COMMISSION OF THE EUROPEAN COMMUNITIES 
C0M(94) 96 final 
Brussels, 06.04.1994 
STRATEGY OPTIONS TO STRENGTHEN 
THE EUROPEAN PROGRAMME INDUSTRY 
IN THE CONTEXT OF THE 
AUDIOVISUAL POLICY OF 
THE EUROPEAN UNION 
Green Paper 
(presented by the Commission) 
m 
an 
FOREWORD 
The White Paper "Growth, Competitiveness and Employment" adopted by the European 
Council in December 1993 opened the debate on the major trends in our society on the 
eve of the 21st Century. Among the sectors where the stakes are highest, the White 
Paper identified the Information Society and, in particular, the audiovisual sector as 
having the greatest potential for growth and job creation. 
A key component of this information society, the audiovisual industry is undergoing a 
transformation, in particular as a result of rapid technological developments. 
Films and television programmes, as prime vectors of European culture and a living 
testimony to the traditions and identity of each country, deserve special attention. These 
programmes play a strategic role in what is happening in the audiovisual sector and today 
are fundamental to the future diversification in the sector. 
The European Union must look resolutely to the future, take part in the developments that 
are occurring worldwide and play its full role in mastering and making use of this new 
technology. European operators must be in a position to adapt their strategies and forge 
alliances in order to benefit from the overall growth in the sector. 
Coming in the middle of all this manoeuvring, the full implications of which cannot 
easily be measured today, this Green Paper looks at the future of one specific industry: 
the European film and television programme industry. 
How can the European programme industry be made more competitive and more open 
on the world market? How can it be guaranteed its share of the overall growth of the 
audiovisual sector? How can it be placed in a position to realize its potential in terms of 
employment? How can European cultures be promoted without causing any individual 
country to lose its identity? 
All these questions are discussed in this Green Paper as preparation for a wide-ranging 
debate in the European Union and the definition of options for the future under three 
heads: the rules of the game, financial incentives and the convergence of national support 
systems. 
On the basis of this Paper the Commission intends to organize wide-ranging, in-depth 
consultations, reflecting the collective effort that will be needed in order to strengthen the 
European programme industry. 
Contributions from all those concerned will be welcome 
A 
CONTENTS 
1. INTRODUCTION 1 
2. FUNDAMENTAL TRENDS IN THE PROGRAMME INDUSTRY 5 
2.1 The diagnosis 5 
2.1.1 The film industry 5 
(i) Decline in the market share of European films 5 
(ii) Partitioning of national markets 5 
(in) The spiral of deficit 6 
(iv) The perverse effects of support systems 7 
2.1.2 The television industry 7 
(i) Explosion of demand and rising production costs 1 
(ii) Low rate of programme circulation within Europe 1 
(Hi) Weak production structures and catalogue shortage 8 
2.2 The new technology 8 
2.2.1 Targeting of supply 10 
2.2.2 Internationalization and globalization 11 
2.2.3 Explosion of demand and need for catalogues 11 
2.2.4 New products 12 
2.2.5 Industrial imperative 14 
3. THE CHALLENGES FACING 
THE EUROPEAN PROGRAMME INDUSTRY 15 
3.1 The audiovisual sector in the new "information society" 15 
3.1.1 The objectives of the European strategy 15 
3.1.2 Implications for the audiovisual sector 16 
3.2 The dangers 18 
4vX 
3.2.1 Suffocation in partitioned markets 18 
3.2.2 Refusal to move with the times 18 
3.3 The opportunities 19 
3.3.1 Overcoming the language barriers 19 
3.3.2 Turning diversity to advantage 19 
3.4 The aims of a European policy for the programme industry 21 
3.4.1 Removing barriers between national markets 21 
3.4.2 Catering for the European public 21 
3.4.3 Promoting an industry with a future 22 
3.4.4 Ensuring profitability for a loss-making industry 22 
4. EXISTING INSTRUMENTS 23 
4.1 The regulatory framework in the European Union 23 
4.1.1 The role of the Member States 23 
4.1.2 The role of the European Union 24 
4.2 A favourable environment for the development of services 24 
4.2.1 The development of infrastructure and the liberalization of services 24 
4.2.2 Removing barriers in the single market 25 
4.3 Promoting European programmes 26 
4.3.1 Majority proportion of European works 27 
4.3.2 Encouraging independent production 28 
4.3.3 Media time scales 28 
4.4 European financial incentives 29 
4.4.1 Community instruments 29 
(i) The MEDIA programme 29 
(ii) The Action Plan 30 
Ab 
4.4.2 Other European instruments 31 
4.5 National financial incentives 31 
4.6 The international context 32 
5. OPTIONS FOR THE FUTURE 33 
5.1 The rules of the game 34 
5.1.1 Development of the market 34 
(i) Infrastructure and services 35 
(ii) Single market 35 
(in) Application of the rules of competition 35 
5.1.2 Measures to promote European programmes 36 
(i) Tighter checks on the application of Community law 36 
(ii) How can incentives be made more effective? 37 
(in) Media time scales 39 
5.1.3 Should new types of service be covered? 40 
5.2 Financial incentives at European level 41 
5.2.1 A horizontal approach or sectoral priorities 41 
(i) A horizontal approach 41 
(ii) Priority sectors 42 
5.2.2 Priority for companies or priority for projects? 43 
5.2.3 What should the scale be in terms of territory, time and funding? 44 
(i) Market size 44 
(ii) The time factor 44 
(in) The level of funding 44 
5.2.4 The European market and cultural diversity 45 
5.2.5 Involvement in the development of new markets 46 
A(L 
(i) Reconstruction and development aid 46 
(ii) Extension of the Community's financial incentives 47 
(iii) A new partnership 47 
5.3 Convergence of national support systems? 48 
5.3.1 A forum for exchanges and thought 48 
5.3.2 What are the priority themes for exchanges and thought? 48 
(i) Convergence in the priorities of national support systems 49 
(ii) Convergence in financing national support systems 50 
CONCLUSION 52 
SUMMARY 53 
1. Options for the rules of the game 55 
2. Options for financial incentives 56 
3. Convergence of national support systems? 58 
Annexe I 59 
4o) 
1. INTRODUCTION 
The audiovisual industry is a large, complex sector currently undergoing fundamental 
changes, brought about in particular by rapid technological developments. 
These changes are causing new interactions between the different cultural, technological 
and industrial components of the industry. 
They are also generating new audiovisual products and services reflecting the multimedia 
and interactive approach of the information society. 
These developments are creating new openings for operators who will have to adapt their 
strategies and forge new alliances. This convergence will involve the film industry, 
broadcasting services and the television programme industry, cable and 
telecommunications operators, the publishing industry and manufacturers of information 
and communications technology equipment. 
The sustained growth of the audiovisual sector is set to continue, thereby generating great 
potential in terms of creation of highly skilled jobs. 
These phenomena are all present at world level and it is not yet possible to gauge them 
fully. 
This Green Paper and the debate to which it should give rise focus on one specific 
aspect of the audiovisual sector: the development of the European film and 
television programme industry. 
The Commission is aware of the difficulty of isolating this aspect among the many 
problems connected with the changes in the sector. But it believes this exercise to be 
necessary to take account of two characteristics of the programme industry: 
films and television programmes are not products like any others: as the prime 
vectors of culture they retain a specific place in the midst of the manifold new 
types of audiovisual products; as living testimony to the traditions and identity of 
each country they deserve encouragement; 
the programme industry is - and will be even more so in future - a strategic 
element in the development of the audiovisual sector: as recent developments 
show, the most powerful operators on the world market (equipment manufacturers 
and cable and telecommunications operators) are seeking to control the most 
important programme catalogues. 
The debate initiated by this Green Paper on the future of the European programme 
industry must, of course, take account of the general trends in the audiovisual sector. It 
will draw on thoughts about the development of the information society. 
But the Commission's present analysis, taking account of technological developments, 
convergence of industries and the changing market structures, already identifies four 
fundamental requirements for the future of the European programme industry: 
it must be competitive in an open worldwide market; 
1-£-
(2) 
it must be forward-looking and be involved in the development of the information 
society; 
it must illustrate the creative genius and the personality of the people of Europe; 
it must be capable of transforming its growth into new jobs in Europe. 
Building on the additions made by the Maastricht Treaty to the existing Community 
instruments (in particular the new provisions on culture) and the acquis of Community 
audiovisual policy and the trends in this sector, this Green Paper sets out to present the 
options for the future on the basis of these fundamental guidelines. 
The essential problem can therefore be summed up as follows: 
How can the European Union contribute to the development of a European 
film and television programme industry which is competitive on the world 
market, forward-looking and capable of radiating the influence of European 
culture and of creating jobs in Europe? 
The approach is therefore to consider what the European Union can contribute. But it 
is obvious that these objectives will not be attained unless there is a coordinated effort 
by all the actors at whatever level. 
This Green Paper will also have a logical place in a series of further reflections and 
debates launched by the Commission to determine what role the European Union must 
assume in meeting the challenges facing the audiovisual sector in Europe. 
Foremost among these exercises in futurology is the White Paper on Growth, 
Competitiveness and Employment1 adopted by the European Council in December 1993 
which provides the Union with a framework for action and thought on the development 
of the information society, underlining the growth potential of the audiovisual sector, in 
particular in terms of employment. Within this medium/long-term framework a high level 
working party on the information society has been set up to consider matters relating to 
the objectives of the European Union as regards the development of infrastructure and 
applications. This is evidence of how the European Union intends to play a full role in 
harnessing and using the new technologies. ' 
The technological and industrial issues involved in the "digital revolution" in television 
broadcasting are discussed in a Commission communication to the Council and 
Parliament on digital broadcasting.2 While this document (and the proposed directive 
on standards for satellite broadcasting)3 is being discussed in the various institutions, the 
Growth, competitiveness, employment - the challenges and ways forward into the 21st century -
White Paper: COM(93) 700 final of 5 December 1993 - Part B, II, Chapter V, Sections A and 
C. For the presentation of these aspects of the White Paper, see 3.1 below. 
Communication from the Commission to the Council and the European Parliament - Digital video 
broadcasting - a framewoik for Community policy. Draft Council resolution - COM(93) 557 final 
of 17 November 1993. 
