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A return of investors to Spain?

World Report: Spain 2012

Struck by a perfect storm — shrinking home markets, rampant piracy, subsidy cuts — Spain’s film industry is down in funding, production levels and budgets.

Down, but not out. Some producers are showing significant resilience against the recession.

Crisis tactics were emerging only weeks after Spain’s ICAA film institute saw its Film Protection Fund slashed by 36% to e49 million ($61.25 million) on April 3. Five months on, production contours are far more defined.

For producer Xavier Parache, “this is a really tough moment, but one of opportunities as well.”

Just how tough was brought home to the industry in mid-July when Spain’s center-right Partido Popular, which won power in November, announced a hike in cinema ticket sales tax from 8% to 21%.

Largely holding in the past decade, 2012 total box office in Spain plunged 11.2% through August to $472.5 million, per Rentrak. DVD sales in 2012 will drop to $92.5 million, vs. $385 million in 2004, Screen Digest predicts.

But, per media lawyer Francisco Menendez, at Singular Law, Spain’s biggest bane remains uncertainty about the future of the country’s subsidies, or other public incentives.

Recession is proving a game changer. “The old system of mostly TV money and ICAA subsidies will probably be gradually replaced as people look into other ways of financing films,” says Christophe Vidal, director of Natixis Coficine, Europe’s biggest film bank.

That’s already happening. In June, the government renewed nationwide 18% film tax breaks through the end of 2013. In Spain’s Canary Islands they leap to 38%. However, other-sector incentives — for shipping and solar/wind industries — have been rescinded.

“Banks are running out of tax schemes to offer clients,” says Juan Gordon at Morena Films. “Two or three” — Banesto, for example — now recommend film investment.

Per Susana de la Sierra, ICAA director general, tax break investment has grown in recent years and is now consolidating.

Gordon agrees: “The market’s matured. Banks are increasingly comfortable structuring tax benefits. It’s much easier to find film investors and larger investments.”

In Barcelona, Parache has set up Gate Media, a film finance consultancy and packager, that is in advanced talks to rep Natixis in its day-to-day cash-flow credit business in Spain. It’s also teaming to tap new tax break investors, leveraging close associations with some of Spain’s most powerful law firms, with one eye on attracting big international shoots to Spain and to provide fiscal funding to national producers.

This is hardly tilting at windmills. Used by Warner Bros. and Relativity Media on “Wrath of the Titans” and now by Universal for “The Fast and the Furious 6,” the Canary Islands’ 38% break is far more fulsome than Germany’s (16%), the U.K.’s (16%-20%), France’s (20%) and Italy’s (25%).

In July, producer Adrian Guerra announced Ylands, which will provide production services on Canary Island international shoots, advising them on Spanish and Canary Island tax credits. First film serviced is Eugenio Mira’s Guerra-produced “Grand Piano,” starring Elijah Wood and John Cusack, which shoots two weeks in October in Las Palmas.

“It would be logical for producers to attempt to structure more international co-productions, although it may be too soon for that tendency to really kick in,” De la Sierra says.

Once icing, international pre-sales are becoming an increasingly important part of the film-financing cake.

Also, led by Telecinco and Antena 3, Spain’s commercial broadcast networks are still obliged to plow 3% of annual revenues into co-producing or buying Spanish films.

Telecinco Cinema will “try to finance films through international sales, pay TV money, tax breaks,” says CEO Ghislain Barrois. Ricardo Darin starrer “The 7th Floor” shoots November, Daniel Monzon’s action-thriller “El Nino” next year.

“We are looking for more internationally orientated films, developing more projects in English and co-productions,” says Simon de Santiago at Mod Producciones.

Other producers are moving into English-language projects.

At Cannes, sales agent Marina Fuentes, producer Arcadia Motion Pictures and producer-distributor Wanda Films launched Dreamcatchers to produce, finance and sell usually higher-bracket English-language movies.

Its first production, $25 million teen novel adaptation “Mariah Mundi and the Midas Box,” was financed “significantly” via Spanish tax breaks and equity, and Dreamcatchers’ pre-sales and minimum guarantee for international rights, per Arcadia’s Ibon Cormenzana.

English-language’s key “is not the language but that it grants you actors with far bigger marketing impact,” says Fuentes.

Another discernable development: production costs are tumbling, down 30%-40% vs. 2011, says “The Impossible” producer Enrique Lopez-Lavigne at Apaches Ent.

“Beginning with actors, the sector has to realize that, for films targeting Spain’s domestic market, costs have to decrease,” says Mercedes Gamero, at Antena 3 Films. She confirmed, however, that the broadcaster’s film arm will go on financing local Spanish movies and international, English-language titles incorporating Spanish talent.

“We are evolving Morena’s production financing away from state grants towards private investment,” Gordon says. “Production will be more market-orientated simply because the sources of finances are changing.”

Not all companies have resources to deal with not only artistic and production challenges, but also financial issues, Vidal says.

One thing is certain: Spain’s sector is set for a shakeout, and continuing media concentration.

World Report: Spain 2012
A return of investors in Spain? | Co-prods, English-lingo pics help Spain biz survive a hard landing | Web, low costs, lead to profits

San Sebastian Film Festival @ 60
Stars buoy San Sebastian Fest’s spirits | Spanish bizzers dig for future B.O. coin at fest | Event connects with local after turbulent times |

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