State aid under review as 'Impossible' grosses $40 mil

MADRID — As Warner Bros.’ “The Impossible” smashes B.O. records in Spain, its government is set to launch a full-scale makeover of its state film incentive and tax shelters, establishing production parameters for the foreseeable future.

That’s no local affair.

Sold abroad, co-produced or distributed in Spain by big U.S. companies, “The Impossible,” “The Others,” “Agora,” “The Orphanage,” “Pan’s Labyrinth,” “Buried” and “Intruders” are all the fruits of one key Spanish incentive: Quotas obliging TV operators to buy or co-produce Spanish and European movies.

WB’s “Wrath of the Titans” and Universal’s “Fast and Furious 6″ tapped fulsome Canary Islands’ tax breaks, the latter’s reportedly worth $20 million.

But “there’s a consensus Spain’s public aid systems aren’t working properly,” said Susana de la Sierra, director general of Spain’s Icaa Film Institute.

Headed by Jose Maria Lassalle, Spain’s secretary of state for culture, a working group will shortly be set up to review state aid regs, De la Sierra added. The group will include culture ministry and finance officials, TV station execs and producer, distributor and exhibitor association reps.

Spain’s incentive reform is a rumble in a crisis jungle. Budget-crunched, in April Mariano Rajoy’s government slashed the Icaa’s Film Protection Fund by 36% to Euros 49 million ($63 million).

Tax breaks should take up some straight subsidy slack, Culture Minister Jose Ignacio Wert insists.

Largely triggered by movies’ B.O., subsidies are paid 18-24 months after their commercial release. In the current crisis, banks back away from cash-flowing such long-term commitments.

The industry is also on edge.

On Oct. 16, Spain’s Ministry of Industry, Energy and Tourism issued a circular to Spanish TV operators clarifying that Spain’s TV quotas now require them to invest 1.8% of annual revenues in Spanish-language movies.

From 2004, webs met the quotas — set at 5% of revenues until 2010, 3% thereafter — investing in movies of any language from Spain or Europe.

The circular simply reminded operators of how the language-quota applies, after some expressed doubts, circular author Carlos Romero Dupla told Variety.

But big industry players fear a bigger picture.

“Alejandro Amenabar, Jaume Balaguero, Alex de la Iglesia, Rodrigo Cortes. Isabel Coixet, Daniel Monzon and I, among many others, are betting on projects that aren’t necessarily always in Spanish,” Bayona told Variety.

If the language quota is kept, “they’ll very probably stop being Spanish films.”

The language reg “limits our cinema’s capacity to compete in a global market,” concurred “Impossible” producer Belen Atienza, at Apaches Ent.

The circular spat may prove a storm in a tea-cup.

It’s not foreseen that new regs will scrap 3% film-investment quotas, De la Sierra said. But quotas could be opened up to any European language, she suggested, and U.K.-style cultural tests introduced, establishing eligibility for TV coin.

The big question is how to reconcile Spain’s burgeoning international movie production with support for Spanish-language fare. There isn’t much money to go round.

“The Impossible” cumed $41.9 million through Sunday. That’s the biggest B.O. ever for a Spanish film in Spain and manna for local exhibitors.

Decimated by piracy and crisis, Spanish film business’ way forward is “ambitious films designed for overseas markets, or made with international producers,” argued Adolfo Blanco, at Barcelona distrib-prodco A Contracorriente Films.

“A film is Spanish if its investment and fundamental talent are Spanish,” said Alex Martinez Roig, paybox Canal Plus’ content head.

But many filmmakers counter that incentives carry a cultural imperative. “The law protects a Spanish cultural industry… Spanish, not English-language films,” said one producer.

There’s little evidence Spain’s broadcasters plan a full-scale plunge into English-language production.

Announced Oct. 4, the 10-pic 2013-14 production slate of “Impossible” co-producer Telecinco Cinema features only two English-language titles: Thriller “Way Down” and Jorge Sanchez Cabezudo’s “Air Cocaine.”

The current language quota won’t affect TC’s main rival, Antena 3 Films, given its higher-level of Spanish-language pic investment, said CEO Mercedes Gamero.

But scores of producers, including an older guard unused to foreign-language production, now jockey for ever-less subsidies and TV coin.

The government intends to present a draft film law to parliament by May, De la Sierra said. Drawing it up will be no easy play.

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