Business models shift as new regs reward higher budgets

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Last July, having just won Karlovy Vary’s Crystal Globe for “The Mosquito Net,” Catalan producer Lluis Minarro sat in a small Barcelona bistro. His mood was bittersweet: Under new national subsidy regs, introduced by the Spanish film institute ICAA, “Net” could never have been made at its — for Spain — middling budget of e1.4 million ($1.8 million), he says.

Catalan producers are now working with new parameters, regional and national.

“The market’s looking for big movies to compete with films from abroad, or smaller films that can be more original,” says Ikiru’s Edmon Roch, producer of “Bruc” and “Lope.”

Roxbury’s Miguel Angel Faura agrees: “Production is ever-more polarized between budgets of $1.3 million-$1.9 million and $13 million with an international cast,” he says.

In contrast, Roch says, “mid-range films will now be more difficult to finance.”

Big factors drive this trend.

In Catalonia, as in Spain at large, public funding has escalated. ICIC’s film and TV budget was $19 million in 2004 and $28 million last year.

So production skyrocketed from 2004’s 40 Catalan movies to 2009’s 74, from 133 to 186 for all Spain.

But the box office of local films hasn’t risen with this swell. Catalan pics’ total gross from the region spiked in 2007 at $15.9 million, the year of “The Orphanage” and “REC,” hitting $9.5 million last year.

Audience tastes have evolved. A decade ago, crossover auteur Isabel Coixet was one of Catalonia’s most bankable directors. Now upscale genre fare dominates.

Faced with new market realities, governments have reacted.

Since 2008, the Catalan Institute of Cultural Industries (ICIC) and Catalan pubcaster TV3 together have ploughed up to $2.2 million per pic into four higher-budget Catalan-language movies.

“Catalan filmmaking must be consumer-sensitive, ready for an age when telcos and media companies, private investors and Internet end users establish new business parameters and new ways of audiovisual consumption,” says Xavi Parache, ICIC film finance director.

New ICAA regs, launched in May, offer $19,000 for every $57,000 of producer’s investment, if films cost $2.5 million-plus and sell 60,000 ticket (around $500,000 in B.O.) in Spain.

But the ICAA’s bet on low-budget fare is clear in its July project subsidies, often given to little-known production houses, says producer Luis de Val.

Catalan film finance goes beyond local coin.

Rodar y Rodar’s latest movie, Sitges opener “Julia’s Eyes,” is co-produced by Guillermo del Toro and UPI, which has taken Spain, France and Latin America, and pre-sold strongly by DeAPlaneta, including to Germany and U.K.

Such financing reduces exposure to the Spanish market, argues Rodar’s Joaquin Padro.

The ICIC-TV3’s first films under the new guidelines and market philosophy — “Bruc,” “Heroes,” “Black Bread” and “Eva” — all bow this fall.

“Producers are raising the bar. Budgets of $2.5 million-$3 million are being replaced by $5 million-$6 million (budgets),” Parache reports.

And it’s not only producers — many once-radical helmers are embracing more commercial films.

Marc Recha (“Pau and His Brother”) says he is aiming to make three “upscale, mass-market” genre films: a sci-fi pic, a Western and a war movie.

Isaki Lacuesta (“The Damned”) is prepping “The Next Skin” and “All the Masks,” which “require bigger budgets than I’ve had till now.”

“Next” would now have to be cheaper, with unknown actors, targeting fest awards, or snag larger TV finance, costing above $2.5 million, says Minarro.

A series of micro-budget pics are also being prepped.

The Mallerich/Cromosoma-produced “Caracremada,” which played Venice’s Horizons, cost just $440,000; Santiago Zannou (“The One-Handed Trick”) is prepping a $380,000 docu feature called “La puerta de no retorno,” about his father.

The move into audience-friendly bigger-budget filmmaking has been compounded by the rise of a new producer generation — such as Roch, Faura, Adrian Guerra, de Val, Sergi Casamitjana, Ibon Cormenzana — not to mention directors and technicians, many from Barcelona’s ESCAC film school, who boast broad film tastes, large international ambitions and big budget ranges.

Financed by sales agent Kinology, ICAA, ICIC and high-net-worth Spanish investors, Versus Entertainment’s “Buried,” with Ryan Reynolds, cost just $2.9 million, says Versus’ Guerra.

But one of Versus’ next productions will be budgeted at $18 million-$19 million, using bank-arranged Spanish tax coin, he adds.

However powerful, Catalonia’s pic polarization faces large challenges.

Not everyone buys into the macro-micro divide.

“Big-budget films play everything on one bet and make multiple concessions in authorial originality. Low-budget films sometimes don’t get distribution outside festivals,” says Oberon’s Antonio Chavarrias, whose upcoming “Dictado” costs between $3.2 million and $3.8 million.

Spain’s film financing models aren’t in sync.

Just as ICAA encourages producers to depend more on private investment, Telecinco, the biggest source for that money, will bet on one high-budget Spanish film project a year, says its CEO, Paolo Vasile.

In general, Spanish TV stations will make just two to three big films a year, Padro suggests.

And budgetary hikes demand a change in attitudes.

“Spain’s youngest generation of producers and directors want to make films for the world. But bigger-budget international films often have less artistic freedom,” Faura says.

A brave new world beckons.

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