Falling profits at TV networks trip reduction in film-funding quotas

MADRID — Imagine Hollywood losing two-thirds of its studios. That might in large part just have happened in Spain.

Since 1999, by law Spanish broadcasters invest 5% of annual revenues in European — mostly Spanish — movies.

On Jan. 7, parliament dropped these TV quotas to 3% of sales for Spain’s biggest commercial nets, Telecinco and Antena 3.

Hit by plunging TV ad sales, 2009 nine-month revs were down 41% at Telecinco to Euros 432.25 million ($618.1 million) and 22% at Antena 3 to $605.6 million.

For Spain’s film industry, the fallout from the double whammy — eased quotas, plummetting revs — looks large.

A brief Golden Age of mainstream Spanish filmmaking, blooming in 2009, may now be over.

Private broadcasters’ contribution to the Spanish film industry will be reduced quite drastically,” says Ghislain Barrois, CEO of Telecinco Cinema, its film production arm.

That’s saying quite a lot. In 2007, RTVE, Telecinco and Antena 3 plowed a combined $134.7 million into Spanish films.

Last decade, Telecinco Cinema, the network’s film production arm, bankrolled “Pan’s Labyrinth,” “Agora,” and Steven Soderbergh’s “Che” and put up 50% on “The Orphanage.”

A production-acquisition division, Antena 3 Films took 50% equity in Woody Allen’s “Vicky, Cristina Barcelona” and “You Will Meet a Tall Dark Stranger.”

In 2009, six Spanish movies topped box office charts for a total 10 weeks, a last-decade record. TC co-produced “Agora”($30.0 million), sleeper “Cell 211″ ($12.7 million) and “Spanish Movie” $9.7 million); Antena 3 co-produced comedies “Brain Drain” ($9.9 million) and “Sex, Party & Lies” ($6.1 million); RTVE pre-bought “[REC]2″ ($7.4 million).

A quota drop was expected, since new quotas framed in the General Audiovisual Law clearly favor Spain’s private TV stations, said Gaspar Llamazares from radical left party Izquierda Unida.

But from Jan.-Sept. 2009 profits at Telecinco plunged 73% to $88.9 million, and fell 89% at A3 to just $11.0 million. They’re no longer profit powerhouses.

Spain’s main webs will still invest in Spanish films.

At 4.5%, fulfilled only by features, RTVE’s quota is broadly the same, though one question now is whether TV docs qualify, said Gustavo Ferrada, RTVE head of cinema.

Without quotas, Telecinco and A3 wouldn’t invest at all in movies, they say. With relaxed quotas, TC and A3 Films will not be the film financing forces they once were.

In 2008, Telecinco Cinema’s invested $72.9 million in Spanish films. 2010 financing will be only a small fraction of that amount, Barrois said.

Fewer big pics will be get produced: a downsized U.S. speciality market hardly encourages them anyway.

If in 2010, we were presented with ‘Pan’s Labyrinth,’ which cost $23 million, we probably couldn’t commit to the film, because it would take up almost all of our quota obligation,” said Barrois.

Or Telecinco would have to find co-production coin.

A3 Films will go on investing in quality, international projects and mainstream pics budgeted more at local market levels, said CEO Mercedes Gamero. But it will back fewer films.

It looks likely there will be fewer films in general made in Spain, and indeed some producers are already downsizing, or focusing on TV production.

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