From Deadline|London editor Tim Adler: Filmmakers in Spain tell me the country’s new film law will work against anybody making spainmovies with Hollywood ambitions. Spain has been making a clutch of ambitious movies recently such as Pan’s Labyrinth, Che, and the most expensive Spanish film ever, Planet 51. Sony released Planet 51 last November. All three were funded by private Spanish broadcasters, which have had to divert 5% of revenue into film production since 1999. This has been pumping up to E150 million ($200 million) a year into local production. Now the Spanish government has told commercial channels they can reduce their contribution to 3%. But every TV channel must contribute rather than those just showing recent movies.

And broadcasters will have their investment capped at 60%. Telecinco, for example, provided almost all of the budgets for Pan’s Labyrinth, Agora and Alatriste, starring Viggo Mortensen. Instead, broadcasters will have to spread their money thinner. Good news for local producers. Bad news for anybody trying to make a movie that has any chance of travelling anywhere outside Spain. The average budget for a Spanish film is E4 million. Planet 51 cost E49 million. The new law comes into effect this summer.

“Certain elements of this new law are not beneficial for the bigger productions,” Ignacio Perz Dolset, CEO of Planet 51 producer Ilion Animation told me.

The levy has been extended to all private broadcasters because existing TV channels are contributing less. Blame the ad revenue downturn. Telecinco has, in the past, injected E40 million into local production. This year Telecinco estimates this will drop to E15 million.

The irony is that broadcaster Telecinco, which fully-financed Agora and Pan’s Labyrinth, doesn’t even show the films it puts money into. TV audiences just aren’t interested. Telecinco Cinema CEO Ghislain Barrois told me, “The situation’s completely Kafka-esque. We have to invest in a product we don’t care for. We’re not showing the movies we put money into because they don’t work.”

However, there’s a silver lining to the new film law. Perz Dolset points out smaller movies are test beds for future talent. “Bigger movies are the best investment in the short term, but smaller movies are a long-term investment. There is a delicate balance between what is good from a commercial point of view, which is definitely bigger movies, and the protection of an industry with thousands of people working on these smaller films,” he says.

The ICAA, the Spanish film agency, is also doubling the amount of subsidy it can offer a feature, from E1 million to E2 million. And state broadcaster TVE will have to increase its film investment obligation from 5% to 6%.