Region offers wide range of coin -- and problems
Latin America offers a mixed bag for indie distribs. Pan-regionals like Buenos Aires-based Sun Distribution Group face the challenges of serving a multicultural territory.
“When you buy a film, you have to think about whether it will work in at least 24 countries with varying cultural tastes, two languages (Spanish and Portuguese) and even several dialects,” says Sun chief Diego Halabi. “We have to fight against the dominance of blockbusters and for the scarce number of indie films that can touch the hearts of the Latin American audience.”
Luckily there are such titles as “21 Grams,” “Million Dollar Baby” and, most recently, “Juno” that have fit the bill. But risks remain high. What keeps Sun afloat is its strategic alliance with TV distribution company Telefilms.
Mexico and Brazil represent the lion’s share of the market, a combined 78%. Central American territories Venezuela and Colombia capture 10%, Argentina nabs 6% and the rest of the region reps 6%.
Venezuela has a keen filmgoing public, but ever since President Hugo Chavez came into power, distribs wait six to eight months to collect their royalties. Chile has stabilized but has a lukewarm filmgoing aud. Argentina, where six to eight pics debut every weekend, faces a glut of both local and international product jostling for barely 1,000 screens. Argentine screen growth has been stagnant since the 2001 financial crisis, with several hundred closing down. The good news in the region comes from fast-growing Colombia, where new screens are popping up.
Piracy and a steep decline in the home entertainment business are hitting both majors and indies. In Brazil, video rentals plunged some 50% compared with last year. Mexico reports five to six pirate copies for every legal DVD while Argentina reports an eight-bootlegs-to-one ratio.
Local cinema is bolstered by government aid in most of Latin America. Production incentives are most entrenched in Brazil and Argentina, where they have spurred a glut of local pics, straining the limited exhibition space in both territories. In recent years, Colombia, Mexico, Chile and Venezuela have also introduced varying incentives to prop up local cinema. Their production output has grown as a result.
Argentina’s cheap peso and stunning landscapes have been luring some foreign productions. UGC’s “Lucky Luke,” based on the popular Franco-Belgian comicbook series, is set to shoot in Argentina starting Sept. 1. Oscar Kramer’s K&S Films will provide production services, but this will not allow UGC to take advantage of local production incentives.
“A foreign producer would have to hook up with a local partner in order to make use of the subsidies,” Kramer says.
The latest James Bond installment, “Quantum of Solace,” recently shot in Chile, which, like Argentina, offers the advantage of reverse seasons, a vital scheduling plus.
In Brazil, local film production is highly dependent on federal government incentives, which totaled $77.5 million in 2007. An estimated 70% of this tally went to the production of fiction and nonfiction pics, with the remaining funds going to shorts, TV indie programming and film distribution.
More Brazilian producers are seeking international partners in a bid to diversify their financing sources, but incentives continue to account for an estimated 90% of the total investment in film production in Brazil.
Interest in Mexico’s corporate tax incentive, which helped boost total production by a third since taking effect in early 2006 to 70 films last year, is in danger of petering out this year as President Felipe Calderon’s tax reform takes effect. Companies like Televisa and TV Azteca, which have used aggressive tax strategies for years and are being forced to pay up under a new alternative minimum tax regime, won’t be eligible for the rebate this year. That is the case for other major companies as well.
While other firms are still in the position to take advantage of the break, continued obstruction from tax authorities has sown uncertainty about tax liability. Also, abuses by some companies could end up spoiling the pot for all. Unless Congress clarifies rules governing the break this year, the balloon supporting Mexico’s film boom could burst.
Anna Marie de la Fuente in Los Angeles, James Young and Michael O’Boyle in Mexico City and Marcelo Cajueiro in Rio de Janiero contributed to this report.
Production spend in 2007: $25.2 million
Anticipated production spend in 2008: $26 million
Foreign producers can access incentives through a local producing partner but not through a production service company. Subsidies are backed by a $40 million film fund fed by 10% of ticket sales.
Top film: “The Simpsons Movie,” $7.5 million
Total B.O.: $103.9 million
Total number of releases: 288
Total film production spend in 2007: $54.2 million estimated funds collected from incentives only
Anticipated production spend for 2008: $57 million estimated funds collected from incentives only
Audiovisual Law Article 3: U.S. majors can use a portion of the taxes paid on local revenues to fund production.
Sector Fund: This incentive will launch this year. The money comes from a contribution paid by audiovisual companies (TV and film producers, distribs, ad agencies, etc.) that previously went right to the federal government. Now it will be reinvested in the entertainment industry.
A committee comprising government and industry reps will decide how to invest the money in production, distribution and exhibition. Ancine’s president Manoel Rangel says the Sector Fund will allow a total investment of $21.8 million in 2008.
Audiovisual Law Article 3-A: A tax-shelter system for local broadcasters and pay TV programmers.
Top film: “Spider-Man 3,” $27.6 million
Total B.O.: $399 million
Total number of releases: 333
Production spend in 2007: $6 million*
Anticipated production spend for 2008: $9 million
Local producers can tap a film fund sourced from ticket sales. International producers must partner with local producer to access subsidies. No film commission yet but trade org ProChile provides help.
Top film: “The Simpsons Movie,” $3.7 million
Total B.O.: $52 million
Total number of releases: 257
Film production spend in 2007: $5.8 million
Anticipated production spend for 2008: $13 million
Foreign producers would have to team up with a local producer to access subsidies. Nonfilm corporate and individual investors can deduct the equivalent of 125% of their film investment or donation from taxable income, capped at 30% of declared income in the case of straight donations to production. Country’s in the process of creating a film commission and establishing tax rebates for foreign productions.
Top film: “Shrek 3,” $4.2 million
Total B.O.: $81.4 million
Total number of releases: 186
Total film production spend in 2007: $105 million*
Anticipated production spend for 2008: $97 million*
Efecine, $47.5 million cap; Imcine, $13.3 million cap. Both require 70% Mexican production (payroll, employees, location) and at least one Mexican co-producer.
Top film: “Spider-Man 3,” $36 million
Total B.O.: $615 million
Total number of releases: 342
Film production spend in 2007: $4.7 million
Anticipated production spend for 2008: $9.7 million
International film producers can tap local film subsidies via partnership with Venezuelan producer whose participation must not go below 10% nor exceed 30% of the budget. Has a film commission.
Film commission: cnac.gob.ve
Top film: “Harry Potter and the Order of the Phoenix,” $3.3 million
Total B.O.: $93.9 million
Total number of releases: 158
“The Diving Bell and the Butterfly,” Europa Filmes, Brazil
“Les Ambiteux,” Cineplex, Colombia/Central America
“Killing Pablo,” Sun Distribution Group, Latin America
“Guerrilla” and “The Argentine,” Sun Distribution Group, Latin America
“Splice,” Videocine, Mexico
“Sex and the City,” Distribution Co., Argentina