Animation World Magazine, Issue 2.10, January 1998


Funding Co-Productions: A Complicated But Tasty Recipe

by Michael Hirsh

Editor's Note: When we decided to investigate how the complicated world of international co-productions really works, we turned to someone who successfully assembles these deals everyday. As co-CEO of NELVANA Limited in Toronto, Michael Hirsh has overseen co-productions with over half a dozen countries. In this article, Michael explains firsthand the recipe for success that has NELVANA's co-productions filling the airways on both sides of the Atlantic and beyond.


Michael Hirsh.Michael Hirsh.

For those of you who have attended the television markets at NATPE, MIP TV and MIPCOM, you have probably noticed that a great deal of animated product coming from outside the United States is the result of international co-productions. These animated series and features are the products of many negotiations, collaborations and international cultural mediations. This article is an attempt to summarize the delicate and very creative process of bringing an international animated co-production to the screen.

Finding the Elements
The first step is to locate a property that will travel well across borders. NELVANA has often used classic properties, partly because they have a universal appeal and work well for a variety of worldwide audiences. A real advantage that animated co-productions have over their live-action counterparts is that they often have no specific cultural references. Franklin, for instance, is a talking turtle who has no basis in regional reality. His forest home could be found anywhere in the world. Animation is also much easier to dub into multiple languages than live-action programming.

Once you have found a unique property that is likely to have a wide international appeal, the next step is to locate a co-production partner or partners. A co-production partner must be based in a country with which your own country has a co-production treaty. Unlike the United States, Canada and several other countries have set up international co-production treaties which establish the parameters of a co-production deal between the two countries. Each treaty is different and serves as a guide throughout negotiations. Canada, for instance, has signed more than twenty such treaties with various countries around the world including France, Germany, the UK, Spain, China and Russia.

Franklin is a co-production between NELVANA
(Canada), Neurones s.a.r.l. (France) and Neurones
(Luxembourg).
Image courtesy of and © NELVANA.
Franklin is a co-production between NELVANA  (Canada), Neurones s.a.r.l. (France) and Neurones  (Luxembourg).  Image courtesy of and  NELVANA

Simply finding an available animation company in the appropriate country is not nearly enough. A suitable partner must also think the same way about animation as you do. A key preliminary question is, "What does each partner want out of the production?" Sometimes, one partner is very committed to high quality while the other wants to do a quick and dirty low-budget project. It is crucial to know these differences up front.

Structuring the Deal
There are many ways to financially structure a co-production agreement. It could be anything from a five year licensing arrangement with a broadcaster who funds part of the budget, to agreements that carve out distribution rights by territory. Every deal is different, but here are a few of the elements that we look for in structuring a deal. We usually seek out a partner who is capable of sharing the risk with us in exchange for the upside (back-end profit). We therefore want a partner who is solvent and has the kind of capital to contribute to an animated series that will cost approximately U.S. $350,000 per episode on average.

We also look for a partner who's government provides financial incentives that complement those provided by Canada. These incentives will often come in the form of tax breaks. We also look for a deal that fulfills European as well as Canadian content quotas. If a German broadcaster is looking for German content and our co-production qualifies as German, we have just made the programmer's job a lot easier while increasing market penetration for ourselves. The same, obviously holds true for our partner, who may be looking for increased penetration into North America.

Ideally, we will come to an agreement whereby each partner can take advantage of production subsidies in the other partner's country. This allows the production as a whole to broaden its funding base.

Ned's Newt is a Canadian/German co-production
with additional work being completed in the Philippines.
Image courtesy of and © NELVANA.
Ned's Newt is a Canadian/German co-production  with additional work being completed in the Philippines.  Image courtesy of and  NELVANA.

Keeping the Creative On Track
In negotiations with a potential co-producer, we also look to minimize the risks. There is a risk that, without the proper creative cohesion, a series or feature will become what Canadians call a "Europudding" - a series or feature that is run by committee. This kind of product inevitably loses its creative thrust and audience appeal. A strong creative partnership will preclude this kind of situation.

Ned's Newt is a great example of a Canada/Germany co-production agreement that worked well for two partners. This animated series showcases the talents of each partner in a way that enhances the series as a whole. NELVANA had the project in development when we approached TMO Film GmbH about a co-production agreement. We retained distribution and worldwide merchandising rights to the property. TMO acquired the right to distribute the series in its native Germany. In this agreement, we share in each other's revenues to a degree. Each entity recoups first for the area it has invested in, and then the profits are split.

The division of labor is the tricky task that comes next. Budgets must be split in such way that the production qualifies as local content in each participant's country. The creative control is then negotiated, with script and storyboard approvals assigned to the participants. In the case of Ned's Newt, TMO, our German partner, is painting, compositing and rendering the series with the help of a company in Hungary. In Canada, NELVANA is handling script, storyboard, design, art direction and post-production. Layout and posing are split between NELVANA and TMO with digitally scanned animation being done in the Philippines.

With television animation, delivery dates become a pressing issue. It is crucial that each partner be aware of the other partners' delivery dates. The whole team must work together to meet broadcaster requirements.

NELVANA will co-produce Bob &
Margaret
with Channel 4 Television
Corporation (U.K.) in association with
CanWest Global System. The series
is being licensed to CanWest Global
in Canada, Comedy Central in the U.S.
and Channel 4 Television in the U.K.
NELVANA Enterprises Inc. will distribute
the series worldwide excluding the United
Kingdom. Image courtesy of and © NELVANA.
NELVANA will co-produce Bob &  Margaret with Channel 4 Television  Corporation (U.K.) in association with  CanWest Global System. The series  is being licensed to CanWest Global  in Canada, Comedy Central in the U.S.  and Channel 4 Television in the U.K.  NELVANA Enterprises Inc. will distribute  the series worldwide excluding the United  Kingdom. Image courtesy of and  NELVANA

Constant and open communication is essential since the specter of cultural differences will inevitably rear its ugly head. It has been a challenge to adapt Ned's Newt for international audiences. The humor, essentially North American based, hosts personalities with definite cultural references, and frenetic slapstick comedy that provides a universal appeal of sophisticated and subtle adult humor.

A Worthy Risk
There are many reasons to pursue this kind of venture, despite the inherent risks and increased complexity in negotiations. The recent proliferation of specialty channels launched in France, Germany, the U.K., Latin America and Asia, have created a greater demand for children's product in those markets. A great way to enter those markets is to become a player there. Co-productions allow instant access.

The biggest advantage to co-productions is the ability it affords you to reduce the cost of any one show. Although co-productions present their own challenges, they give your company a competitive edge on a crowded playing field.

A Recipe for Success
A successful co-production is like a great meal. Even if you follow the directions carefully, you will never end up with exactly the same taste. Keeping that in mind, here is a recipe for a successful co-production:

Start with two or more ripe production companies with sufficient capital.
Add while stirring constantly:

Quickly add re-shoots, incorporating comments from around the world. Bring to a boil then add:

Serve immediately through strong distribution channels.

(Metric conversions available in four languages upon request. Dessert should be the sweet taste of success; no heavy Europuddings.)

Michael Hirsh is co-CEO of NELVANA Limited, a company whose recent co-productions include Bob and Margaret, The Neverending Story, Rupert the Bear, Stickin' Around, Donkey Kong Country , Blazing Dragons , Ned's Newt and Franklin.

Note: Readers may contact any Animation World Magazine contributor by sending an email to
editor@awn.com.


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