Proposal for a directive of the European Parliament and of the Council on the use of standards for 
the transmission of television signals (including repeal of Directive 92/38/EEC) - COM(93) 556 
final of 15 November 1993. 
Commission is watching carefully the work of the European Digital Video Broadcasting 
Group which comprises most of the European operators concerned.4 
Finally, in the context of the changes in the audiovisual market structures and the 
development of operators' strategies, the Green Paper entitled "Pluralism and media 
concentration in the internal market - an assessment of the need for Community action"5 
analyses the question of whether the European Union should be laying down rules on 
ownership of the media. 
The outcome of these different activities will help shape the framework in which a new 
environment for the audiovisual sector and a new communication society will gradually 
emerge in Europe. The Commission will endeavour to coordinate the different strands 
into an overall policy. 
To take into account the analyses and suggestions of all the audiovisual professionals in 
the Union, the Commission, in preparing this Green Paper, conducted wide-ranging 
preliminary consultations during which three types of contribution were received: 
To begin with the audiovisual sector presented its views and suggestions: 
professional associations representing the audiovisual industry at European level 
and various professional bodies responsible for managing the Community support 
measures available under the MEDIA programme6 were sent a questionnaire; 
in addition, any company or organization which expressed the wish to contribute 
to the exercise was requested to submit its views and suggestions in writing. 
Secondly, the Commission set up a Think Tank7 last November to present a diagnosis of 
the audiovisual industry and suggestions for the future. The report produced by the Think 
Tank reflects the opinions of its authors and is not therefore a document put out or 
approved by the Commission. 
Finally the competent authorities of the Member States were asked to submit their views. 
For the presentation of the work of the DVB Group, see 4.2 below. 
COM(92) 480 final of 23 December 1992. 
There has been widespread consultation in connection with this Paper and the conclusions reached 
will be set out in spring in a communication to the Council and Parliament in which the 
Commission presents its position on the need for action. 
Council Decision (90/685/EEC) of 21 December 1990 concerning the implementation of an action 
programme to promote the development of the European audiovisual industry (MEDIA) ( 1991 -95): 
OJL380, 31.12.1990, p. 37). 
This Think Tank was chaired by Antonio-Pedro Vasconcelos (TV and cinema producer and former 
coordinator of the National Secretariat for the Audiovisual Sector in Lisbon). The other members 
were David Puttnam (film producer, Director of Anglia Television and head of Enigma 
Productions), Michèle Cotta (journalist and TV producer with France 2, former Chairwoman of 
the Audiovisual High Authority and former head of the TF1 news service), Peter Fleischmann 
(film director, head of Hallelujah Films and founder of the European Federation of Audiovisual 
Film Makers) and Enrique Balmaseda Arias-Davila, lawyer, former legal adviser to Spanish 
television and former Director-General of the Institute of Cinematographic and Audiovisual Arts 
in Madrid). 
It also heard the expert opinion of Gaetano Stucchi (RAI) on matters relating to new technologies. 
From the mass of contributions received,* it was seen that though there were some 
contrasting, not to say conflicting, views on what instruments should be used to 
implement the Union's audiovisual policy, there was virtually unanimous agreement on 
the following points, confirming the need for wide-ranging debate on the future on the 
audiovisual industry in Europe: 
the audiovisual industry is a special case amongst the high-growth 
industries, in particular with the possibilities it offers for job creation; 
the safeguarding of the diversity of national and regional cultures, often 
expressed in terms of maintaining the choice available to the public, is 
now clearly linked to the development of a predominantly European 
programme industry which must ultimately be profitable; 
digital compression technology is seen as revolutionary because it appears 
set to transform the sector, accentuating the strategic role of the 
programme industry; 
if the European Union wants to strengthen its audiovisual policy, it must 
act quickly, otherwise it will be overtaken by the rapidly developing 
technology and the unavoidable liberalization of the industry at 
international level. 
While this Green Paper broadly reflects these points on which there is consensus, it is 
mainly concerned with initiating a wide-ranging debate on the options the European 
Union should take for the future. 
To this end it will be circulated extensively and in-depth consultations will be organized. 
For the list of contributions, see Annex 1. 
2. FUNDAMENTAL TRENDS IN THE PROGRAMME INDUSTRY 
The diagnosis of the condition of the European programme industry reveals its structural 
shortcomings and its malfunctionings at a time when new trends are becoming apparent 
as a result of technological change. 
2.1 The diagnosis 
The diagnosis of the situation in the European programme industry produced by the Think 
Tank, the professional organizations and the Member States is detailed - often highly so -
and, apart from some slight differences between the various analyses, notably with regard 
to the causes of the phenomena under investigation, broadly consistent, enabling the 
Commission to give an overview of the key aspects of recent developments before going 
on to highlight the main upheavals likely to result from current technological advances 
linked to digital transmission. 
2.1.1 The film industry 
The current state of the European film industry shows clear evidence of a decline in the 
market share of European films. The causes of the decline are complex but there is 
agreement on some of the main factors involved. 
(i) Decline in the market share of European films 
While cinema attendance has been falling steadily (although the decline now appears to 
be bottoming out in some of the Member States), there has been an increase in the part 
played by television (pay-channels in particular) and the video cassette in the screening 
of cinema films. Although the success of a film on these alternative media is often 
largely determined by its success on the large screen, it is the video sector (hire and sale) 
which generates most of the revenue. 
But whatever the medium, the market share of European films continues to shrink in the 
face of competition from imports from outside Europe, in particular from America. 
Falling attendance has indeed affected only European films, and American films remain 
popular with their market share averaging nearly 80% for the European Union as a whole. 
And the "showcase" effect of large-screen success obviously has an impact on the 
television and video sectors. 
(ii) Partitioning of national markets 
Cultural and linguistic diversity clearly plays a part in market partitioning. But while the 
circulation rate of European films within Europe remains low, the Europe-wide 
distribution of American films is high, a paradox which has resulted in a polarization of 
supply between national films (dependent in terms of quantity and quality on the size of 
their national market) and non-European films. 
All fingers point at the weakness of European distribution structures as one of the factors 
identified as causing this phenomenon. But apart from this structural defect,, some blame 
the failure to take account of market realities throughout the creation, production and 
distribution process. 
* Fragmentation of distribution structures 
The American film industry invests massively in distribution and promotion throughout 
the Community. As revenue from the European market is now essential to cover 
ever-rising production costs, it is building pan-European strategies based on powerful 
distribution networks. 
The European film industry, on the other hand, is struggling with fragmented distribution 
structures. With nearly 1 000 distribution companies in Europe for 400 or so European 
films produced each year, this sector is oversized and does not even provide genuine 
international distribution networks at European level. 
The upshot is that only 20% of European films go beyond their national frontiers. Films 
are released in a number of countries but without any overall strategy. Only if they are 
a success on the markets where they are first screened will they be distributed further 
afield. But this step-by-step approach deprives distributors of the economies of scale that 
could be achieved via a comprehensive promotion strategy. 
This fragmentation has also put the distribution sector in a position where it is incapable 
of investing in film production, thereby depriving the industry not only of resources but 
also of an indispensable link with the market. 
* Failure to take account of market realities 
This breakdown in essential links with the market is evident at two levels in particular. 
At the creation stage, European projects are handicapped by a lack of development. This 
is the crucial stage where original ideas must be reworked and geared more towards other 
audiences, whether elsewhere in Europe or throughout the world. It is regrettable that 
some public support mechanisms are unduly restricted to domestic production and do not 
give sufficient incentive to work for European and transnational markets. This 
creation/development stage is essential: even with the most sophisticated distribution 
mechanisms, if no account is taken of the audience's tastes and demands, the European 
film industry will never be competitive. 
At the promotion and marketing stage, compared with the massive investments of 
American operators (the promotion budget for blockbusters is frequently as much as the 
production budget), European campaigns are on too small a scale and lack experience in 
pan-European and worldwide marketing. 
(iii) The spiral of deficit 
With rising production costs compounded by failure to break into the different markets 
the European film industry is being sucked into the spiral of chronic deficit. 
The increasing participation by broadcasters in production financing has so far done little 
to disrupt this pattern. Investment in co-productions is geared primarily to securing 
access to programmes attracting what are usually national audiences. 
The small scale of the European film industry locked into national markets too restricted 
to guarantee continuing or profitable investment, is reflected at all levels, both upstream 
and downstream of production proper. The result is a crisis of confidence and a diversion 
of European capital, notably to the American programme industry. 
(iv) The perverse effects of support systems 
Apart from the shortcomings connected with the restriction of support mechanisms to 
domestic production, the proliferation of national and regional aid schemes for film 
production - with operating rules which pay little if any heed to market requirements -
can create "lame-duck" mentalities in the European industry. 
Where this happens, European operators become experts in milking these schemes and 
are then incapable of taking financial risks commensurate with the box-office receipts 
they can expect. They then develop projects without a thought for potential audiences, 
knowing full well that a substantial proportion of production costs will be covered by 
public aid. 
The fact that some films produced with public funding are never distributed in cinemas 
is clear evidence of this. 
The principle of public aid is not in itself the cause of this phenomenon; it can be an 
effective stimulus for the development of profitable projects, provided that the rules 
governing such aid take account of the market dimension. The reverse phenomenon can 
also occur, namely that where all public aid is discontinued, the film industry disappears 
almost entirely. This is why thought must be given to the priorities, the volume and the 
mechanisms of public financial support in the European Union. 
2.1.2 The television industry 
In the television sector the explosion in programme demand has failed to boost the 
European programme industry, which remains locked into fragmented national markets. 
