TORONTO (Reuters) - Toronto, long a movie stand-in for New York, has led Ontario to an impressive rebound in the cutthroat film and television sector, but a strong Canadian dollar could dull the region's competitive edge.
The industry spent nearly C$1 billion ($970 million) in Ontario last year, up 41 percent from 2008 and the highest level since 2002, according to the Ontario Media Development Corp, an agency of the provincial government.
The rise reflected a hefty new provincial credit that gives foreign moviemakers a 25 percent tax break on a range of production costs, up from 25 percent on only eligible labor costs previously.
But filmmakers say a stronger Canadian dollar could offset some of the gains, as the currency climbs toward parity with its U.S. counterpart.
"The Canadian dollar almost being at par historically has been pretty tough on the film business," Canadian producer Miles Dale told Reuters. "I think it needs to stay south of par for the business not to be affected."
The Canadian dollar is currently worth around C$1.03 to the U.S. dollar, or 97 U.S. cents, down from a peak in November 2007, when it took $1.10 to buy a Canadian dollar.
A decade ago, the Canadian dollar was worth as little as 64 U.S. cents, and the Ontario industry thrived because of its cheap costs in U.S. dollar terms.
Dale is currently in pre-production of "The Thing", a prequel to director John Carpenter's classic 1980s sci-fi horror film, for Universal Pictures, a unit of General Electric Co. In it, Ontario is a stand-in for Antarctica. "The Thing" will also film for a couple of days in British Columbia.
In movies produced by Dale, Ontario has also stood in for Los Angeles, New York, Washington, and Detroit.
"The Thing" has a budget of about $35 million and Dale said the expanded tax credit will save him up to $8 million in total.
"It's all here. The equipment's here, the trucks are here, the people are here, the extras are here...I will typically look to do it here first and try to figure out a reason not to do it here if you have to," he said.
The credit also benefits Ontario's post-production, visual effects and animation industries, where output also rose last year, even for productions not shot in the province.
"The package of incentives that Ontario is able to offer today is helping to offset the high Canadian dollar," said Karen Thorne-Stone, head of the provincial government's film development group, who noted that Ontario offers a combination of talent, tax credits, diverse locations and infrastructure.
"We're no longer perceived as just being a discount location or a cheap location. We are being evaluated by productions on the quality of the package and the cast and the crew and the services which we think is quite a nice change," she said.
Incentives for moviemakers in Toronto include a new waterfront studio, one of the biggest production complexes in North America, operated by Britain's Pinewood Studios, which sets Ontario apart from jurisdictions, such as Louisiana, that also offer tax incentives.
"I think we're way ahead of the game in terms of places that have tried to attract filmmakers," said Seth Feldman, a professor of film studies at Toronto's York University.
"Given the costs of film today and given the production is half the cost and publicity is the other half of the cost, tax credits while they lure people, I don't think keep people."
Feldman said the Toronto International Film Festival has also helped attract Hollywood types who have got used to doing business -- and spending their downtime -- in the city.
"It's become a film town for them," he added.
In 2009, C$272 million was spent producing foreign films and television programs in Ontario, and C$674 million on domestic movies and TV, up 114 percent and 24 percent respectively.
Ontario Film Commissioner Donna Zuchlinski said the industry still faces challenges, but the outlook for 2010 production is just as bright as last year's.
"The film and television industry is very cyclical... there were a number of factors that contributed to the ebb, shall we say. The strength of the Canadian dollar was one," she said, while also pointing to Hollywood labor unions trying to stop so-called "runaway" productions.
Ontario already has almost 20 productions on the roster for this year, including the films "Dream House," starring Daniel Craig, Rachel Weisz and Naomi Watts, and "Red", featuring Bruce Willis, Helen Mirren, Morgan Freeman and John Malkovich.
It's also been the best U.S. pilot season in many years for Ontario, thanks to "Nikita" from Time Warner Inc's Warner Bros, and "Breakout Kings" from News Corp's 20th Century Fox TV."
Editing by Janet Guttsman