Underneath the Red Carpet: Government Intervention in the Spanish Movie Industry

Abstract

Despite its glamour and elevated social status, the movie industry receives much assistance from governments around the world. Governments mainly use both direct (subsidies and tax credits) and indirect (screen quotas or censorship) tools to help their own domestic motion picture industries. This article presents evidence of an indirect government intervention in the Spanish movie industry. In 1999, the Spanish government mandated that operating TV networks invest 3% of their receipts on the production of movies in the Spanish language. Using a new dataset of Spanish movies produced between 2000 and 2008, this article studies the empirical relation between TV network participation on movie production and box office success. Private TV network participation (as opposed to public networks) through production (and not distribution) was found to be associated with higher box office revenues and gross profitability rates, even after controlling for movie production budgets.