Would a Greek Euro Zone Exit Hurt the Film and TV Business in Italy, Spain?

Greece - H 2015
AP Images

Greece - H 2015

Last-minute negotiations with debtors are designed to avoid a "Grexit" from the group of nations using the euro as observers discuss the possible fallout on other Southern European countries.

An emergency summit of leaders from euro zone countries on Monday will discuss possible last-minute deals for Greece that would allow it to avoid defaulting on more than $1.8 billion in loan repayments due at the end of the month.

With the country's current bailout program running out, EU countries, the International Monetary Fund and the European Central Bank have urged reforms in return for making available new funds. If Greece defaults on the debt, it risks having to leave the euro zone and possibly even the EU.

Observers have wondered if a Greek euro zone exit, which has been dubbed Grexit in Europe, could have fallout for other Southern European countries that have been emerging from deep recessions in recent the past couple of years, particularly Italy and Spain, including their entertainment industries. 

Stock markets across Europe are expected to take a hit if Greece defaults, and there is expected to be fallout on the value of the euro, which could have an impact on deals between European and U.S. companies.

After emerging from their country's worst recession since World War II, Italian entertainment industry folks generally feel though that the worst is over, no matter what happens in Greece. They are looking forward to a brighter economy, boosted by incentives for the film and television industries. With its slowly resurging industry, insiders are mostly not too worried about any contagion from Greece's crisis.

“Honestly, I feel that this will not impact the Italian industry, as commercial relations with Greece in our sector are not so frequent,” said Cinecitta Studios CEO Giuseppe Basso.

After lifting the production tax credit limit and responding to the falling euro, Italian cinema is looking forward to a return to big Hollywood films and television productions to the country. This year alone, the Ben Hur remake, James Bond film Spectre and Zoolander 2 are among the films taking advantage of the new tax breaks.

Last year, Everest took over Rome’s Cinecitta Studios to depict the tortuous expedition in Nepal. Not since Martin Scorsese’s Gangs of New York has big Hollywood’s presence been so clearly felt in the country’s capital.

Last year, the number of Italian productions also increased to 180, compared to 137 in 2013. While 2014 box-office numbers suffered a setback, dropping 7 percent from 2013 down to $648 million (574.8 million euros), ticket sales have already been on the rise this year, boosted by high-performing Hollywood films. The top three films of the year, Fifty Shades of Grey, Furious 7 and American Sniper, have already drawn in $62.7 million, compared to last year's $51.6 million top-three pull. Local films Si Accettano Miracoli and Youth have also drawn Italians to theaters in droves.

Additionally TV advertising sales, which are tied to economic trends, finally started to snap back in the final quarter of 2014. After a four-year slump, major TV networks are expecting an increase of advertising sales ranging from 2 percent to 4 percent this year.

In Spain, the film industry has also bounced back since the dark days of 2012 and 2013 when it seemed there was no light at the end of the tunnel, with plunging theater attendance, skyrocketing piracy and austerity measures that slashed subsidies and hiked the sales tax on movie admissions.

In 2014, not only were admissions up, but more than one in four movie tickets sold in Spain was to go see a domestic film. That’s a first in recorded history in Spain.

Spanish films, led by the surprise hit of the year A Spanish Affair, grossed a record-breaking $153 million (€123 million), compared with €119.8 million in 2012, which was the previous high. Spanish films earned 75.3 percent more than in 2013, with an 89 percent leap in the number of tickets sold to 20.8 million in 2014.

The figures were in part thanks to a bumper crop of local fare. Spanish Affair raked in an astounding $69.5 million (€56 million) and became not only the highest-grossing film of 2014, but also the all-time highest-grossing Spanish film and the second highest-grossing film in Spain from any country, only behind Avatar.

After three years of clamoring for a new financing model, Spain’s film industry celebrated earlier this year when the government approved a decree to restructure subsidies so that producers will know how much aid they will receive before production begins.

The Spanish Film Protection Fund budget used for film subsidies for this year will be $60 million (€52.5 million), with the government greenlighting a $18 million (€16 million) extraordinary credit to satisfy back payments to producers dating back to 2014. The fund is set to grow over the next three years, with 2016 kicking off the new financing model with $39.6 million (€35 million) earmarked for amortization, $34 million (€30 million) for new subsidies and $11.3 million (€10 million) for other aid.

And, in March, rumors that the government was thinking of dropping the 21 percent sales tax that the industry says is strangling admissions gained traction. The government has avoided any confirmation on whether it would reduce the tax.

And the icing on the cake is that after years of watching the Spanish TV ad market drop, 2014 saw the market return to growth in the second half of the year. The market grew some 11 percent for the year to €1.89 billion against €1.7 billion the previous year, according to Infoadex.

"Spain is a high-momentum advertising market bouncing back strongly," said Liberum Capital analyst Ian Whittaker late last year.

Given all the recent momentum, what would a greek euro zone exit do to the entertainment industry in Spain? "I don't think it will influence the industry very much," says veteran Spanish producer Antonio Perez, vp of Media Desk. "It will be a disaster at the economic and political level, not just for Greece, but for all of Europe. But for the Spanish industry, which is coming out of the financial crisis, I don't think it is a threat."

He added: "We are very far from that kind of a situation. However, for the Greek industry, which is not very strong, it would be a huge shame. Greece has a lot of fresh talent that is starting to emerge and it's a  shame they would have to pay for a political and economic problem."