SAN SEBASTIAN  — “Meryl Streep and Hugo Silva revolutionize San Sebastian,” Basque newspaper “El Diario Vasco” trumpeted Sept. 26 as the San Sebastian Festival rounded its final bend.

Streep graced San Sebastian for a career-achievement Donostia Award, a lure for the local press. But it was Silva, the stubble-faced poster-boy of “Paco’s Men,” a popular Spanish TV series, who had teenagers staking out the fest’s main hotel.

As in the U.S., it’s the TV stars that really get younger auds excited, which isn’t always good news for the film business.

Spanish broadcasters, led by Telecinco, Antena 3, TVE, have spent $500 million buying and co-producing Spanish films over the last 10 years, due to laws mandating investment in the film biz. But as far as the bottom line is concerned, it really hasn’t worked. All over Europe, ratings for televised films have plunged, as viewers catch them in multiple earlier windows.

New Telecinco Cinema CEO Ghislain Barrois says that broadcasters nearly all lose money on film investments.

“If pic investment were profitable, the 5% obligation wouldn’t exist,” says Mercedes Gamero, A3 Films topper.

TV bizzers think there should be less division between the two businesses.

“At TVE, we want to integrate film and TV more. The way industries are developing, it’s senseless to treat them as separate businesses,” says TVE head of film Gustavo Ferrada.

TVE and A3 are commissioning two-part features, aired as first-run minis. One, “Fago,” collecteda good 18.7% share this March for TVE. And auds apparently are developing a taste for local shows: For the first time ever, over 2007-08, Spanish series contributed more (8.4%)  to channels’ share than U.S. dramas (8.3%).

TVE chose the starry San Sebastian fest to preem its flagship series “Guante blanco” at a main theater.

Pedro Perez, prexy of Spain’s Fapae producers association, delivered his traditional state of the industry address at San Sebastian. This time round, however, he was flanked by TVE supremo Luis Fernandez. He announced the pubcaster would tubthump Spanish films on TVE and at theaters.

That’s desperately necessary, as San Sebastian underscored.

Despite healthy attendance numbers for the glitzy San Sebastian fest, in general, Spaniards are going to cinemas less frequently. Total Spanish admissions through August are down six million from 2007.

While topically themed Spanish Competition films “Bullet in the Head” by Jaime Rosales and “Camino” by Javier Fesser might impact local theaters, San Sebastian illustrated that Spain’s forte remains small, edgy social-issue pics, like the Moroccan-set “Ordinary Boys,” hip-hop themed “El truco del manco” or “Night Flowers,” an oral history of a working-class Madrid district.

Such films, all worthy, need all the TV tubthumping they can get.

Or a role for Hugo Silva.

Jonathan Holland contributed to this report.