(i) Explosion of demand and rising production costs 
The proliferation of broadcasters in the 1980s combined with longer viewing hours 
produced a veritable explosion of programme demand. 
Increased receipts have not compensated for rising production costs or for soaring fees 
for rights to broadcast sports events. Programme budgets have been cut and broadcasters 
have had to make massive use of non-European material from programme catalogues that 
have already paid for themselves on other markets. 
(ii) Low rate of programme circulation within Europe 
Moreover, as most of the new broadcasting services have been developed on a national 
basis, television production has focused on satisfying national audiences with very little 
by way of programme circulation within the Community (other than in language areas). 
The small number of co-production and co-financing ventures involving operators from 
more than one Member State is not conducive to the development of projects likely to 
attract European or world audiences. This has had an adverse effect on the production 
of television films in particular but television series, cartoons and documentaries are also 
affected, and these programmes are vital for the creation of catalogues. They are stock 
programmes which can be screened repeatedly. Catalogues of such programmes are the 
economic heritage of the television programme industry. 
(iii) Weak production structures and catalogue shortage 
Production structures remain fragmented, often dependent on one or two national 
broadcasters, and too small to compete on larger markets. They are undercapitalized and 
limited resources reduce their potential for building up catalogues, as programme rights 
are for the most part usually granted to broadcasters financing the production. 
At a time when the emergence of pay-television has highlighted the strategic role played 
by catalogues in the launching of new services, these structural weaknesses are the 
Achilles' heel of the European television industry. 
At the same time there is a tendency for broadcasters to integrate vertically, upstream 
towards production but also downstream towards conditional access technologies and 
individual receiving equipment.9 Recent alliances in Europe show that this tendency is 
set to increase, focusing on communications groups of telecommunications operators, 
catalogue holders and equipment manufacturers. 
Despite the differences between the cinema and television sectors, the European 
programme industry can be said to display the following characteristics: 
it is fragmented into national markets threatening the survival of small producers 
unable to compete on European and world markets; 
the partitioning of national markets is compounded by a low rate of cross-border 
programme distribution and circulation; 
it is trapped in a chronic deficit spiral; 
it is unable to attract European capital, even though this is available for 
investment in non-European programme industries. 
2.2 The new technology 
The increasingly imminent transition from analog to digital broadcasting is so rich in 
potential that it is not excessive to use the term "revolutionary". 
Based on digital compression (the vast quantity of information needed to transmit a 
moving image is "compressed" by means of algorithms), which is becoming increasingly 
sophisticated with every day that passes, digital transmission makes it possible: 
Individual receiving equipment (apart from decoders) is mainly satellite dishes. 
8 
to relay much more information on the same communications vector; 
to relay the same information on many different vectors (radio waves, cable, 
satellite, telephone lines ...) and develop multilevel user-interactivity; 
to access, store, rework and combine information at will in line with user 
requirements; 
to combine on the same networks services for consumers and services for 
business. The large investment required can be justified in economic and social 
terms by this extensive scope for utilization and the potential benefits for the user 
and profits for the supplier. 
* The first possibility provides the audiovisual sector10 with a double option: quantity, 
quality or a combination of the two. 
The quantity option will enable operators to use one and the same vector, either to 
provide a number of different services (increasingly specialized in nature) or to provide 
a single service on a staggered basis (near video-on-demand). 
The quality option will enable them to play around with the different broadcasting 
parameters ranging from HDTV through the entire range of image quality and formats 
to mobile television and with the different sound channels and ancillary services 
(teletext ...) on one and the same transmission vector. 
* The second possibility places on an equal footing all the different modes of programme 
transmission, practically fusing broadcasting and telecommunications. Thanks to digital 
technology, which has the potential to reduce the constraints imposed by frequency 
availability, access to a communications vector will become less and less costly. While 
the potential of digital technology can easily be realized with cable and satellite 
broadcasting, exploiting this potential with land-based radio transmission will depend to 
a very large extent on the approaches adopted by the Member States concerning the 
distribution of frequencies. Transmission modes will be selected depending on the level 
of user interactivity required. 
* The third possibility virtually provides access to any information at any time with, as 
end result, the concept of multimedia, which allows the user to move around freely 
through all the information available and to combine images, texts and sounds at will. 
In view of the scale and speed of the technological (digital) revolution, the European 
hardware and software (in the broad sense) industries will probably need to establish and 
develop new forms of cooperation and strategic alliance to exploit their respective 
strengths. If the multimedia opportunities are to benefit European firms, all parties 
involved must be given sufficient incentive to cooperate. 
* The fourth possibility makes it difficult to accept that delays in introducing advanced 
digital infrastructures should jeopardize not only the availability to the consumer of a 
1 The term "audiovisual sector" is used here to cover television broadcasting as well as all other 
telecommunications facilities able to transmit audiovisual programmes (see p. 7). 
(3) 
range of educational, entertainment and information services, but also the development 
of business services for professional users, on which the competitiveness of European 
companies depends. 
The rich potential offered by digital transmission applies to all our communications 
systems but its impact on the economies of the image business will be decisive. Without 
opting for any given scenario it is possible to anticipate the main trends likely to result 
from this technological evolution, particularly as most of them are simply a consolidation 
or acceleration of trends already apparent on the audiovisual market. 
2.2.1 Targeting of supply 
Although the public has always been the raison d'être of the audiovisual programme or 
operator, it is the different distribution or transmission modes, and the economics 
underpinning them, that largely shape the influence of the consumer on the process as a 
whole. 
Alongside the "mass media" approach offering "television for all" financed from licence 
fees or advertismg revenues, the development of pay-television, subject-based or 
otherwise, has resulted in the phenomenon of channel loyalty, with viewers who are fewer 
in number but may well directly finance the service to which they subscribe. 
The introduction of new types of service will accelerate this process of supply targeting 
led by consumer demand and purchasing power. For example: 
pay-per-view (PPV) enables the consumer to select a broadcast from a programme 
schedule limited both by the number of broadcasts and by the start-times (for 
example, ten films starting every quarter of an hour); the consumer pays only for 
the programme selected; 
video-on-demand (VOD) enables the consumer to select, at any time, a 
programme (or programme extract) from a catalogue which is virtually unlimited 
(the only limits are economic - capacity to acquire broadcasting rights - and technical -
server storage and management capacity); the consumer pays only for the 
programme (or extract) selected; 
numerous types of services both interactive (enabling various levels of dialogue 
with the user) and multimedia (combining different types of information) may 
develop, resulting in an increasingly personalized pattern of consumption. 
The change from the predominantly passive to the active consumer will have an impact 
on the economics of the audiovisual sector. As it is financed more and more by 
individual spending, so its mode of operation will become more and more like that of the 
cinema or video market. And if the viewer is to be won over, the link between 
programme promotion and programme distribution will have to be tightened. 
10 
2.2.2 Internationalization and globalization 
The emergence of new technology for the development of transnational - even 
transcontinental - audiovisual facilities (satellite, cable, telephone) and for the 
diversification of storage media (video cassette, videodisc, CD-ROM,11 CD-I12) is only 
one indication of the trend towards the internationalization and globalization resulting 
from the economics of the audiovisual sector. 
The steady increase in production costs has made it essential to expand the audiovisual 
programme market, either by targeting new territory or by diversifying applications. This 
in turn means further investment, notably in the promotion/distribution business, and in 
the longer term the development of a global strategy. 
The European programme industry has tended to submit to this trend rather than go along 
with it. As it has not yet exploited the potential of its domestic market, it does not have 
the necessary structures to benefit from this fundamental sectoral growth. 
2.2.3 Explosion of programme demand and need for catalogues 
An analytical appraisal of the audiovisual sector with a view to the imminent digital 
revolution reveals three different functions: 
the rights holder, who provides the programme; 
the broadcaster, who offers a package based on market knowledge; 
the communications vector, which provides the necessary medium. 
Disappearance of the constraints resulting from the shortage of frequencies thanks to 
digital compression, the potential of which can be easily realized in the short term for 
transmission by cable and by satellite, will seriously alter the balance of power. Quite 
clearly, at the centre of the market development process, it will be the operators who 
develop new applications and provide the consumer with a variety of services who will 
benefit. But this will only be the case if the operators in question develop a 
content-based strategy: the potential of the broadcaster will be directly determined by 
whatever exclusive rights he has managed to acquire. 
This content-based strategy, which applies in the case both of communications groups and 
of equipment manufacturers or telecommunications operators, is clearly reflected in the 
alliances currently being formed, in particular in the United States: the vertical integration 
of MCA and Matsushita, Columbia and Sony, Polygram and Philips, and Paramount and 
Viacom demonstrate that the most powerful operators on the world market are striving 
to acquire control of the most extensive programme catalogues. 
11 
12 Invented in 1985 by Philips, CD-ROM (Compact Disc Read Only Memory) is capable of storing 
an enormous quantity of multimedia information (images, sounds, texts, ...) that can be read by 
micro-computer. 
Invented by Philips and Sony, CD-I (Compact Disc Interactive), like CD-ROM, stores multimedia 
applications but the drive is connected direct to the television and is operated by remote control. 
A large number of programme titles for the general public (games, education, culture, cinema) are 
already available on the market. 
11 
The new opportunities which this opens up for rights holders will be measured firstly in 
terms of quality: the quality of a programme will be determined by the ratio between the 
number of consumers it is likely to attract and the price they will pay to watch it. And 
secondly in terms of quantity: the launching of new services will be based on a critical 
mass of programmes constituting a catalogue that matches a given market segment. 
Moreover, production regularity (in terms of quantity and quality) will be a key factor in 
determining the structure of relations between programme industry and broadcasters. 
Structuring the catalogues and boosting the production capacity of the European 
programme industry is therefore a fundamental challenge. 
