The government approval last week of the merger between Spain's rival pay TV platforms - Canal Satelite Digital (CSD) and Via Digital - has produced as many questions as it has answers for the film industry.

The government released a surprisingly long list of 34 conditions on the merger (, Nov 29), yet none deals specifically with how the platform should treat local film productions or independent film pick-ups from Spanish distributors.

"We would have liked there to have been some mention about protecting Spanish product," says Eduardo Campoy, president of Spanish Producers' Federation FAPAE. Campoy is optimistic: "Both platforms have fulfilled their investment agreements with FAPAE individually. I don't think after the merger they will turn their backs on Spanish cinema.

"Distributors are less reassured: "Our sector is not regulated [by the conditions], meaning we will have to trust in the good will and good criteria of the pay TV platform," says Andres Martin, head of arthouse distributor Vertigo Films and a founding member of the new Independent Film Distributors' Association (ADICINE). "In the case of the independents, we haven't been able to sell to pay TV for the last year and a half, and now it looks like we have another year of uncertainty ahead."

"It's going to be difficult because if you kill off one more mouth there's no competition, there's a monopoly," adds Antonio Llorens, CEO of more commercial distributor-exhibitor Lauren Film. Both free-to-air broadcaster Telecinco and cable operator Ono have denounced the conditions as compromising fair competition.

The government has placed a series of limitations on the purchase, exploitation, resale and distribution of content from the "major studios." The conditions do not put an end to CSD's existing long-term output deals with the lion's share of the Hollywood studios, nor do they require future contracts to be non-exclusive, although a three-year limit is imposed. An exception is made for MGM - the only studio Via Digital signed exclusively - and which is given the option to rescind its contract, ostensibly to negotiate a new one with the merged platform.

Julio Veloso, a lawyer with SJ Berwin, suggests that the platform's continued sourcing of Hollywood films - the content most in demand, with football - combined with the "economic strength and power of [nearly] three million subscribers," will give it "a lot of muscle when it comes to negotiating contracts."

Hugo Ecija, partner in media law specialists Ecija & Asociados, adds that the majors, for their part, "have benefited from an artificial war of inflated prices. They may not benefit from the fusion, but it won't damage them." On the other hand, he affirms, "The national industry could have been protected more."

For now, the waiting may be the hardest part. CSD backer Sogecable and Via Digital owner Telefonica have until January 29 to define a business plan for structuring the new platform and carrying out the conditions. They are expected to give their preliminary acceptance or denial within weeks. One especially thorny condition for Sogecable appears to be the four-year fixing of subscriber fees.

General consensus is that the partners will go forward, for the same reason they accorded the merger last May: both unprofitable entities risk folding otherwise. For this reason, and in light of the acquisitions cutbacks this year, the film industry overwhelmingly views the merger as the "lesser of evils."

Meanwhile, Ono and cable competitor Auna are widely expected to appeal to European authorities. Significantly, the European Commission announced last week that it would open an investigation into the Telepiu-Stream pay TV merger in Italy. As FAPAE's Campoy puts it: "We're keeping a close eye on the situation in Italy."