Tax induces pain in Spain

Government imposes tax on broadcasters' revenue

MADRID — Spanish networks thought they had it bad. Now they’ve got it worse.

Taking a page from France, Spain’s government has nixed advertising on pubcaster starting in the fall.

On May 29, pols approved a 3% tax on commercial broadcasters’ annual revenues to compensate RTVE for its lost advertising coin.

The tax comes at the worst time possible. First quarter Spanish TV advertising revenue plummeted 27%, according to Screen Digest, outstripping France (-20%), Italy (-16%), the U.K. (-15%) and Germany (-13%).

“By 2008, suffering market fragmentation, Telecinco and Antena 3 TV had increasing difficulty delivering auds to justify their premiums and with the recession, ad agency demand dropped,” says Daniel Knapp at Screen Digest. 

RTVE’s ad nix should free up some E500 million ($665 million), according to one analyst. Where that goes is another question.

In France, which banned primetime ads on pubcaster France Televisions in January, commercial rivals TF1 and M6 had been expected to benefit. But their first quarter advertising revenue plunged 28% and 8% respectively.

Spanish webs Telecinco and Antena 3 are already airing 12minutes an hour of ads, the legal limit. So they could only benefit from RTVE’s ad loss by raising their own prices.

In fact, both cut rates by around 20% this year.

Agencies may well refrain from committing RTVE ad spend elsewhere, fearing budget cuts by year-end.

Margin-crunched — only Telecinco is still turning large profits — broadcasters are reacting.

Battling “horrific” industry conditions, many TV media groups will merge in four to six months, Jose Miguel Contreras, CEO of terrestrial web La Sexta, told a business conference on May 28.

Prisa-owned Cuatro and La Sexta have reportedly held informal talks about creating a joint broadcast group, an alliance that makes economic sense.

“You could transfer ‘good’ content from La Sexta — its Saturday night soccer match, Formula 1 racing — to better-rated Cuatro where it would have more commercial impact,” an analyst says.

Meanwhile, broadcasters are cost-cutting where they can. 

According to Nathalie Garcia, general manager at Notro TV, producer of Antena 3 primetime drama “Doctor Mateo,” series’ budgets are 15% down on 2008. Notro has trimmed production schedules, wages and set-hire costs.

Like their U.S. counterparts, the terrestrial webs will air a clutch of high-profile shows: TVE’s “Aguila roja” and “Mateo” have been renewed.

“We can’t stop producing our own fiction. It marks each channel apart,” says Antena 3 Films CEO Mercedes Gamero. But few new flagship fiction shows will bow this fall.

U.S. acquisitions will continue or grow. Antena 3 needs to increase buys to feed upstart digital channels, Gamero said.

Telecinco punched huge ratings over 2008-09 with “CSI” and even “Life.”

But Spanish nets will play even harder ball once the pubcaster tax kicks in.

“We all have to adapt to times of crises,” says Fernando Jerez, Cuatro programming director.

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