The capacity to offer a wide selection of programmes, one of the main results of the 
digital revolution, will enable the industry to cater for a wide range of requirements and 
types of user. Economies of scale in programme production will always be important, 
but many opportunities will arise for programmes geared to limited and specialized 
audiences. This is worth bearing in mind, since the cultural fragmentation of Europe has 
been a negative factor for the competitiveness of the European audiovisual industry: 
exploiting cultural diversity can be turned into an opportunity to be seized. 
2.2.4 New products 
Digitization will not only bring with it a diversification of the means of distribution (in 
the broad sense) of audiovisual programmes. The new media (CD-I, CD-ROM) and the 
new services (services on demand, databases) mean that the concept of audiovisual 
programmes is now overtaken and replaced by a wide range of new audiovisual products. 
The educational, information and entertainment functions traditionally assumed by 
television - although the arrangements vary from one Member State to another - will 
be developed on new applications using the potential of multimedia and interactivity. 
Distance learning, for instance, which has been identified as a key vector, in particular 
for outlying regions and continuing training for small businesses, is an important avenue 
to be explored for the development of new types of service and product.13 
In all these areas, the extension of the range of products already present on the market 
opens up prospects of certain new links within the progralnme industry. 
First of all, the relationship between traditional programmes (cinema and television) and 
new products can be put in terms of synergy in the context of the globalization of the 
industry: for instance, a film (or cartoon) which has been a worldwide hit will quickly 
be taken up as the basis for a new video game (the characters and decors can be directly 
integrated in the game in digital form); similarly computer-assisted production of images 
for games provides basic experience for the production of cartoons or special effects in 
13 The importance for education and training of the audiovisual media in general and television in 
particular is also underlined in the proposal for a scientific programme on targeted socio-economic 
research recently adopted by the Commission under the fourth research and technical development 
framework programme. The interactive and the supply-targeted approach are two important 
elements in the new information and communication technologies and there is a need for in-depth 
educational research in both areas. 
12 
films. Quite simply, any image produced and any experience acquired in any audiovisual 
subsector could give rise to new products at any other point in the image business. 
Secondly, this relationship can also be expressed in terms of substitution: as the amount 
of leisure time available each day cannot go on increasing indefinitely, it is possible that 
the time devoted by consumers to the use of video games, educational or other services 
(on television or a home computer) will eventually be subtracted from the time spent 
watching traditional programmes. It is difficult to predict what will be the respective 
place (in cultural as well as economic terms) of the different types of audiovisual product 
in this new environment. 
While this rapid overview of the many problems connected with the arrival of new 
multimedia products shows that it is impossible to define the frontiers of the audiovisual 
sector, it is also clear that a definition must be given of the programme industry, to which 
this Green Paper relates. 
By programme industry, we mean the industry producing cinema films and television 
programmes. 
Within the second category the main emphasis is on the production of stock programmes 
(fiction, cartoons, documentaries) which can be screened repeatedly and are thus the basic 
ingredients of catalogues. The other types of television programme (flow programmes) 
are very important for broadcasters and producers from an economic angle, but their 
value is nil (or little more) after the first broadcast. 
The "traditional" programme industry will have to diversify and exploit the potential 
offered by new technology. But the wealth of the "traditional" catalogues will be a 
decisive factor in the success and profitability of this diversification. 
With new technologies providing new possibilities for producing and transmitting 
pictures, we must turn our attention to these programmes and films, because: 
* they are the basis of the entire "image business"; 
* they are essential for the launching of new technologies in the world market since 
the public bases its choice on the content of programmes, not on the technology 
used to produce and transmit them; 
* they are central to the cultural dimension of the industry, since the cultural impact 
of a country or region is largely dependent of the success of its programme-
makers, whose products pass on not only cultural heritage but also lifestyles, and 
influence the daily lives of the people who watch them. 
* they constitute the fundamental link in a chain of creation, production, distribution 
and use, connecting a network of creative individuals and companies. 
European cinema and television programmes are a basic cultural and economic asset and 
this Green Paper presents ideas on how best to protect, develop and use this asset. 
13 
2.3.4 Industrial imperative 
This all points to an industrial imperative in terms of both the size of the structures 
involved and the way in which they operate. 
The globalization of the market and the increase in production and promotion costs 
demand not only talent but also industrial structures of the critical size needed to secure 
the necessary financing and to constitute programme catalogues which have appeal for 
the different markets. 
The future high-speed digital networks will be shared by entirely different services: voice 
telephony, information, video-on-demand, educational programmes, etc. The use of 
common technologies and the proximity of activities could influence the structure of 
industries which at present are independent. There will be convergence of interests and 
technical alliances involving the film industry, cable and telecommunications operators, 
the publishing industry and manufacturers of information and communications technology 
equipment. The effects of this phenomenon could prove extremely important for the 
financial structure of the audiovisual industry and for the range of diversification 
opportunities available to the industry. 
Quite apart from critical size, another element in the industrial imperative is the modus 
operandi. With the economics of the sector being conditioned more and more by 
individual consumer choice it is important, if programmes are to find their public, that 
each production should determine the market segments on which its profitability can be 
guaranteed. To this end structuring the information flow between the different operating 
markets and the programme industry14 is just as vital as providing information for the 
public. And the constraints affecting audiovisual production vary depending on whether 
it is targeted at the world market, a local market or a very specialized segment of a 
transnational market. 
14 Experience, notably of coded services and all other services relying on the development and 
management of a subscriber base will be crucial in the task of identifying the different publics. 
European creators and producers will have to be able to collaborate closely with specialists in this 
area with a view to more accurate targeting in project development and marketing. 
Similarly, information on technological developments affecting audiovisual programme production 
and operation must be effectively fed to creators, producers and other professionals in the image 
business. 
14 
3. THE CHALLENGES FACING THE EUROPEAN PROGRAMME 
INDUSTRY 
In addition to the problems already identified, the European programme industry will 
have to meet the challenges that will come with the new information society: the risk 
of being sidelined into local markets and so missing out on the overall growth in the 
audiovisual sector; the chance to develop into a competitive industry which can make 
the most of our diversity of cultures and create new jobs in Europe. 
3.1 The audiovisual sector in the new "information society" 
Taking a medium/long-term view, the White Paper on Growth, Competitiveness and 
Employment devotes two large sections of the Chapter entitled "The changing society, 
the new technologies" to the information society and the audiovisual sector.15 
Stressing the importance of the management, the quality and the speed of information for 
economic growth, the White Paper outlines the basic principles for establishing and 
implementing a common information area consisting of a number of indivisible levels: 
the hardware, components and software available to the user to process the 
information; 
the physical infrastructure (communications networks, satellites, etc.); 
basic telecommunications services; 
the applications, which offer users a wide variety of services; 
the users. 
The White Paper underlines the importance of the establishment of a common information 
area for growth, competitiveness and employment in Europe. This analysis is even more 
relevant for the strengthening of the European audiovisual sector, as it will give 
consumers wider choice and develop new opportunities for the programme industry. 
What the "digital revolution" will entail for the audiovisual sector is just one example of 
the impact of the emergence of a new "information society" which will transform 
dramatically many aspects of economic and social life. The boom of information and 
communication technologies made possible by digital applications is a powerful factor 
for economic and social improvement: a factor for growth, a factor for economic and 
social cohesion, a factor for effectiveness of other major infrastructures, a factor for 
development of new services and hence a factor for job creation. 
3.1.1 The objectives of the European strategy 
In response to the strategies developed by the United States and Japan, which are based 
largely on the development of information infrastructures ("digital highways") and new 
information and communication technologies, the European Union must step up its action 
to create a genuine common information area as soon as possible. 
15 Chapter 5, Sections A and C. 
15 
The White Paper identifies three fundamental objectives for this European strategy: 
from the outset the approach must be placed in a world perspective with the 
encouragement of international alliances; 
account must be taken of specific European characteristics (multilingualism, 
cultural diversity, lack of economic uniformity); 
conditions must be created whereby, in an open and competitive international 
system, Europe still has an adequate take-up of basic technologies and an efficient 
and competitive industry. 
To ensure that these objectives have maximum impact on employment and that they 
promote the development of new markets and a competitive environment, a European 
policy will have to be introduced, focusing on five interdependent priority themes: 
informing firms about best practice and developing European information and 
communication technologies; 
establishing and implementing rules and policies which stimulate private initiative 
with particular emphasis on competition, universal service, standardization and 
openness but with guarantees for data protection and privacy and the security of 
information and communication systems; 
providing the Community with basic trans-European telecommunications services 
with emphasis on interoperability of networks; 
developing the right training; 
harnessing technologies and enhancing the performance of Europe's information 
and communication technology industry, by the promotion of "technological 
strategy watch" and support for research and development effort. 
3.1.2 Implications for the audiovisual sector 
Audiovisual services are but one individual category in an ever-widening range of 
information services for firms and consumers; but they are, of course, foremost among 
the beneficiaries of the implementation of such a strategy. Their "supplier", the 
programme industry, likewise has everything to gain from the rapid development of a 
common information area. Without this demand-pull attraction exercised downstream by 
the development of a maximum of services, any stimulation of the European programme 
industry (stimulation of supply) would be doomed to failure. 
Apart from the trends connected with the introduction of new technologies which are 
already evident on the audiovisual programme market (in particular the globalization of 
the industry), most of the priority themes for establishing a common information area can 
easily be transposed into the audiovisual sector. 
Bringing the new technologies to companies working in programme production is a key 
challenge at a time when the very concept of the programme needs to be reviewed in the 
light of multimedia developments. In this connection the new information and 
communication technologies will require us not only to rethink the manner of developing 
and making new audiovisual products but also to learn how to use a multitude of new 
16 
ways of exploiting and recycling existing catalogues in order to give a fresh boost to the 
influence of Europe's cultures. 
A competitive environment should generate new types of services which will help realize 
the economic value of the diversity of European audiovisual production. 
