Spanish Industry Divided Over 'Game of Thrones' Recovery Plan

Mountain Oberyn Game of Thrones - H 2014

Tax breaks to attract international productions face opposition from Spanish producers who say Madrid should do more to help the local industry.

MADRID – When HBO did an extras casting call for Game of Thrones in the Andalusia region of Southern Spain, more than 55,000 people turned up for a shot at 1,000 walk-on roles.

News that the phenomenally popular fantasy series will shoot parts of its fifth season in Southern Spain had people in the economically depressed region (where unemployment tops 35 percent) hoping Game of Thrones knights and dragons would ride to their rescue.

Spain looks longingly at the Game of Thrones effect in Northern Ireland, where Deputy First Minister Martin McGuinness said in April the HBO series has injected some $34 million annually in the local economy. In Croatia, special Game of Thrones location tours have seen tourism revenues jump 24 percent since 2010.

The Spanish government is crossing its fingers international shoots will revive the local industry, which was decimated by the economic crisis of 2008-2009. In addition to Game of Thrones, big budget studio shoots, such as Ridley Scott's biblical epic Exodus: Gods and Kings and Fernando Gonzalez Molina's Palms in the Snow, which Warner Bros and Telefonica are backing, are bringing in much-needed cash and jobs for local talent and service companies.

Spain's center right government led by Prime Minister Mariano Rajoy recently approved new legislation aimed at reviving Spain's film and TV industry. Central to the measures is a 20 percent tax credit for domestic investment in production. But a small section of the legislation opens the door to an historic first by offering up to 15 percent reimbursement on local spending for foreign productions that shoot in the sunny, southern European nation.

Spain's film commissioner Carlos Rosado hailed the legislation when it was in its draft stage as "a crucial and important first step" in attracting international productions to Spain and making the region competitive with other big European territories such as France, Germany and Italy, which already offer similar incentives.

As a shooting location, Spain has several selling points, including its countless sunny days, varied landscape and historic architecture from Moorish castles and sleepy Mediterranean towns to gothic churches and modernist urban centers.

"The landscape and architecture we found in Spain are perfect for parts of the story to be told in the fifth season of Game of Thrones," said Jay Roewe, a senior vice president of production at HBO. But in the runaway production game, great incentives always trump great views. "Incentives are, and will continue to be, an important part of our filmmaking process," Roewe admits. "When there is an incentive in place it raises the interest of us being able to shoot there. Assuming, of course, there is already an existing infrastructure and the locations work for our creative needs."

When it comes to Spain's new tax incentives, however, many Spanish producers are crying foul. In their eyes, while Madrid is looking to give foreign producers a tax break, they are squeezing every last Euro out of the local industry. They point to a tax hike in 2012, when Spain boosted the value added tax on theater, concert and movie tickets from 8 percent to 21 percent. The move, said industry leaders in an open letter this week to Prime Minister Rajoy, has caused ticket sales to plunge 30 percent over the past two years, triggering job losses and bankruptcies.

The proposed tax incentives, say critics of the new bill, do too little for Spanish companies. As it stands now, the bill allows for a 15 percent tax refund for international shoots even if no local co-producer is involved. Comparable schemes in Germany, France and Italy offer tax rebates of up to 40 percent and typically require a local production partner to qualify. The bill would also cap tax rebates at just over $4 million (€3 million) per production. While that may be sufficient for international features and runaway TV productions doing location work, it falls short for ambitious big budget Spanish films.

Juan Antonio Bayona's The Impossible (2012), a tsunami survival tale starring Ewan McGregor and Naomi Watts, cost more than $40 million. It shot mainly in Spain, with some location shoots in Thailand. Under the new scheme, it would have received tax benefits of just $4 million, or ten percent of its budget, less than in almost any other European country.

"One of the biggest assets of the Spanish film industry is its quality developing features that can travel abroad," says Oscar-winning Spanish producer Axel Kuschevatzky (The Secret in Their Eyes) of Telefonica Studios. "The cap tax credit can create a disadvantage for local talent trying to make bigger films for international markets, even big movies just for Spain."

"We were expecting more and, given the way the draft looks now, it seems insufficient," said Ramon Colom, president of the Spanish producers lobby FAPAE. "We hope to be able to amend it in the governmental and parliamentary process that remains. It’s a problem of competition. With these figures, we can’t compete with other countries and the result is damaging for the Spanish industry."

The Spanish industry hopes it can still amend the tax incentives bill as it moves through parliament before becoming law.

But Spain needs to move fast. Bayona is set to shoot the sequel to zombie action blockbuster World War Z. Getting the Paramount Pictures' tentpole to shoot in Spain would be a coup for the local industry and, along with Game of Thrones, help put Spain's industry back on the map.