Streams and producers wage billion-dollar war for film and series resources

An agenda on July 10th brought together, in Brasília, the Ministry of Culture and the National Cinema Agency () with representatives of the main streaming services operating in Brazil. Prime Video, from Amazon, Warner Bros. Discovery, Globo, Netflix and Disney approached the ministry to raise disagreements with the proposed regulation of the sector defended by independent producers and the government.

The document presented by the executive director of the Strima association, Luizio Felipe Rocha, and representatives of the five heavyweights, brought “points for discussion” to Bill 2,331/22, reported by deputy Jandira Feghali (PCdoB-RJ). The text, created in the Senate, was changed in the Chamber’s Culture Committee and received a replacement from the rapporteur two days before the meeting between Strima and the Ministry of Culture. This text, however, should no longer be voted on, as will be explained throughout this report.

Since discussions about regulating the sector began years ago, one of the central points of divergence between independent producers and streaming services is the contribution rate to the Audiovisual Sector Fund (FSA), the main financing tool for the industry in Brazil.

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This was the problem once again: the proposal made by the Culture Commission and endorsed by the government proposed a Condecine rate — contribution channel to the FSA — at 6% of , while companies suggest a level of 3%.

In the document, to which the InfoMoney had access, Strima argues that a 3% rate would bring an annual contribution of R$1.4 billion, higher than Condecine Teles, the contribution made by telecommunications companies that represents more than 90% of FSA revenue. It also suggests that the calculation base deducts indirect taxes and “secondary availability”.

Unlike what happens with Condecine Teles, however, not all of the value calculated by streaming would be allocated to the Sector Fund.

Both the proposal presented in the substitute and the reservations made by Strima involve some level of deduction of the contribution via Condecine for the direct application of resources in new productions. The text of the substitute speaks of a 60% reduction in investments in the licensing or pre-licensing of independent Brazilian works. Strima wants 70%.

This means that Strima intends to contribute 30% of its Condecine tax rate directly to the FSA coffers, something in the region of R$400 million, if Strima’s own estimate is used as a basis. The association also wants to expand the deduction possibilities within the proposed 70% in addition to licensing and pre-licensing of works.

In audiovisual, pre-licensing works as a kind of anticipation of resources while a film or series is still in production. “It’s important money, because it helps to produce the work. It gives resources to make that film”, explains the professor of the Cinema and Audiovisual course at ESPM, Ana Paula Sousa.

Licensing, explains Sousa, is a temporary contract with very specific clauses regarding time and region. When a , it is already produced and will be available on the platform for a certain number of years, in a certain region. After this period, a competitor may make an offer to include it in their catalogue.

For a long time, streaming companies did not agree that only these modalities were part of the deduction hypotheses. The sector claimed that the provision of services, when a production company is hired to make an original series or film for the platform, could also be deducted. It would be as if original streaming productions were financed with resources from Condecine, producers argue.

Sector representatives were against the measure: “They [streamings] they can commission independent Brazilian productions, dividing the patrimonial rights. Then the producers have access to public funding and it adds to their money”, explains the executive president of the Brasil Audiovisual Independente association, Mauro Garcia. “Not having full patrimonial rights, no.”

According to the document presented by Strima to the Ministry of Culture, the sector gave up asking again for the inclusion of service provision among the waiver hypotheses, but treated the hypothesis of co-productions with independent producers as “essential”.

If the suggestion of a 70% deduction in “direct investments”, as the streams call it, was accepted, Strima also requested that 25% of this amount could be invested in:

• Training, training and technical qualification projects for professionals in the audiovisual sector;
• Implementation, operation and maintenance of infrastructure for the production, availability and delivery of audiovisual content in Brazil;
• Accessibility of audiovisual content in Brazil;
• Support and assistance to associations representing categories of professionals in the audiovisual sector.

The government disagrees with a deduction percentage above 60%. To the InfoMoneythe executive secretary of the Ministry of Culture, Márcio Tavares, said that the 60% proposal is already high and a higher value would be “counterproductive in every way”. “For us, the ideal would be for the value to be more balanced”, he stated, without pointing out an ideal level.

Calculations made by Ancine at the request of the Ministry estimate that the revenue of companies linked to streaming services in Brazil is approximately R$70 billion. Under a Condecine of 6%, the sector’s total contribution would be R$4.57 billion, of which approximately R$1.83 billion would go directly to the FSA coffers and another R$2.74 billion would be deducted.