The development of infrastructures in the form of trans-European communication 
networks should increase the size of new markets and so enhance the profitability of 
investments in both audiovisual services and the programme industry. 
The development of appropriate training in the programme industry is essential not only 
to direct professionals towards the market-place but also to enable them to benefit from 
the potential offered by the new technologies. 
These routes will all lead to the environment required to enable the European programme 
industry to benefit from convergence with the telecommunications, publishing, consumer 
electronics and computing sectors. The entrance of new actors, with greater financial 
resources, on the audiovisual stage opens up new prospects in terms of new investments 
and new outlets for the European programme industry. 
The White Paper (which announced this Green Paper16) also translates the development 
potential of the audiovisual sector into employment terms: 
"The audiovisual sector has a highly labour-intensive structure... The sector intrinsically 
provides many high-level 'grey-matter' jobs, like technicians, performers, script-writers, 
directors, and so on. It is thus potentially less vulnerable to competition from low labour 
cost markets. Though there is a lack of reliable statistics on employment within the 
sector, it has been estimated that at least 1.8 million people are earning their living in the 
EC audiovisual services.... It is clear from the vigorous demand-side growth trend, 
accentuated by technological developments, in the audiovisual software sector in Europe, 
and from the nature and structure of the employment that it can provide, that there is 
remarkable potential for job creation in this sector.... In line with the increased growth 
predicted for the sector, on the condition that the growth is translated into jobs in Europe 
and not into financial transfers from Europe to other parts of the world, job creation could 
be of the order of two million by the year 2000, if current conditions prevail. 
Furthermore, bearing in mind that, if proper resources are deployed, there is a clear 
potential for an increase in our share of the market, it is not unrealistic to estimate that 
the audiovisual services sector could provide jobs, directly or indirectly to four million 
people." 
This industry can therefore derive nothing but benefit from the creation of a European 
information area. What is more, it must help speed up its introduction, since any delay 
will subsequently turn out to be a handicap for our programme industry which will have 
to compete with non-European industries well versed in the multimedia techniques of the 
"Moreover, a Green Paper on audiovisual policy will be presented by the Commission during the 
first semester of 1994 setting out suggestions on how existing policy instruments in this field may 
be developed and refined in order to maximize their impact and continue to guarantee not only the 
survival but also the growth of a viable audiovisual software industry in Europe into the year 
2000M (Chapter 5, Section C of the White Paper). 
17 
(4) 
future and with the accumulated experience and innovation capacity which will guarantee 
growth and competitiveness on the world market. 
3.2. The dangers 
Bearing in mind the various trends outlined above, what are the dangers and opportunities 
facing the European programme industry? 
The main dangers can summed up in a few words: the European industry may be 
sidelined into local market segments and fail to benefit from the overall growth in the 
audiovisual sector. 
3.2.1 Suffocation in partitioned markets 
Unless partitions between markets are removed and a new direction given at European 
level, the European programme industry faces gradual suffocation within the tight 
confines of its national boundaries. 
In some Member States the industry has managed to derive some benefit from the first 
wave of expansion, which saw the proliferation of audiovisual services and the 
development of the video market. However, these have mostly been short-term gains and 
the industry has failed to remedy the chronic production shortage or constitute catalogues 
which are attractive for other markets. By contrast, the American industry has benefited 
fully from the expansion of the European market and readily invested in its development 
(e.g. the video market, pay television and networks of cinemas). It has consolidated its 
market share and, armed with its catalogues, has established itself as an indispensable 
partner for the launch of any new service. 
With the 'digital revolution', the European market is set to become the major prize in the 
global struggle for market supremacy. Only a genuinely European industry, backed by 
its most powerful players, can be a match for the world's communications giants. 
3.2.2 Refusal to move with the times 
Since no such industry exists and we therefore stand to lose out both economically and 
culturally, some observers are tempted to oppose the introduction of the new distribution 
networks, which will be unified around a digital language and hence more efficient. 
However, it must be stressed that, quite apart from its disastrous consequences for related 
European industries such as telecommunications, computing, consumer electronics and 
publishing, this Luddite approach would seriously undermine our chances of ever 
developing the programme industry. Not only is it essential that we coordinate 
restructuring measures throughout the communications industry in order to strengthen the 
European programme industry, we must also develop distribution networks of all kinds 
(and in particular those at the leading edge of technology), if we are to ensure growth in 
this sector. 
18 
3.3 The opportunities 
Europe seems to possess all the prerequisites for developing a strong and competitive 
programme industry: it has the talent (which, incidentally, is easier to export than actual 
programmes); it has a domestic market of over 300 million consumers; it has adequate 
financial resources; and it has skills in the new production and broadcasting techniques 
(notably digital compression, which European firms have played a major part in 
developing in the United States).17 
3.3.1 Overcoming the language barriers 
Besides the obvious structural defects in the European audiovisual industry, observers 
over the last thirty years have generally pointed to the linguistic and cultural diversity of 
Europe to explain or justify its permanent state of crisis and underdevelopment. 
Without going into the rights and wrongs of this argument, it is worth noting that the 
'digital revolution' brings with it the potential to overcome or even capitalize on what has 
hitherto been seen as a structural constraint. 
On the language front, digital compression makes it economically viable to edit and 
broadcast works in a number of languages. Several different soundtracks or sets of 
subtitles can be added, provided they already exist. Compression cuts costs drastically 
and allows a wide variety of combinations to be used in the same broadcasting medium 
thus offering audiences increased possibilities of access to European programmes. 
These new technical possibilities must be used to the full in order to remove partitions 
between national markets and enable programmes to cross borders. This will require a 
special effort in bringing these new technologies to firms working in the industry. It will 
also mean developing high-quality dubbing and subtitling, the poor quality of dubbed and 
subtitled versions being the real reason why programmes fail to reach other markets or 
turn out to be flops, rather than the absence of such versions. 
If the industry is to benefit from the European market, investment in dubbing and 
subtitling is a priority requirement. 
3.3.2 Turning diversity to advantage 
As for 'cultural barriers', the increased specialization of supply will, to some extent, 
enable Europe to develop a quality market where the diversity of programmes will 
become a valuable economic asset. 
As the public is faced with an exponential increase in services and a growing variety of 
forms and media, the differentiation of products on the market will be a vital factor. The 
trend towards more uniform programmes supplied by companies seeking to maximize 
their share of the audience will be followed by a fragmentation of the market; companies 
17 The European system for the production of high-definition videos, including post-production 
(montage, special effects, etc.), which is already based on digital technology, is very successful 
and much appreciated by producers and directors in television and, increasingly, in cinema. 
19 
will be forced to develop a strategy based on differentiation with the aim of satisfying 
ever-smaller audiences that are nevertheless capable of sustaining a specific product. 
This opens up the prospect of a European audiovisual industry where diversity and quality 
of production are allowed to flourish and which at the same time is economically viable. 
A striking illustration of this point may be seen in recent trends in the market for the sale 
of video cassettes.18 While the video rental market is confined almost exclusively to 
films, sales have quickly opened up to other products (programmes for children, 
documentaries, sport, natural history, music and tourism, etc.).19 
The film sector of the video market is dominated by the American industry (although 
experience shows that it is possible to sell European films which would not have been 
successful in the rental market). However, the European market share of the non-film 
sector is steadily increasing. This market segment illustrates the European public's need 
for diversity. Moreover, it is the only market segment where Europe's share is in fact 
increasing! 
The same thing can be said about the possibilities opened up by the development of new 
multimedia facilities. One example is the opportunity offered to the programme industry 
by the possibility of exploiting in multimedia form the enormous wealth of Europe's 
cultural heritage (museums, libraries, architectural sites ...). 
It is tempting to draw conclusions from this analysis for trends in the market as a whole 
in the 21st century, but we must bear two things in mind: 
concentrating on 'market niches' may be a way of safeguarding and developing 
diversity, but it is no substitute for a wider strategy aimed at building up attractive 
programme catalogues for broader segments of the European and world markets; 
to make the most of these 'market niches' we need a pan-European approach: the 
narrower the target audience, the greater the need for broad geographical 
coverage. 
Another cultural and economic opportunity is now emerging in Central and Eastern 
Europe, with the development (or revitalization) of the audiovisual sector there. A strong 
and competitive European programme industry can both contribute to this development 
and profit from it. 
By offering competitive programmes across the whole market-range and capitalizing on 
the diversity of Europe throughout the continent, the European programme industry can 
18 
19 Although the market for the sale of video cassettes {sell-through) is a relatively recent 
development, it has already outstripped in volume the market for video rental. In Germany, for 
example, it accounts for 55% of the total video market. 
For example, in the sale of video cassettes on the British market from 1991 to 1993, the share of 
films fell from 44% to 30%, while that of general-interest and health and sport programmes 
increased from 6% to 22% and 6% to 19% respectively. Although the main beneficiaries of this 
increase have so far been British programmes, there is also potential in this market segment for 
programmes from other European countries. 
20 
realize its immense potential as outlined in the White Paper on Growth, Competitiveness 
and Employment. 
3.4 The aims of a European policy for the programme industry 
In accordance with its aims and the powers assigned to it, it is for the European Union 
to facilitate the distribution of audiovisual programmes and to stimulate the development 
of the industry. But it is clear that a European policy for the programme industry will 
require a joint effort from all players in the Union. 
The analysis above suggests that the broad lines of such a policy should be as follows: 
As regards market development the European programme industry must exploit the 
growth potential provided by the development of a European information area in terms 
of creation of new services and investment in ancillary industries with greater financial 
resources. 
The European Union must press ahead with the introduction in Europe of technologically 
advanced information infrastructures to give consumers a wider choice and create new 
openings for the programme industry 
On the programme supply side, the development of extensive distribution networks cannot 
be allowed to benefit only non-European programme makers and force Europe's own 
industry to retreat into local markets, with their limited economic potential and cultural 
influence. 
