RIO DE JANEIRO — With the fifth-largest population and territory in the world, Brazil is often referred to as the country of the future. A joke heard here is that Brazil is indeed the country of the future and always will be. But the recent economic and social advances in the nation indicate the rise of Brazil as a major world player might not be that far off after all.

Plagued by hyperinflation in the 1980s and early 1990s, the country’s economy has been relatively stable since 1994. During the first years of the 21st century, virtually all economic indicators have improved, and the country now has the world’s 10th largest gross national production.

The government has initiated a process of income distribution through the introduction of an ample welfare program, but the gap between rich and poor remains quite large, and crime is still a problem. Just like the country at large, a look at local TV and film industries shows positive growth (TV) and some major hurdles to overcome (film).


TV broadcasters pocketed 4.88 billion reais ($2.42 billion) in ad revs in the first half of this year, nearly 60% of the total ad spending in the country. There are 48 million households with TV sets, which represent 92% of the country’s households. The ad sector is sophisticated, and local campaigns often nab prizes in international commercials fests. Ibope, the real-time audience measurement service, is internationally acknowledged.

Local nets are now preparing themselves for the migration to digital — they must launch digital transmissions (simultaneously with analog transmissions) on Dec. 2 in Sao Paulo, the country’s largest city. The other regions of the country will follow next year. Brazil has adopted Japan’s ISDB digital standard.

The Marinho family-owned TV Globo has remarkably managed to keep its market leadership since the early 1970s. The net pockets about two-thirds of the total broadcasters’ ad spending and has an audience share of more than 50% on primetime. The net’s programming, which relies heavily on telenovelas, continues to please Brazilian viewers.

TV Globo has also kept its successful production/distribution model, which resembles the old Hollywood studio system: The net produces four telenovelas and several series in its Projac center in Rio with a team of actors, writers, directors and crew members under contract. It airs the shows via a network of 121 TV Globo-controlled or -affiliated TV stations across Brazil.

“Except for networks in China and India, TV Globo is the network with the highest audience in the world. Our 9 p.m. telenovela has an average share of 45%. If we consider two viewers per TV set, roughly 45 million people watch it every night,” TV Globo general director Octavio Florisbal tells Variety.

But rival TV Record has its eye on the top prize. It has invested $300 million in telenovelas since 2004 and this year took the No. 2 spot during primetime, a position long occupied by Sistema Brasileiro de Televisao (SBT). To advance in the ratings, TV Record has copied TV Globo’s successful formula and built a production center in Rio, where is makes two telenovelas. The net’s execs say they aim to eventually become the market leader.

The growth of TV Record seems to strengthen Brazil’s tropical version of the old studio system, where there is little room for indie productions, mostly relegated to local pay TV nets. Ironically, giant TV Globo has given indies some air time, most notably series from helmer Fernando Meirelles’ O2 Filmes (“City of Men”) Hector Babenco’s HB Filmes (“Carandiru”) and Tata Amaral (“Antonia”). TV Globo’s next indie series is “O Pai, O,” based on Monique Gardenberg’s feature.

Meanwhile, the government is in process of creating TV Brasil, a pubcaster modeled particularly after U.K.’s BBC.

In the pay TV sector, operators had a total gross revenue of $800 million in the second quarter of 2007, up 19% from second-quarter 2006. Their subs base reached 4.9 million this June, up 12% from June 2006. The figures are positive, but the sector continues to have a penetration of just 10% of the country’ total TV households. Subs are mostly from the upper classes.


Despite the size of the local market, the film biz has yet to exploit it fully. Even with the recent wave of Hollywood blockbusters, the January-July accumulated total attendance was down 3.1% to 53.8 million. The B.O. in the period rose 1% to $214 million thanks to the continuous rise in the average ticket price to almost $4.

The exhibition biz caters to the typical Brazilian moviegoer, who is an upper-class resident of a fancy neighborhood in a large city. In smaller towns and in blue-collar neighborhoods of big cities, the growth of network TV saw the demise of smaller theaters. The rise of the multiplex in the late 1990s saw the total number of screens in the country go from 1,480 in 2000 to 2,110 this past August. But Cinemark, UCI, the Ribeiro Group and other local exhibs chose to build plexes mostly in shopping centers in rich areas of the biggest cities. And they have raised ticket prices above the inflation rate.

