Cinema not so paradiso
The VAT rise on movie tickets threatens to deal a death blow to the industry
It has been a summer of discontent for Spain's movie theaters. Up and down the land exhibitors are fretting that the government's decision to raise the value-added tax rate (VAT) on cinema tickets by a huge 13 points, from eight to 21 percent, could be the definitive blow to an industry that is growing weaker by the day.
From September 1, Spaniards are due to start paying the highest VAT rate in the euro zone not just when they go to watch a movie, but also when they go to a concert or play. To top it all, while the Treasury is going to collect more money, it will cause a drop in income of 10 million euros in the film industry alone, according to a study by PricewaterhouseCoopers, commissioned by exhibitors and distributors and now in the hands of the government.
To understand the present, you need to take a look at the past. Cinema attendance figures in Spain have seen a major drop, unprecedented in Europe, in recent years - in 2004 there were 144 million spectators; in 2011, there were 98 million. What's more, this crisis has come at a time when theater owners have stumped up around 200 million euros to equip half of the country's 4,000 screens with new digital projection equipment.
This fall in audience numbers cannot be explained without the rise in piracy. According to the Pricewaterhouse study, Spain finds itself top of the global list when it comes to the illegal copying of digital content, especially films, and no government, whatever its ideology, has committed itself to eradicating the problem.
Lack of optimism
So with such an outlook, what does the future hold? Opinions differ, but all lack optimism. Last week it was announced that the nine-screen cinema in Utrera, a town of 50,000 inhabitants in Seville, will close. That leaves just 850 more screens to disappear from the 859 expected to be affected by the VAT rise. It will be the provincial capitals and small cities that will end up with no cinemas, predicts exhibitor, distributor and president of Spain's Cinema Academy, Enrique González Macho. In three months he has had to close six complexes in Madrid, Zaragoza, Cuenca, Palma de Mallorca, Bilbao and Barcelona. "If it's not stopped, the hemorrhaging will be terrible," he says.
Juan Carlos Tous, head of legal movie download site Filmin, believes the market will swap its rigid ticket pricing for more liberalized charges, with different offers for different days, times and population sectors. "If the [recent reduced ticket price] offer for Madrid senior citizens worked so well, why not somehow widen it to young people, who struggle today to afford a ticket price of eight euros?" he wonders.
The owner of the Verdi cinema chain, which has 14 screens distributed around Madrid and Barcelona, is already studying such moves. Enrique Pérez - who does not belong to FECE, the association that covers 90 percent of exhibitors, as he says it does not defend cultural diversity - says he is planning a fall full of new ideas. With the final details still to be decided, he will apply the VAT rise to peak sessions and reduce ticket prices at off-peak times. "We will look at the possibility of loyalty cards for moviegoers, something like a menu of prices, so that nobody who wants to see an independent film will be stopped from doing so.
"There will be very little space for independent films, above all European ones," he warns.
Pedro Pérez, president of the producers' association FAPAE, explains that efforts are still being made to get the measure revoked. So far they have been without success, but Pérez remains hopeful: "I am confident that in the end they will reverse it, as has happened in other countries where they made the same mistake."