Brazilian exhibitors may face bankruptcy as a result of a 14-year battle they have waged with local authors rights society ECAD (Escritorio Central de Arrecadacao e Distribuicao).

When ECAD raised its royalty charges from the original 0.5% to 2.5% over gross box office receipts more than a decade ago, both foreign and local exhibitors filed individual injunctions against the new charge.

Early this year, Texas-based Cinemark International won its suit based on the argument that ECAD would have to prove that it was authorised to collect royalties from the soundtracks of all films screened in Brazil.

On the part of the national exhibitors, they argued that the new charge was taxation without representation and that it was arbitrary and excessive. "With Cinemark's victory, we fear that our arguments will not hold sway with the Supreme Court," said Ugo Sorrentino of Art Filmes. "Legally, we are not allowed to change our arguments so the only solution will have to be political, " said Sorrentino who also heads the National Federation of Brazilian Exhibitors (FNEEC).

If the Supreme Court rules against them, local circuits will be forced to shell out back payments covering the past 14 years. "This would destroy us. As it is, among the original 29 exhibitors in Rio de Janeiro that filed suits 14 years ago, only two of us remain, Art Filmes and Luis Severiano Ribeiro," Sorrentino added.

Ribeiro, who runs the largest local exhibition circuit in Brazil and heads the Brazilian Association of Cinemas, ABRACINE, and Sorrentino have met with Gustavo Dahl, head of government agency ANCINE to find a solution. In an official statement, Dahl stressed the historical ties between local exhibition and homegrown films. "We cannot allow for screens to be dominated by multiplexes," said Dahl.

As it is, local exhibitors have been struggling against adverse market conditions to survive. Inflation has brought down the average ticket price to its current value of $2.20, making it among the lowest in the region.

Three to four years ago, the average ticket price was $5.20, according to Sorrentino. "We can't afford to raise ticket prices or we will drive away our customers", he said.

To finance the building of screens, local circuits have to tap special government loans as interest rates charged by private banks are prohibitive, at about 60% per annum.

Government loans charge 16% to 17% a year and the borrower/exhibition circuit would need to meet special conditions such as screen Brazilian films above the quota for example.