email print share on Facebook share on Twitter share on LinkedIn share on reddit pin on Pinterest

Panorama of the public film support in Spain I: National aids and legislation

by 

- Information about the different funding schemes offered by ICAA for short films, feature films, script development, distribution of European works, for the attendance to international festivals, the launching of film festivals in Spain and the preservation of original negatives.

1.- ICAA

Instituto de las Ciencias y las Artes Audiovisuales (ICAA) is the National Institute for Audiovisual Sciences and Arts. It is a self-governing administrative body attached to the Ministry of Culture. Its budget was Euro 107,74M in 2008. ICAA has different funding schemes for short films (production and amortization), feature films, script development, distribution of European works, for the attendance to international festivals, the launching of film festivals in Spain and the preservation of original negatives.

(The article continues below - Commercial information)

Breakdown of the main schemes:

 

SCHEME

ALLOCATED (in €)

GRANTED (in €)

%

Script Development

600.000

600.000

100%

Reduction of loans’ interest rate (ICO-ICAA scheme)

Film exhibition facilities

500.000

49.071

9,81%

Cinema production

2.500.000

1.332.800

53,31%

Production of feature films (new directors, documentaries,…)

10.000.000

10.000.000

100%

Amortization of films

56.000.000

50.258.264

89,75%

Preservation of original negatives

1.000.000

779.807

77,98%

Distribution of European works

2.500.000

2.492.000

99,68%

Attendance to international festivals

1.200.000

750.614

62,55%

Short Film

Production

800.000

800.000

100%

Amortization

1.200.000

731.822

60,99%

Overall amount

76.300.000

67.794.378

88,85%

Source: ICAA, 2008 Annual Report.

 

 

There are two important juridical definitions closely linked to the regulation of this public support: the film’s cost is the production cost –considered as the cost of the film’s physical production from the beginning to the delivery of the married print- plus the producer’s remuneration (up to 5% of the production cost), the overhead cost (up to 5% of the production cost), the financing cost (up to 10% of the production cost) and the cost for the production of a security copy. The producer’s investment is defined as the own and external investment brought by the producer to the project excluding the regional or national public aids and the broadcasters’ investment.

Most of the money allocated for cinema funding (around Euro 66M in 2008) is granted through two different schemes: the production scheme for films involving new directors –having directed no more than two feature films-, experimental works with artistic and cultural content, documentaries or pilots of animation series, up to Euro 500k, 60% of the film’s cost or the equivalent to the producer’s investment It has an overall allocated amount of Euro 10M ; and the amortization scheme, to be granted at least one year after the theatrical release of the film, with an available budget of Euro 56 million, Within this last support scheme the same production can neither be granted more than 50% of the film’s cost nor more than 75% of the producer's investment up to a maximum of one million euro. The ceiling of awarded money for the same production company or group of companies is fixed to 15% of the scheme’s allocation. Since the money is granted time after the production and release of the film, the producer will have to cash flow the grant. The credits granted through the ICO (see point 2) were mainly conceived to solve this problem.

The amortization scheme consists of two stretches: the general aid awards all Spanish films up to 15% of the net box office collection during the first 12 months following the theatrical release. The final applicable percentage depends on the overall net collection of Spanish films during the year. In 2009 Euro 7,32 million were awarded.

In addition there is a specific aid for those films which did not benefit of the production scheme. The granted amount is up to 33% of the producer's investment, with a ceiling of Euro 700k. The final applicable percentage depends on the overall producer’s investment of the call’s applicants. There is minimum requirement in terms of box office of euro 330k of net collection during the first 12 months after release in theatres in order to have access to this aid. Euro 40,79 million were awarded in 2009.

2.- ICO

Instituto de Crédito Oficial (ICO) is the State-owned public investment bank attached to the Ministry of Economy. ICAA has signed two agreements to give the cinema industry access to credit facilities: one for the financing of the film exhibition industry through the construction, reconversion or refurbishment of cinema theatres; and another focused on access to finance for cinema production. Within this last scheme ICO put at disposal up to Euro 50M a year while ICAA allots Euro 2,5M to reduce the interest rate of the loans granted under the umbrella of this agreement. ICO plays the role of an intermediary, signing agreements with private credit entities where the producers can apply for a soft loan.

The process works as follows: the producer first applies for a loan in any bank with agreement with ICO. ICAA makes a technical evaluation and if it gives the green light, the bank signs the agreement with the producer and ICO lends the money to the bank, with a 6 months Euribor interest rate. At the same time, ICAA decides on granting an aid for the reduction of the interest rate of the loan. The private bank assumes the whole risk of the operation, being obliged to reimburse the money to ICO even if the producer fails to pay it back. Nevertheless any profit due to the payment of the interest –whose ceiling is fixed by the ICAA-ICO Agreement to up to 0,75% +the 6 months Euribor rate- goes to the lending bank. As an additional guarantee the money awarded to a production through the amortization grant by ICAA goes directly to the lending bank, which will discount it to the remaining owed amount.

This kind of soft credit cannot exceed 50% of the film budget (with a ceiling of Euro 1M per film and Euro 4M per company a year). The films profiting of the production scheme are not eligible for this line of credit. The term of the loan is five years, of which the three first years will be considered of deficit gap; in other words, during the first three years the borrower will be paying the interests but not the amortization.

3.- Audiovisual Aval

Even with all these actions at disposal of the cinema producers, many projects were not able to achieve private funding. Each film is a prototype by itself and the standardization does not exist in the small cinema productions. Many banks do not have the know-how to determine if a film could be viable and the fear for the risk closes the access to finance for many projects. Therefore ICAA and EGEDA decided to create Audiovisual Aval (www.audiovisualsgr.com) in 2005, a mutual guarantee society for giving access to finance to the cinema industry by assuming the risk of the loans towards the bank (up to 100% of the risk; up to 65% if a loan takes place under ICO’s umbrella).

4.- Legislation

The Royal Decree 1652/2004 on TV operators’ investment in cinema transposes the European Directive 89/552 that obliges broadcasters (not thematic channels) to invest at least 5% of their annual net income in the co-production of European feature films, series or TV-movies and/or the acquisition of TV rights in advance. At least 3% must be invested in Spanish language projects. The last figures published by ICAA, regarding the year 2007 showed a national broadcasters’ investment of roughly Euro 150M, of which Euro 125M went to works in Spanish language (62% of the amount was invested in production and 38% in acquisition of TV rights in advance), representing almost a third of the financing sources of the Spanish film production industry.

In addition, a new Cinema Law came into force in 2007 (http://www.boe.es/boe/dias/2007/12/29/pdfs/A53686-53701.pdf), introducing tax incentives for Economic Interest Group and venture capital firms linked to the cinema industry.

(The article continues below - Commercial information)

Did you enjoy reading this article? Please subscribe to our newsletter to receive more stories like this directly in your inbox.

Privacy Policy