This account is one of the reasons why the rate is not a consensus even among representatives of the sector. In a motion from the Superior Cinema Council (CSC) published in May 2024, the body asked for a 12% contribution, without deductions, directly to the FSA.

“If they [streamings] advocate a 50% discount, let’s suppose, the 12% rate becomes 6%. The current percentage of 6% that is being processed is adequate if it all goes to the Audiovisual Sector Fund”, argues filmmaker Cíntia Domit Bittar. The director defends a regulation similar to the European model, in which there are financial and industrial obligations. “Here we are seeing a model in relation to collection with the discount.”

Producers defend a greater contribution to the FSA so that the share of direct funding from public authorities is more relevant in financing Brazilian works. There is also a sovereignty argument: as almost all major streaming companies are based outside Brazil, financing via FSA would better respond to the demands of the local industry.

Exchange of hands project

There is so much talk about the contribution of streaming to the FSA because it will represent the biggest jump in the fund’s revenue since 2011, when telecommunications companies became its main financiers. To give you an idea, that year Condecina’s revenue was R$54.6 million; the following year, after the approval of Condecine Teles, the number jumped more than 15 times, to R$906.7 million.

At the time, Ancine, the agency managing the fund, collapsed without enough structure and employees to deal with the jump in assets. The total number of permanent employees in the body needed to increase from 234 in 2011 to 343 in 2012.

According to executive secretary Márcio Tavares, Ancine is already experiencing another moment and, even so, has been preparing for a possible advance in regulation. “We are strengthening the institutional structure, we will have more competitions, new employees. The agency is strengthening itself from an institutional point of view. If the agency receives greater funding, it will be able to cope”, he says.

The only thing left now is to know when a text on the regulations should go to vote. In a turnaround for the sector, which was waiting for the vote on the Senate project that was processed before the Culture Committee of the Chamber of Deputies, the president of the House, Hugo Motta, appointed in September the deputy Doutor Luizinho (PP-RJ) as rapporteur of another proposal, PL 8.889/2017, authored by the then deputy Paulo Teixeira (PT-SP).

The government did not participate in appointing the rapporteur, but there have been conversations between the Ministry of Culture and the rapporteur in recent weeks. Since assuming the proposal, Doctor Luizinho has met with representatives from streaming, the broadcasting and audiovisual sectors, but no text has been presented — the expectation is that this will happen within 30 days from the rapporteur’s appointment.

Although there is an expectation that the rapporteur will make changes to the text in comparison to the substitute presented by deputy Jandira Feghali, the sector’s expectation is to maintain the 6% rate and the hybrid allocation of resources between contributions to the FSA and deductions.

In the document sent by Strima to the Ministry of Culture in July, the association asked for a 50% discount for services with half Brazilian content. According to the InfoMoneythis suggestion can be accepted by the rapporteur.

Ancine data from 2023 shows that no platform has this proportion of national works, although a high percentage of titles do not have a nationality available. Globoplay, for example, recorded 35.2% Brazilian works and 23.7% foreign works. All other 41% did not provide information on nationality.

If it depends on the Ministry of Culture, the text will be voted on at least in the Chamber in 2025. Deputy Doutor Luzinho was contacted, but did not respond to the contact.

Quotas and prominence of Brazilian content

Another topic of conflict between independent producers and streaming companies is the proportion of Brazilian titles in their catalogues. The proposal coming from the Culture Commission and supported by the government established a four-year deadline for streaming companies to have at least 10% Brazilian content in their catalogues, of which 60% must be independent productions.

Streaming has a different proposal: fewer Brazilian films for the minimum number of total works in the catalog and 50% of independent productions.

Quota proposal made by PL 2,331

Quota proposal made by Strima

People in the sector argue that the increase in the deduction percentage proposed by streaming companies has a double effect for the platforms: to fill the quota, the platforms will have to license Brazilian films and series, therefore, the larger the slice deducted for licensing, the more Brazilian films are covered in the direct contribution reduction to the FSA.

There is an expectation in the sector that the regulation will finally come out soon, although there are now doubts about the new text: “It seems that it will now. We just don’t know what”, says Mauro Garcia, from Bravi.

For Ana Paula Sousa, from ESPM, “there is a consensus today that it is necessary to regulate. It is not good for anyone. The platforms also want regulation, because as it will come anyway, it is better to know what to expect.”

In a statement, Strima said that “it understands and recognizes the relevance of the ongoing legislative debate and will continue to act in a purposeful and collaborative way in the construction of public policies for audiovisual”. The association states that it continues to follow the discussions in Congress and maintains “an open dialogue with everyone involved”.