Spain’s SETT Drives Big Investment to Build Global Media Players

No Spanish industry initiative is likely to drive more conversation at this year’s San Sebastián Festival than the latest moves by the Spanish Society for Technological Transformation (SETT).

Over the past 12 months, state-backed venture capital fund SETT, the investment driver of the Spain Audiovisual Hub, has plowed €215.6 million ($252.3 million) into Spain’s film, TV, video game and new technology sectors, sparking matching private-sector investment of a further €230 million ($269.1 million), says María González Veracruz, Spain’s secretary of state for digitalization and artificial intelligence.

That’s around four times the average budget of Spain’s core subsidy fund at the country‘s ICAA Film Board. 

In other ways, SETT, which is part of Spain’s Ministry for Digital Transformation, also harbors a revolution. Since the 1940s, Spanish governments have offered subsidy grants and loans for individual films, and from around 2015, tax breaks on shoots in Spain.

In contrast, SETT invests up to 10 years in companies with a portfolio of productions, requiring co-investment from private-sector partners, and looking to give them an edge in the international market. It also backs private-sector investment vehicles.

“We are moving from an era of encouraging an ecosystem to consolidating a truly international audiovisual industry,” says González Veracruz.   

Eleven of 15 SETT investments have been made public to date, with beneficiaries including animation sector leaders (Anima Kitchent, Amuse Animation, Planeta Junior), new Spain-based production companies (Good Films Studios Spain, Ítaca Films Madrid, Moonlighting Studios Spain), post-production facilities (Lazona Audiovisual Hub, the Refinery) and a full chain-of-value production-distribution player (Impulse Studio).

Also underscoring the range of SETT’s portfolio, risk capital fund partners include Aurora Media Inversiones, led by the Secuoya Content Group, Culture CAP7, which targets small- to medium-sized enterprises, and elevated genre specialist Moby Dick Film Capital.

Serving as a “public catalyst for growth, employment, innovation and talent, which are all core elements of the audiovisual sector,” SETT brings to the table the weight and power of the Spanish government and European Union backing, says SETT director general Javier Ponce.

With the Spain Audiovisual Hub a key element of Spain’s post-COVID Recovery Plan, SETT’s funding is financed through the European Union’s Next Generation funds, Ponce notes. 

Its model has been built on three pillars, adds SETT audiovisual director María Coronado: “First, it adopts an industrywide approach, rather than a project-based one, addressing the entire audiovisual business ecosystem. Second, its investment facilities are directed at the equity capital of companies or regulated investment vehicles. Third, it promotes public-private partnership instruments in the medium to long term.”

Companies must represent a “worthwhile business opportunity,” she adds.

As global markets have contracted to some 75% of peak TV, according to Ampere Analysis, however, where are these opportunities? The key to SETT is its specific operations. SETT has taken a 46% stake for €19.8 million ($22.6 million), for instance, in Good Films Studios Spain, set up at Spain’s Ciudad de la Luz, one of Spain’s biggest studio complexes. It aims to make competitive English-language movies, budgeted at €15 million-€25 million ($17.5 million-$29.3 million) “with stars of international theatrical market value,” says GFSS head Miriam Segal, producer of “Good,” with Viggo Mortensen and “The Infiltrator,” starring Bryan Cranston.

Attracting such stars, however, is ever more difficult, she adds. “So it makes making independent films at this level very, very hard. So to have a government body like SETT and hopefully new producer-driven tax incentives, it’s like I died and went to heaven,” says Segal. “In a world that’s receding, to have a country with the vision to support filmmakers, independence, training and creation of an industry is very exciting.” 

Established in Madrid by Roberto Butragueño and Andrés Sánchez Pajares and co-owned by SETT, Impulse Studio offers everything, from upstream development to financing, production, post-production, international sales and distribution.

“When we talk with potential partners on projects or potential investors, we have the stamp of security of government backing,” says Sánchez Pajares. With SETT’s support, we can bring “hard equity” to the table, retaining part of the IP, “and offer all services at any phase of a project,” says Sánchez, Impulse Studio CEO. “I think that will allow us to sit at tables where we were not able to talk to date.” 

Further growth opportunities turn on scaling up animation projects aimed at the preschool audience. In another move, investing €9.2 million ($10.7 million) and partnering with Planeta Junior and Amuse Animation, SETT co-bought select distribution rights to hit preschool toon series “Milo,” sold to 186 territories, across multiple formats.

“‘Milo’ represents a strategic opportunity in the field of technology development, particularly in software, video games and mobile applications,” says Coronado. 

“Spain has already established itself as one of Europe’s most attractive production hubs, thanks to its combination of creative talent, production incentives, and infrastructure,” says Maria Rua Aguete at London-based consultancy Omdia. “The next logical step is for Spain to transition from being a production destination to building globally competitive Spanish companies that own and export intellectual property.”

EU Next Generation funds ran out on Aug. 30. SETT doesn’t aim to stop here, however. “The audiovisual sector will remain one of SETT’s strategic areas of activity and will continue under new fund, España Crece. We have begun discussions with [Spanish state bank] ICO to define the procedures and framework for collaboration between the two institutions, ensuring the continuation of co-investment in strategic technologies and sectors,” says Ponce.

A Drill Down on Further SETT Investments

“The goal of the Hub’s second phase is clear: that Spain continues to be not only a great place to film, but also a great place to create, produce, finance, and export content, technology, and intellectual property to the world,” says González Veracruz.

She adds: “It’s a portfolio that reflects an industrial, technological, domestic and international view of Spanish audiovisual production.”

A breakdown of announced SETT investments:

*South Africa’s Known Associates Group and SETT have invested a joint €25 million ($29 million) to launch Moonlighting Studios Spain, a Madrid-based production company, and post-pro The Refinery, with facilities in the Basque Country and the Canary Islands. 

*Alongside DNEG, “The Odyssey’s” sole VFX partner, SETT has taken €24.9 million ($29.1 million) equity in the Canary Islands’ Anima Kitchen, behind pre-school animation series hits “Cleo & Cuquín.” Anima Kitchent is renowned for leveraging YouTube, where it has over 67 million subscribers, in order to launch and consolidate IPs.

“The real edge is the combination: strong IP and production values paired with data analysis that tracks audience trends in real time. Producing quickly and at high quality is precisely what makes that IPs travel into new markets,” comments Pablo Hernández, executive president of the Canary Islands ZEC tax benefit zone.

*SETT has put up €20 million ($23.4 million) of a total €45 million ($52.65 million), the rest coming from Mexico’s Ítaca Films and investor Omega Capital, to found Ítaca Films Madrid, an international content studio. “For Ítaca Films, SETT represents much more than financing. It’s an instrument which institutionalises the industry, strengthens producers and shows that creativity, when it counts on structure and solid bases, can grow and develop better,” says Ítaca’s Santiago García. 

*Focused on the creation, ownership and global distribution of kids & family IPs, Amuse Labs, a new Canary Islands animation company, has received a €6.4 million ($7.3 million) investment from SETT in return for a 48% equity position. Amuse Studios will become Amuse Labs’ second-largest shareholder.

*SETT has taken a 46% equity participation for €1.1 million ($1.3 million) in Lazona Audiovisual Hub, along with Lazona (36%) and El Alamedia Estidios (13%), billed as a Madrid creation and post-production factory aiming to meet the large demand for post-production services in the Spanish capital.