Sector adds more screens and films

Crisis, what crisis? Following a 33% growth in the total B.O. across 2009, Brazil’s upward trend continued into the new year, with ticket sales up 21% during the first quarter. Global recession notwithstanding, the Brazilian film sector is actually expected to break the 1 billion barrier this year — a first since the introduction of the Real currency in 1994, with B.O. potentially reaching as high as 1.2 billion real ($686 million).

Such strong performance is due to a combination of factors, including the explosion of 3D pics, the incorporation of millions of Brazilians to the middle class, and an overall strong economy (the country’s GDP is expected to grow 6% this year).

Hollywood 3D pics are the driving force behind the expansion, with the latest installments in popular franchises such as “Shrek,” “Toy Story” and “Harry Potter” expected to follow the successful runs of “Avatar” and “Alvin and the Chipmunks: The Squeakquel.”

As in other parts of the world, local moviegoers not only are hungry for 3D fare but also seem willing to pay more for it. According to Filme B e-newsletter publisher Paulo Sergio Almeida, 3D boosted the country’s average ticket price 9.5% in Q1 over the same period in 2009, staying well ahead of inflation.

The challenge now is to expand the number of 3D-capable screens. There were 126 such screens in April, up from 97 at the end of 2009, and Almeida believes the figure could rise to 200 by the end of the year.

Since the consolidation of commercial free-to-air TV in the ’70s and ’80s and the subsequent closure of thousands to screens countrywide, the habit of attending theatrical screenings has been limited mostly to the upper classes in Brazil. However, in the past few years, Brazilians from the middle class are increasingly falling for the charms of the bigscreen. Thanks to social programs and the economic growth, the middle class has been inflated by the addition of millions of emerging poor families with coin to spare for tickets, a number of studies show.

In order to fully benefit from the immense potential of this new middle class, however, the industry must first address the lack to screens in blue-collar neighborhoods. The majority of theaters exist in shopping centers situated in better big-city neighborhoods.

“The middle class is the major beneficiary of the economic model adopted by this government. They particularly like Brazilian films, but it’s necessary to build theaters near their homes,” says helmer Carlos Diegues, attending Cannes for the world premiere of “5XFavela.”

In response to the country’s exhibition circuit problems, the government has announced two programs. According to Manoel Rangel, president of the National Cinema Agency (Ancine), the Cinema Near You program will launch this year, providing a low-interest credit line for exhibs willing to build screens in average-sized towns (of 100,000 to 500,000 inhabitants) and big-city neighborhoods with large concentrations of middle-class residents. The goal is to build 600 screens in four years.

For towns with 20,000 to 100,000 residents that do not have screens, Rangel says the federal government will fully fund the construction of screens through its Town Cinema program, launched last November. Public tenders will select the screens’ operators.

Meanwhile, the exhibition sector will also continue to expand in upper-income areas. According to Almeida, 72 Brazilian shopping centers are expected to open within the next three years, the bulk of them with multiplexes, with an important player joining this expansion effort: Mexican giant Cinepolis entered the Brazilian market this year and plans to open 40 screens by December.

Following its stunning performance in 2009, when the combined B.O. of Brazilian pics rose 88% over the previous year, the local sector got off to a rough start in 2010, when blockbuster hopeful “Lula” flopped in January. All that changed with the record-setting April release of vet helmer Daniel Filho’s “Chico Xavier,” the biopic of the local spiritual leader who died in 2002, that enjoyed the biggest opening of a Brazilian pic in 20 years.

Analysts predict local pics can sell as many as 16 million tickets this year (which would match 2009′s boffo figures), especially with such releases as “Elite Squad 2″ and Wagner de Assis’ “Our Home,” a super-production with top-notch special effects and major international talents working below the line, coming in the second half.

In terms of film financing, the prospects also look favorable. The local production sector received $71 million in incentives last year, down 18% from 2008. Analysts attribute the dip to the economic slowdown, pointing to a combination of factors indicating more available coin in 2010.

“The Brazilian economy is now heated up, which means profit-based incentives will deliver better results,” Rangel says. “Additionally, Brazil’s largest company, Petrobras, resumed their investment in feature production. This year, we will also have 81.5 million reais ($46.6 million) through the Sector Fund.”

According to Rangel, Sector Fund kicked off last year by giving out $16.8 million. And though several local producers have complained about the new incentive system’s red tape and inflexible requirements, Rangel refuted the criticisms. He expects Sector Fund to eventually fulfill its goal of stimulating local producers to make more pics with commercial potential, citing “Chico Xavier,” which was partially funded through the incentive, as a step in that direction.

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