Spain's Box Office Sales Drop 15 Percent in 2013

20th Century Fox
"The Croods"

A downward spiral of poor movie attendance and government austerity measures coupled with Europe's highest VAT on ticket sales left the film industry gasping for breath.

MADRID -- The year can't end fast enough for the Spanish film industry, which was hit by austerity measures that depleted state subsidies, piracy that ranks among Europe's worst and a VAT sales tax hike on theater admissions that skyrocketed to 21 percent.

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The result? Spain's total box office sales should plunge a startling 15 percent for 2013, marking a new low.

Fox's The Croods tops Spain's 2013 ticket sales with $18.5 million, followed by Universal's Despicable Me 2 ($17.5 million) and World War  Z ($16.3 million).

Spain has long wrestled with rampant piracy. The Coalition Against Piracy estimates that more than 77 percent of the digital content consumed in Spain is pirated, worth an estimated 5.2 billion euros ($7.2 billion) to the music, film, publishing and videogame sector. The fact that the government has stepped up measures to fight piracy in the past few months goes hand in hand with the fact that president Barack Obama appointed HBO executive James Costos as the U.S. ambassador to Spain.

In Spain, movie tickets cost about €11 ($15). When the government hiked the VAT from 8 percent to 21 percent just after slashing the national cinematography fund 14 percent to €33 million, the industry cried foul and accused the center-right government of conducting a vendetta against the culture industry.

Spain's treasury minister blamed the sector for the drop in revenues, charging that the loss was due to poor quality and boring films.

When moviegoers turned out in droves to take advantage of a three-day Fiesta de Cine, which offered tickets for €2.90 ($3.90), the industry pointed the finger clearly at the government for suffocating the sector.

According to figures from FECE and Madrid's Complutense University, an estimated 3 percent of the price of the ticket goes to authors' rights organizations, 21 percent goes to sales tax, 33 percent goes to exhibitors and some 43 percent to the distributors.

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While the ticket price is lower than England, the U.S., Germany and other EU countries, Spain still suffers from vast unemployment -- as much as 27 percent in parts of the country -- and an ongoing financial crisis that makes movie attendance a bit of a luxury.

The contrast between the attendance during the Fiesta de Cine -- a 633 percent jump from the ticket sales during the first three days of the previous week -- prompted many to question whether people aren't going to the movies because it's just too expensive.

"After so much bad news for so long, it shows that audiences are interested in seeing movies in theaters and paying to go see them," said Arturo Guillen, general manager of Rentrak Spain. "And it showed that people are sensitive to the stimulus of lowering ticket prices."

But exhibitor Enrique Gonzalez Macho, president of the Spanish Film Academy, cautioned that it's unrealistic to think a theater could exist with those prices over long periods of time.

"We have to rethink the commercial part of the industry," Gonzalez Macho said. "It's clear that the massive attendance [from the Fiesta] can't be maintained, but we should find a balance between attendance and price to reach profitability."

Last week, when the government announced it had mapped out a new financial model that included fiscal incentives to attract private capital and a lowering of the VAT, the industry breathed a sigh of relief.

Even so, the industry is holding off on passing judgment.

"The most urgent thing now is to define how and when the payments for aid corresponding to the years of 2011 and 2012 will be made so that we can then focus on a new finance model," Ramon Colom, the president of Spain's producers' confederation FAPAE said.