For lower- and middle-class families, going to a movie theater is an expensive proposition and, in most cases, requires a trip to a distant location. There are plenty of other less expensive, closer forms of entertainment, including DVDs. Consequently, the DVD rental market has rapidly expanded.

And, also consequently, the pirate DVD market has boomed. Pirated films cost about $5 for a pretty good copy.

The combination of all these factors explains the low growth of the local theatrical market in past years. The question is how to grow in such circumstances. For Jorge Peregrino, senior VP of Paramount Latin America, only the further expansion of the exhibition circuit will create the conditions for solid B.O. growth. In fact, despite the new plexes, Brazil still has one of the lowest screens-per-capita ratios in the world — one for every 90,000 people.

“The pace of the exhibition expansion is too slow and does not provide the conditions for market growth,” Peregrino says. “If the government puts so much money in production, why doesn’t it invest in exhibition, too?”

Indeed, the government policy for the film business traditionally focuses on the production sector, leaving behind not only the exhibition sector but also the distribution one. Tax shelter incentive systems created in the early 1990s subsidize virtually all feature production in the country. In 2006, $84 million was distributed via tax incentives, the bulk of it for the making of features (both fiction and docs).

Manoel Rangel, president of the National Cinema Agency (Ancine), says authorities are fully aware of the exhibition problem and have already created mechanisms to fund the construction of theaters, which they figure will eventually produce positive results. He mentions a special low-interest credit line for exhibs from government-owned bank BNDES.

But just two exhibs have so far borrowed coin to build plexes. Estacao, one of the two exhibs, plans to open two five-screen plexes in Rio this year.

Additionally, in December 2006 the government signed off on regulations creating the Sector Fund, which will invest in production, distribution and exhibition. The fund is fed by Condecine, a tax on audiovisual sector companies. Condecine’s revenues currently go straight to the federal treasury, which uses part of it to cover the operational costs of Ancine and pockets the other part.

With the new reg, the part that now stays with the treasury will feed the Sector Fund.

According to Rangel, the fund will have $18 million by the end of this year, and an additional $20 million to $24 million in 2008. A committee of government authorities, showbizzers and bank representatives will decide how to invest the coin. As opposed to the incentives, the fund will seek a return to its investments.

“Our main goal is to finance the expansion of the exhibition sector, to strength Brazilian distribution companies, and to promote joint-ventures and co-productions of local production companies,” Rangel says.

“Additionally to (having) more screens, we need strong distributors of Brazilian films,” he continues. “The (Hollywood) majors plan the distribution of their films well in advance. We lack companies with the strength to plan the expansion of our market share.”

And Brazilian bizzers do indeed need help. Consider these figures: The number of local pic releases is at a record high of 80, yet the market share is falling, with January-July figures showing the total B.O. of local pics decreasing by 11.2% and the total attendance falling 9.4%.

Nonetheless, thanks to those incentives, local production is booming and expected to continue. Plus, on top of the existing incentives and the Sector Fund, another funding system that will allow local TV broadcasters to use coin for pics and indie TV shows is expected to go online in 2008, Rangel says.

While virtually all local production companies use the incentives, some are increasingly seeking coin abroad through the establishment of international co-productions.

Gullane Filmes, which makes commercial and arthouse pics, is an example of a growing production company. Founded in 1996, it had its big breakthrough with Cao Hamburger’s “The Year My Parents Went on Vacation,” which had a fine B.O. performance and preemed in competition at Berlin this year.

Gullane has four finished features, an outstanding number for an indie in Brazil, all scheduled to be released this year or in the second half of 2008.

Four other Gullane features are in different stages of production, including two international co-productions. Marco Bechis’ “Birdwatchers,” a co-production with Italy’s Classic and RAI, is scheduled to begin lensing this month in Western Brazil’s Mato Grosso state. Yu Lik-wai’s “Plastic City,” a co-production with China’s Xstream Pictures, is due to be lensed by the end of this year in Sao Paulo.

Also taking advantage of a global outlook is international sales agent Vereda Filmes, launched at Cannes this year. It is funded by RB Cinema I, Brazil’s top private-sector film equity fund. Vereda has 11 features in its distribution portfolio.

Yet the business still needs federal coin to grow internationally. “We will be increasingly seeking international partnerships,” says company co-owner Fabiano Gullane. “But the incentives are crucial for Brazil’s film industry. We must improve the existing incentive systems and continue on this same path.”