What the Catalan Crisis Means for Spain's Movie Business

Demonstrators hold Spanish flags and placards - protest in support of Article 155 - Getty -H 2017
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Demonstrators hold Spanish flags and placards reading 'not to the impunity of the coup plotters' as they protest in support of Article 155 and against the independence of Catalonia under the slogan 'Let's recover Catalonia. For the unity of Spain and the Constitution. Against Impunity' called by DENAES foundation at Colon Square on October 28, 2017 in Madrid, Spain. The Spanish government stripped Catalonia of its autonomy after the Catalan parliament voted yesterday to declare independence. 

Spain's restive northeast region goes to the polls Thursday to decide whether to continue its push for independence.

Images of citizens from Spain’s northeastern region of Catalonia, plastered across the world’s newspapers in October, seem far away now. In those heady days, a region in the heart of Europe wrestled with how to garner greater autonomy while respecting the rules of democracy.

When the Catalan regional government unilaterally declared independence from Spain — and then suspended its effects — in late October, it capped a month of historic moments that split Catalan society in two and challenged Spain’s territorial integrity and constitution.

Catalan aspirations for greater autonomy crescendoed into high-stakes brinkmanship between the regional government and the central government, with thousands of companies moving their fiscal headquarters overnight from Barcelona to seek more stable ground in other parts of Spain.

That period of tense uncertainty could close Thursday when Catalans go to the polls in snap elections called by the Spanish government after it dissolved the renegade regional parliament. 

And while the world’s markets, EU institutions, the Spanish government and Catalan citizens await the results to see what direction voters will go — to further support the push for independence from Spain or to work to renegotiate how the region fits into the Spanish state – one sector that is hoping this will be the end of the so-called Catalan crisis is the Spanish film industry. The industry would like the country's politicians to focus on what the business desperately needs: financial reform. 

A quick political primer: Spain's government is made up of a mosaic of regions with representation in the national parliament. The ruling center-right Popular Party, led by Prime Minister Mariano Rajoy, does not hold an absolute majority in the national parliament and to govern, and pass a budget, must broker agreements with smaller parties. For Rajoy's 2018 budget, the prime minister is counting on backing from the PNV, a Basque regional party that also supports greater independence.

That budget promises reforms that could provide a much-needed financial boost for Spain's ailing film industry. Among them: tax cuts.

In September, a round of applause and a flurry of press releases celebrated the government’s decision to lower the 21 percent sales tax on movie tickets in 2018 — long the battle cry of the Spanish film industry, which blamed the tax, Europe’s highest, as a drag on admissions. The new budget would see the tax fall to 10 percent. Announcing the drop, Spain’s culture minister joked the country's film industry would be so happy, they might even “say something nice to me this year in San Sebastian," the country's leading film festival.

Alas, the jovial environment crumpled shortly thereafter. The political crisis in Catalonia, sparked by an independence-minded regional government that holds a slim majority in the region's coalition government, put the budget’s approval on hold.

“Everything has been paralyzed by the Catalan situation,” said a representative for Spain’s treasury, which handles the due process for the budget. “What was negotiated and expected to be presented in September, no longer stands. The details are now on the table for negotiation.”

The PNV, which had been expected to support Rajoy's budget, is negotiating for bigger handouts for the Basque region. Could that mean that tax cuts — in particular the tax on movie ticket sales — could be scrapped? “I don’t know,” is the answer from the treasury.

While the Spanish film industry waits to see what happens with the sales tax, Catalan producers are worried about the sharp drop in production in their region, which plunged 25 percent in 2016, according to Raimon Masllorens, president of the Federation of Catalan Producers (PROA).

Insiders blame the drop on a decrease in public financing. A lack of funds at regional network TV3, which regularly supports Catalan films, a reduction in subsidy funding from the Spanish Film Institute, and a sharp drop in co-productions with Spanish national public broadcaster TVE.

Significantly, television financing of Spanish and Catalan films is expected to drop further in 2018 as Spain’s Constitutional Court ruled illegal a requirement that forced broadcasters to earmark 6 percent of their budgets for production.

“The crisis at TV3 is especially lethal for the production of documentaries, as is the decline in funds at the film institute,” said Isona Passola, president of the Academy of Catalan Cinema in an interview with El Pais.

PROA has proposed a National Public Fund to Support the Audiovisual Sector (FASA) to be managed by the Spanish Film Institute, which, according to PROA’s estimates, could marshal some 158 million Euros ($187 million) in its first year. Supporters say the funds would come from Spain’s General Budget as well as monies from broadcasters. 

And exhibition?

According to Rentrak, ticket sales in Catalonia for the fourth quarter are in line with the rest of Spain — that is to say down 1 percent.

Some in the industry blame piracy. Others blame a change in movie-going habits. And still others say it is linked with a weaker crop of films.

But everyone agrees that the 21 percent VAT on movie ticket admissions is decimating exhibition. And for that, there is no solution until the government passes a new budget. And for that, they need the support of the PNV.

But before any of that can happen, Catalonia has to go to the polls. Until the outcome of Thursday's vote, Spain's film industry will continue to hold its breath.