The European Union must therefore mobilize its resources into developing a programme 
industry which is able to compete both at home and on the world market and at the same 
time act as a vehicle for its culture, create jobs and generate profits. 
This must be a medium/long-term policy, the ultimate objective being that the European 
programme industry should recover its profitability on an open and dynamic world 
market. 
The aims of these joint efforts are self-evident. 
3.4.1 Removing barriers between national markets 
The policy of the Union must be designed first and foremost to remove barriers between 
national markets so that the European programme industry can benefit from the scale of 
the European market and so provide as many outlets as possible for its products. The end 
result must be stronger audiovisual companies offering attractive catalogues to the rest 
of the world. 
3.4.2 Catering for the European public 
The development of a competitive European programme industry is the only way of 
guaranteeing in the long term a varied supply of films and television programmes. Given 
the importance of the audiovisual media as a vehicle for culture (not only in increasing 
awareness of our cultural heritage and promoting artistic creation, but also in influencing 
21 
our daily lives and behaviour), this is of paramount importance for the future of European 
society. 
3.4.3 Promoting an industry with a future 
The audiovisual industry is not only one of the areas of the economy which offers the 
richest potential for development, including the creation of jobs. It is also closely linked 
to other industries (e.g. consumer electronics, telecommunications, computing, etc.) which 
are also evolving towards internationalization and globalization. Without European 
partners in the programme industry, these other European industries will have no choice 
but to forge transatlantic alliances with the transfer of resources as an inevitable 
consequence. 
3.4.4 Ensuring profitability for a loss-making industry 
If there is no effective stimulation of private investment through the restoration of 
confidence in the European programme industry, the danger is the perpetuation of subsidy 
arrangements which, from a structural point of view, are both costly and inefficient. In 
a world where services are steadily being liberalized, there is an urgent need to 
restructure an industry which must in the long term survive without protectionism and 
without subsidies. 
22 
4. EXISTING INSTRUMENTS 
This section gives an overview of the instruments already applied by the Community and 
the Member States in the audiovisual sector, with special reference to those designed to 
strengthen the European programme industry. 
4.1 The regulatory framework in the European Union 
The United States is a perfect example for anyone wishing to illustrate the importance 
of a regulatory framework for influencing the structure of the audiovisual industry: an 
important factor behind the powerful position of the majors on the world markets lies in 
the clear distinction between studios, which produce, and networks, which distribute. 
Similarly, the powers granted to the Federal Communication Commission have enabled 
it to introduce new audiovisual technology without any great upheaval. 
The situation in Europe is different but here, as elsewhere, there are striking illustrations 
of the impact of regulations on industrial structures. 
4.1.1 The role of the Member States 
In the Member States, various levels of authority (national, regional or other20) have a 
direct and decisive influence on the structures of the audiovisual sector. 
Among the regulations with the greatest impact on the shape of the audiovisual industry 
are those governing the granting of licences to provide audiovisual services. 
Examples include Channel Four in the UK, responsible for the emergence of a strong 
independent production industry or Canal + in France, which has made a significant 
contribution to the French film industry. 
It is clear that the number and type of authorized services (and, in particular, the way in 
which they are funded), and the nature and scope of the rules under which they operate, 
all have a decisive impact on the programme industry, both in the case of television and, 
increasingly, cinema. 
In ^ddition^the Member States have a great deal of scope for developing infrastructure, 
be it for satellite or cable broadcasting, for example, or for telecommunications. Given 
the future prospects for the growth of a wide range of image- and sound-consuming 
information services, the level of development (in particular technological development) 
of these infrastructures and the arrangements for access will increasingly have a crucial 
role to play. 
Lastly, national competition policy and rules designed to ensure pluralism in the media 
can also play a significant role in determining the size of companies in the industry and 
the scale of vertical and horizontal integration. 
20 For example, in some Member States some powers are devolved to the broadcasters themselves. 
23 
Together with population size, languages and the general state of the economy of each 
Member State, all the types of intervention referred to above have a significant impact 
on the way the national programme industries are structured. 
4.1.2 The role of the European Union 
The European Union does not have the means to intervene in such a direct way to shape 
the structure of the audiovisual industry. But it does make a substantial contribution to 
establishing a framework in which the industry can flourish. 
With due respect for the subsidiarity principle, it helps the industry to develop by 
removing the partitions which separate national markets, using to best effect the size of 
the European market and promoting the production and distribution of European 
programmes. 
It does this through the adoption of technical standards, the promotion and dissemination 
of new technologies, the approximation of national laws to facilitate cross-border business 
in the various branches of the industry and the implementation of Community competition 
rules. 
4.2 A favourable environment for the development of services 
The objective of the Union is to create an environment in which services can develop; 
the actions are designed to develop infrastructure, liberalize services or remove barriers 
to the single market to facilitate cross-border business. 
4.2.1 The development of infrastructure and the liberalization of services 
The Community and the Member States have taken various steps to encourage the 
development of information infrastructures. Apart from programmes to support research 
and development of information and communication technologies and policy on the 
standardization of equipment, the legislative framework for the telecommunications sector 
has evolved over the years with the liberalization of added value services21 and the 
adoption of a programme which should lead to the liberalization of voice telephony by 
1998. 
This process of liberalization should create a favourable environment for the development 
of private initiative leading to new services which, in a climate of open competition, will 
widen consumer choice and create new openings for the European programme industry. 
The Commission is also watching carefully the work of the European Digital Video 
Broadcasting Group. This Group comprises 120 European broadcasters whose job is to 
identify the needs of the professionals and define technical specifications which can be 
sent to the European standardization authorities. The Group has already obtained results 
on technical specifications for digital satellite and cable broadcasting; matters relating to 
terrestrial network broadcasting and conditional access systems22 will require more time. 
21 
22 cf Open Network Provision. 
Conditional access systems are those used by "pay-television" channels: the picture is scrambled 
when broadcast and can only be unscrambled by viewers with a decoder and an access code. 
24 
Conditional access is in fact an essential element in the development of new broadcasting 
services. The objective here is to produce a sufficiently open environment to give all 
potential pay-television companies fair and non-discriminatory access to the market but 
without forcing consumers to buy a whole series of different decoders in order to benefit 
from a large variety of services. While the DVB Group is examining the technical 
aspects, the Commission will look into the need for legislation to set up a single market 
and will present its findings in a Green Paper on the protection of encoded broadcasting 
signals. 
As regards technical standards, the best method of achieving the objective of harmonious 
development of the market in digital television broadcasting would be to secure a 
consensus among all those involved in the industry. Voluntary agreements between the 
parties concerned will have an important role to play. 
However: 
if the operators cannot find a consensus which will guarantee the orderly 
development of the market, 
and/or 
if the needs of fair and open competition, consumer protection or other significant 
demands of general interest so require, 
it may prove necessary to introduce regulations to facilitate achievement of this objective 
and protection of these interests. 
4.2.2 Removing barriers in the single market 
Harmonization of national legislation is a form of support for exploiting the potential of 
the European market since, by removing barriers in the single market, it promotes 
operations within the European Union. 
Several directives harmonizing legislation in the audiovisual industry have helped to 
develop a European broadcasting market and promote the transnational exploitation of 
programmes: 
the television without frontiers Directive23 established the general framework for 
free movement of television broadcasting services. 
This Directive lays down common rules for advertising. As advertising is one of 
the sources of revenue for broadcasting companies, the implications of these rules 
go well beyond considerations of general interest such as consumer protection. 
Restrictions on the proportion of broadcasting time devoted to advertising and 
rules concerning the number and timing of advertising slots are factors 
determining the revenue of broadcasters and hence their capacity to invest in 
23 Council Directive 89/552/EEC of 3 October 1989 on the coordination of certain provisions laid 
down by law, regulation or administrative action in Member States concerning the pursuit of 
television broadcasting activities (OJ L 298 of 17.10.1989, p. 23). 
25 
15) 
programme production or purchase. This demonstrates why the entire regulatory 
framework must be taken into account when determining how to strike the 
necessary balance in the development of the programme industry; 
the cable and satellite Directive24 established minimum rules for the exercise of 
copyright and neighbouring rights in the context of cable and satellite 
rebroadcasting; 
two other directives25 applying generally to copyright and related rights (not 
confined to broadcasting specifically) also facilitate transnational activities (e.g. 
video rental). 
The development of the European market in services offers potential European outlets for 
European cinema and TV productions. The challenge consists in realizing this potential. 
4.3 Promoting European programmes 
Looking beyond this services-oriented growth logic (which is in accordance with the 
Treaty), specific rules exceeding what is legally strictly necessary to secure freedom to 
provide services in the programme industry have been enacted. 
The television without frontiers Directive, for instance, has a set of articles devoted to the 
"Promotion of distribution and production of television programmes",26 which establish 
legal rules to be applied by Member States to broadcasting companies within their 
jurisdiction and directed to the following objectives: 
broadcasting of a majority of European works;27 
promotion of independent productions (up to 10% of broadcasting time or 
programming budgets);28 
establishment of time-scales for media exploitation of cinematographic works.29 
24 
25 
26 
27 
28 
29 Directive 93/83/EEC of 27 September 1993 on the coordination of certain rules concerning 
copyright and rights related to copyright applicable to satellite broadcasting and cable 
retransmission. 
Directive 92/100/EEC on rental right and lending right and certain rights related to copyright, and 
Directive 93/98/EEC harmonizing the term of protection of copyright and certain related rights. 
Chapter III of Directive 89/552/EEC. 
Article 4 provides: "Member States shall ensure where practicable and by appropriate means that 
broadcasters reserve for European works ... a majority proportion of their transmission time, 
excluding the time appointed to news, sports events, games, advertising and teletext services. This 
proportion, having regard to the broadcaster's informational, cultural and entertainment 
responsibilities to its viewing public, should be achieved progressively, on the basis of suitable 
criteria." 
