The adage that success breeds success doesn't quite apply to the Quebec film industry.

On one hand, Quebec audiences are embracing local films like never before. But an industry in which bankable filmmakers depend increasingly on government funding has hit a wall. Too many scripts are chasing too little available investment from public agencies Telefilm Canada and SODEC.

"There just isn't enough money to finance films that filmmakers, distributors and Quebec audiences want," says Arnie Gelbart, president of Galafilm Productions.

Now industry players are scratching their heads over how to solve an existing financial crisis that will not be bailed out by a federal government that will not increase its subsidies for Quebec producers - at least for now.

Lorraine Richard, president of Montreal prodco Cité-Amérique, points out that the federal government launched a new film policy six years ago to boost production budgets for indigenous movies in a quest for bigger market share, and it succeeded in Quebec. From 2001 to 2005, the market share of Quebec films rose from 4% to 18%.

Now government investment needs to keep pace with that box-office success, she insists.

"All this depends on the will of the government to support, or not, our culture. Are they there, or not? That's the situation," Richard says.

Potential solutions to the current crisis are being hashed out by various committees comprised of industry players. One group is looking to revise Telefilm's envelope system, while a second is considering alternative financing sources for Quebec films, which, on average, derive three-quarters of their budgets from government sources, including Telefilm, SODEC and tax credits.

There's talk of production tax-credit hikes [from the current level of 30% on labor expenses], a tax on Quebec cinema tickets, and forming a new film fund with public and private dollars. But little consensus has emerged.

While producers hope provincial exhibitors will consider the cinema ticket tax - similar to what France has - Canadian exhibitors nixed that idea when it was last raised six years ago.

Michel Pradier, director of French operations and the Quebec office at Telefilm, argues that, without new federal dollars for the Canada Feature Film Fund, the Quebec film industry should be tapping new financing from traditional partners - the local private sector or francophone copro partners - to maintain current production volumes.

"The international scene is an important part of the solution," Pradier says, adding that Telefilm is committed to helping Quebec filmmakers secure additional copro financing and foreign sales.

Joëlle Levie, director-general of film and television at SODEC, says the Quebec industry needs to rethink its financial model for homegrown films, especially for bigger-budget movies.

"We need more money in the system? Yes. But what kind of money is something the industry must think about. It must not just come from the government," she argues.

Given the small size of the Quebec market, Levie says producers with budgets over $7 million must eye alternatives that include producers putting up more of their own equity, additional private financing, and foreign presales.

Rock Demers, head of La Fête Productions, says Telefilm's criteria for performance envelopes - which guarantee producers funding for new projects based on past ticket sales - should extend beyond box office to encompass TV and DVD viewership.

"If a film is well-received in theaters, it is seen on average by between 100,000 and 200,000 people. But a TV broadcast might secure one to two million viewers," Demers says.

Foreign sales for homegrown movies should also count, he adds. "Strangely, the films that got the best box office [at home] over the last four or five years, both in French and English, are films that don't sell abroad," he says.

Demers points to the Les Boys franchise and Séraphin: un homme et son péché in French Canada and Men with Brooms in English Canada as having scored at the domestic box office but landing few foreign sales.

But homegrown movies that played well on TV, including kids and family-themed projects, can sell widely internationally.

Boosting Telefilm's contribution to Quebec filmmaking appears doubtful after Heritage Minister Bev Oda recently told a delegation of Quebec filmmakers not to expect new federal dollars - at least not until 2007, if at all.

Another obstacle to spreading around available tax dollars is the CFFF's envelope system. Controversy erupted after the latest round of CFFF investments handed Cinémaginaire producer Denise Robert $2.7 million for each of her two latest projects, including husband Denys Arcand's L'Âge des ténèbres, while projects by many other notable local filmmakers, including Robert Lepage, Léa Pool and Denis Villeneuve, were turned down.

Quebec filmmakers went public with their frustration over the decisions, but had to concede that Robert had played by the rules, having sought and received selective Telefilm funds - for perceived project merit - after tapping out her performance envelope. What's more, Telefilm and SODEC could hardly deny financing for the next project from Arcand, who scored huge box office and an Academy Award for his last film, The Barbarian Invasions.

Still, some filmmakers remain dissatisfied.

"This was just one of those events that made us say, if these are the rules, we've come to a point where, with the amount of money in the system, these rules cannot go on and must be changed," says one Quebec filmmaker who asked not to be named.

Meanwhile, Cirrus Communications' Pierre Even, producer of C.R.A.Z.Y., last year's highest-grossing Canadian film at the domestic box office, says he and an industry group are working with Telefilm to modify the envelope system.

Even says a producer with a $1-million envelope could possibly find an international copro partner to complete the financing for a project without requesting additional financing from Telefilm's selective investment component.

The problem, says Even, lies with envelopes between $200,000 and $400,000, which have producers inevitably crowding out other scripts by seeking additional selective investment.

"It could be more beneficial to eliminate the small envelopes, so those that do have [a $1-million envelope] can finance their project without going to the selective process, which in turn offers more chances to producers with no envelopes," Even says.

www.telefilm.gc.ca

www.sodec.gouv.qc.ca