Article 5 provides: "Member States shall ensure, where practicable and by appropriate means, that 
broadcasters reserve at least 10% of their transmission time, excluding the time appointed to news, 
sports events, games, advertising and teletext services, or alternatively, at the discretion of the 
Member State, at least 10% of their programming budget, for European works created by 
producers who are independent of broadcasters. This proportion, having regard to the broadcaster's 
informational, cultural and entertainment responsibilities to its viewing public, should be achieved 
progressively, on the basis of suitable criteria; it must be achieved by earmarking an adequate 
proportion for recent works, that is to say works transmitted within five years of their production." 
Article 7 provides: "Member States shall ensure that the television broadcasters under their 
26 
The Commission recently sent a communication to Parliament and the Council on the 
implementation of the first two points,30 based on Member States' reports to it under the 
monitoring arrangements provided for by the Directive itself.31 
In the light of the conclusions of this exercise, but without anticipating the overall 
evaluation of the Directive, the Commission can make the following observations. 
4.3.1 Majority proportion of European works 
The results of the monitoring exercise show that most broadcasters in the Member States 
transmitted a majority of European works during the 1991-92 report period. 
The overall results would therefore appear to be positive, both as regards compliance with 
requirements and the effectiveness of the machinery set up by the Directive. 
With a view to increased cross-border distribution of programmes and enhanced impact 
on structures, a number of questions need to be asked. As the monitoring exercise is 
resticted to some basic information and not all the Member States supplied the data 
required, some essential indicators are still lacking: 
what is the proportion of European works that would not have been broadcast if 
there had been no legal obligation? The information supplied shows that the 
highest audience ratings are achieved by national material, especially fiction. 
Studio shows (variety shows, talk shows and so on, included within the Directive's 
definition of European works), most of which are hardly suitable for distribution 
in other countries, are more than a match for much of what is produced outside 
Europe in terms of cost:audience ratios; 
what is the proportion of non-national material in the European works broadcast? 
There are no reliable data to support an answer to this question. The figures for 
prime-time viewing suggest a bipolar structure combining national and American 
productions;32 
what, in terms of programming budgets or of turnover, is the business value of 
rights to retransmit these European works as compared with non-European 
works? 
30 
31 
32 jurisdiction do not broadcast any cinematographic work, unless otherwise agreed between its rights 
holders and the broadcaster, until two years have elapsed since the work was first shown in 
cinemas in one of the Member States of the Community; in the case of cinematographic works co-
produced by the broadcaster, this period shall be one year." 
COM(94)57of3.3.1994. 
Article 4 organizes a monitoring scheme whereby the Member States are to report to the 
Commission every two years (beginning on 3.10.1993) on the application of Articles 4 and 5. The 
Commission is to bring the reports to the attention of Parliament and the Council, with its own 
opinion on them. This should not be confused with the general assessment of the television without 
frontiers Directive on which the Commission is to report by the end of 1994 as required by 
Article 26 of the Directive. 
A recent Media Business School survey on the origin of prime time broadcasts by twenty or so 
Community broadcasters over one week abundantly bears out this conclusion. 
27 
While it may be concluded that this mechanism is by and large working effectively, it is 
still too early to say what impact it has had on structures. It has clearly helped promote 
the distribution of European works but it remains to be seen whether it is really helping 
to create a European programme industry. 
4.3.2 Encouraging independent production 
The first point worth noting here is that the Directive offers an alternative between 
proportions of broadcasting time and of programme budgets and most Member States 
have opted for the former.33 
In the Commission's opinion34 however, the second option is best suited to achieving the 
objective of Article 5 of the Directive, namely investment in new works created by 
producers independent of broadcasters. 
On the other hand, the Member States' reports give insufficient information, partly 
because figures are not available and partly because the definitions of independent 
producers used for the purpose have not been supplied. 
Here again, although the structural objective of the measure is plain for all to see, there 
are more questions than answers. Apart from the questions generated by the preceding 
mechanism, which apply just as much to this one, the following points are noteworthy: 
what is the proportion of recent works in the generality of European works? 
Article 5 refers specifically to recent works, but the Member States' reports have 
little to say on the matter; 
what is the degree of the producer's independence from the broadcaster 
transmitting his work? (in terms of capital, proportion of business done with the 
broadcaster, duration and scope of rights transferred, etc.); 
what are the degrees of importance attached to the legal obligation and the price 
factor? Does the legal obligation improve the producers' negotiating position in 
relation to the broadcasters, particularly as regards the scope of the rights 
transferred? 
4.3.3 Media time scales 
Article 7 of the Directive provides for a third mechanism (outside the scope of the 
monitoring exercise) to establish flexible time scales: 
it applies only to the television broadcasting of cinematographic works, not to 
other forms of exploitation (e.g. video); 
the two-year time-lag (one year where there is a co-production with a broadcaster) 
between first cinema showing and television broadcasting may be shorter if rights 
holders are in agreement. 
33 
34 France is the only exception. 
COM(94) 57 of 3 March 1994. 
28 
Following the logic of the single market, time runs from the first cinema showing in any 
Member State. This is important in the context of European exploitation of 
cinematographic works. 
4.4 European financial incentives 
Financial incentives are generally used as a catalyst to promote the development of 
specific activities in which operators in a given industry would not spontaneously engage 
because of structural deficiencies in the market. The incentives should eventually be 
withdrawn, as soon as they have achieved the desired effect of enabling the market to 
develop naturally (if this does not happen, then the "incentives" are subsidies, propping 
up what are essentially unprofitable activities). The money should, as a rule, be repaid 
(unless it is given for research and development or training) as soon as the activity in 
question passes a given profitability threshold. 
4.4.1 Community instruments 
So far the Community has established two major financial support schemes specifically 
for the audiovisual industry - the MEDIA Programme and the Action Plan for the 
introduction of advanced television services in Europe.35 
(i) The MEDIA programme 
In accordance with the Council Decision establishing it, the MEDIA Programme 1991-95 
was put through an evaluation exercise by the Commission in 1993 on the basis of an 
audit performed by a consulting firm.36 
The evaluation was conducted after only two years of implementation of the programme, 
which was too early for a final assessment of its impact on the industry. But some points 
at least emerged clearly: 
given the duration of business cycles in the audiovisual industry, the programme's 
across-the-board micro-economic approach to all stages of the broadcasting 
business is unlikely to have a measurable impact in less than five to ten years; 
35 
36 Council Decision 93/424/EEC of 22 July 1993 on an action plan for the introduction of advanced 
television services in Europe: OJ L 196, 5.8.1993, p. 48. 
Commission Communication of 23 July 1993 on evaluation of the action programme to promote 
the development of the European audiovisual industry (MEDIA) (1991-95), COM(93)364 final. 
Initial conclusions were drawn in the form of proposals for amendments to Council Decision 
90/685/EEC on primarily technical points: COM(93)462 final, 29.10.1993. 
On 5 November 1993 the Council came to the following conclusions as regards the period covered 
by the current programme (expiring on 31 December 1995): 
it emphasized "the need to ensure continuity in existing activities" up to the end of 1995, 
"respecting the decentralized character of the programme"; 
it emphasized the need for stronger "coordination and financial supervision of activities"; 
it requested the Commission to begin studying measures for a MEDIA 2 Programme to 
run after 1995. 
29 
the establishment of new industry structures through cross-border cooperation and 
groupings is seen as one of the most promising aspects; 
the programme is working effectively as a catalyst, since it accounts for only 24% 
of the aggregate financial value of activities flowing from projects; 
in certain areas, the resources available fall short of the critical mass needed for 
an effective market impact and the budget37 is too small to provoke the desired 
structural changes; 
given the limited budget available for the programme, the horizontal approach of 
covering each of the phases from creation to exploitation means that resources 
have to be dispersed. 
The experience acquired with the MEDIA programme thus confirms the main findings 
of the diagnosis of the programme industry's condition. The Commission is therefore able 
to identify four sets of priority objectives: training (geared to the market and the new 
technologies), pre-production and project development, distribution and marketing and 
finally stimulation of private investment. 
(ii) The Action Plan 
The Action Plan38 has a narrower objective: it is to launch a critical mass of TV services 
in the new 16:9 format39 so that a viable market can emerge in Europe. 
Financial support mechanisms are targeted on two aspects of the introduction of new 
services. First, the Plan covers part of the additional costs involved in broadcasting in the 
new format; second, it covers part of the additional costs involved in adjusting 
programmes technically for 16:9 broadcasting (new and existing material). 
It is too early to assess the Plan's true impact. But apart from the fact that in the short 
term it is services-oriented, it is expected to have a significant impact on the programme 
industry: 
by encouraging the use of technical media for stock productions that are 
compatible with high-definition television in terms of both format and image 
definition, it will help to extend the shelf-life of European catalogues; 
through its proximity to a new market, it offers an excellent observation point for 
ascertaining the technical developments that the programme industry will have to 
absorb in order to meet demand for the new services; 
37 
38 
39 Currently about ECU 50 million annually. 
The funding judged necessary to attain the objectives of the Action plan is ECU 405 million. This 
is the aggregate of Community budget appropriations and funds from other sources. The 
Community appropriations total ECU 228 million. 
The traditional TV screen is defined by reference to the 4:3 width:height ratio. Advanced television 
services (including high-definition television) offer substantial improvements in image and sound 
quality as well as a new format - 16:9 - which is closer to the cinema screen format. 
30 
it promotes the use of the European HDTV standard for a wide range of TV and 
cinema productions. 
4.4.2 Other European instruments 
European audiovisual support mechanisms include the following: 
The Council of Europe's EURTMAGES Fund sets out to encourage European co-
productions of cinema and TV fiction.40 
Audiovisual EUREKA41 is an intergovernmental forum to facilitate the establishment of 
transnational audiovisual projects. It has no funds of its own and so is not strictly 
speaking a financial support mechanism, but it does facilitate transnational cooperation 
on projects for which national of Community resources can be mobilized. 
It also constitutes the framework for establishment of the European Audiovisual 
Observatory, which has the chief function of organizing information flows within the 
industry. 
4.5 National financial incentives 
Apart from financing public-sector broadcasting companies through licence fees, the 
Member States have developed national and regional schemes to provide cinema and TV 
producers with the help they need to face the industry crisis, motivations being both 
cultural and economic. 
These schemes reflect differing national and regional realities and vary enormously from 
one Member State to another in terms of resources deployed,42 the activities supported,43 
the type of aid schemes44 and the financial techniques.45 
They are primarily designed to help production having some kind of link with a Member 
State, and a complex network of bilateral co-production agreements gives producers 
access to a variety of national support schemes in the event of transnational projects. 
None of these schemes takes account of the transnational or European dimension of the 
market: selective schemes tend to proceed from cultural (notably linguistic) considerations 
and non-selective schemes proceed from the impact on the national market. 
40 
41 
42 
43 
44 
45 Established in April 1989, it currently has 24 member countries. 
Set up by Joint Declaration in Paris in October 1989. 
In 1990, for instance, Denmark allocated ECU 400 000 to support for the programme industry 
whereas France allocated ECU 268 million (which is more than the whole five-year budget for the 
MEDIA Programme). 
National schemes are substantially directed towards support for the cinema industry, though some 
apply on a broader basis (distribution, cinema theatres, TV programmes etc.). 
Schemes are generally selective; only France has overall schemes operating on a large scale. 
Disregarding tax breaks, five Member States finance their support for programme industries from 
their general budget whereas six run an industry-specific income redistribution system (parafiscal 
charges on takings from cinemas, video rental and broadcasting). 
31 
4.6 The international context 
All this consideration of the future of the European programme industry must further be 
related to the new context engendered by the recent Uruguay Round conclusions. 
In the course of often highly technical debates, the negotiations on liberalization of 
services had the merit of clearly revealing the strategic importance of the audiovisual 
industries in general and the enormous economic and cultural interests at stake in the 
image business in Europe. 
Analysis of the final agreement (General Agreement on Trade and Services - GATS) 
prompts the Commission to make two fundamental points that condition all future action 
in relation to audiovisual matters: 
the audiovisual industry is fully covered by the GATS with no special status, 
culturally or otherwise; it is accordingly subject to Article XIX of the Agreement 
which reads: "In pursuance of the objectives of this Agreement, Members shall 
enter into successive rounds of negotiations, beginning not later than five years 
from the date of entry into force of the Agreement establishing the MTO and 
periodically thereafter, with a view to achieving a progressively higher level of 
liberalization. Such negotiations shall be directed to the reduction or elimination 
of the adverse effects on trade in services of measures as a means of providing 
market access": 
the European Union has committed itself to no particular liberalization measures, 
its GATS obligations being solely to secure transparency and thus to share 
information with the other parties to the Agreement on any new measures taken 
either by the Union or by its Member States. Moreover, through exemptions from 
the most-favoured-nation clause, the Union has managed to secure most aspects 
of its audiovisual policy, including its bilateral and multilateral agreements on co-
production and other matters. 
It is thus clear that the European Union and its Member States have the room for 
manoeuvre they need to develop their measures to help the programme industry, but for 
what will probably be a transitional period of limited duration. 
Like other service sectors, the audiovisual industry must rise to the challenges of 
internationalization and globalization, in particular in the context of the digital revolution. 
The European programme industry must strengthen its competitive position while 
remaining open to the world. 
32 
5. OPTIONS FOR THE FUTURE 
It can once again be said that all parties will have to be mobilized to rise to the challenge 
of the future. Application of the subsidiarity principle is essential for the definition of a 
European policy when action is planned in areas which are not within the exclusive 
jurisdiction of the Community. The point is to determine at what level the action to be 
taken will be most effective in the light of the objectives set. And measures taken at 
different levels must be kept compatible with each other. 
While the decision on the question of who is to act - the European Union or one of the 
various levels of authority in the Member States - is crucial for defining what action is 
to be taken, the Commission's view is that when devising strategy, the interests at stake 
and the solutions to be adopted to secure them must be debated openly. It is against the 
backdrop of this comprehensive approach and on the assumption that a collective effort 
is to be made throughout the Union that pointers are offered as options for the future. 
Whether or not they are explored in depth at a later stage will depend on the general 
reaction to them. 
This Part of the Green Paper is therefore offered without prejudice to the review for 
compatibility with the subsidiarity principle that must precede every practical proposal 
that the Commission makes after its discussions with the industry and the authorities of 
the Member States. 
This Green Paper is not an inventory of practical measures to be proposed at European 
Union level. Instead, the Commission sees the options discussed as a basis for 
discussion, principles that should govern action by the Union and priority strategies that 
could be jointly defined to: 
end the compartmentalization of national markets and promote the exploitation of 
programmes throughout Europe and the rest of the world; 
develop the choice available to European audiences ; 
develop an industry with a future; 
ensure the profitability of a loss-making industry. 
The Commission believes that the period of transition - in terms of technological 
development, the GATS framework and industrial change - on which the European 
programme industry is now embarked calls for urgent, vigorous action which, in the long 
term, will allow the industry to profit from the free play of market forces. 
It is proposed that the debate should address three topics: 
the rules of the game 
financial incentives 
convergence of national systems. 
These three topics are complementary and interdependent. What is more, their 
development and implementation must be closely coordinated with whatever action is 
taken by the European Union as part of its audiovisual policy and with any other 
activities that could have an impact on the audiovisual industry. 
33 
The sections which follow raise a number of issues that the Commission sees as essential 
in shaping a policy for the industry. They deal in turn with each of the three topics, 
adopting a consciously open approach to initiate a wide-ranging debate. 
5.1 The rules of the game 
The rules of the game must be analysed from the angle of their contribution to market 
development and preservation of competition and from that of the promotion of European 
programmes. The appearance of new services will also raise new questions as regards the 
rules of the game. 
5.1.1 Development of the market 
The development of the European audiovisual programme market will involve first 
developing infrastructure and liberalizing services, then removing barriers to the single 
market and filially enforcing the rules of competition. 
(i) Infrastructure and services 
The Commission considers that any action taken by the European Union to foster a 
pan-European approach to the development of new communications networks (whether 
in relation to the provision of services, freedom of establishment, technical specifications, 
standardization, unification and opening of conditional access systems or the 
interconnection of infrastructures) will help to create new markets for European 
programmes. 
These new networks will be used for the development of new types of service such as 
pay-per-view, video on demand, educational services, etc. Only a Europe-wide approach 
to the development of these networks will make it possible to exploit both mass markets 
and market niches in Europe. This is a sine qua non for turning our cultural diversity to 
advantage. 
Similarly, the liberalization of telecommunications services and the opening up of the 
telecommunications sector to the free play of competition is contributing to the 
development of these markets. 
In this context, the timescale of transition to a European information area becomes a vital 
issue. If transition is short, our programme industry will gain much in terms of new 
outlets, fresh investment and experience of new technologies. At the same time, the 
necessary adaptation of the industry will call for more powerful, better targeted 
stimulation. 
The general trend in the services sector, illustrated by the White Paper, is towards 
worldwide liberalization and deregulation. This is equally true of the audiovisual sector 
as far as access to information and communication activities is concerned. Making 
allowance for considerations of general interest that call for the definition of rules 
governing the content of programmes would not run counter to this trend. The only 
remaining issue is the search for an optimum match between these rules and the 
objectives pursued. 
34 
To sum up: 
The European Union should give priority to the early creation of a European 
information area, thanks to the development of technologically advanced 
information infrastructures, liberalization of the services that will be using these 
infrastructures, standardization, and the creation of an open environment in terms 
of conditional access systems. 
(ii) Single market 
Similarly, the Commission considers that the establishment of a single market in the 
audiovisual sector has done much to create the conditions for the emergence of a genuine 
European programme industry. Side by side with the definition and implementation of 
a specific policy for the industry, correct operation of the single market, that is to say, 
removal of obstacles to the free movement of individuals, goods, services and capital and 
freedom of establishment, continue to be basic goals. 
The development of specific national rules for the audiovisual industry must not be 
allowed to interfere with the functioning of the single market. 
(iii) Application of the rules of competition 
Competition policy has a key role to play in any Community strategy to promote 
sustainable development of the audiovisual industry. Healthy competition which 
stimulates structural and technological change will make Europe's companies more 
competitive. Application of the rules of competition is an effective tool in building the 
single market and combating the fragmentation of national markets that dogs the 
European industry. The same is true of the rules on State aids. In this context, the 
principle of non-discrimination implies that support mechanisms must be made accessible 
to nationals of other Member States. Lastly, strict enforcement of the rules of 
competition can help guarantee an optimum environment for companies to develop. 
In the audiovisual industry the Commission is increasingly being asked to apply the 
competition rules to agreements between companies and sometimes to public subsidies. 
The Commission's experience in this area prompts the following comments: 
firstly, many cases are referred to the Commission without any prior 
consultation of national competition authorities (or directly by them) and 
without any action being taken in the national courts;46 all too often 
therefore the Commission is asked to deal with situations that could have 
been solved more readily at national level; 
secondly, the general lack of transparency in the industry, which results 
from patchy monitoring of the sector both by the authorities and by 
specialized companies involved in information gathering at national level, 
46 cf Notice on cooperation with national courts (OJ C39, 13.2.1993, p.5). 
35 
adds considerably to the complexity of the Commission's task, leading 
amongst other things to more lengthy procedures. 
thirdly, in the absence of cooperation between the Commission and 
anti-trust authorities in non-member countries, globalization of the industry 
makes it increasingly difficult to analyse the market penetration strategies 
of international audiovisual or multimedia groups. 
For the future, therefore, the Commission would suggest that (a) cooperation between the 
Commission and the authorities responsible for competition in the Member States and 
non-member countries be developed and (b) market transparency be improved. In this 
connection, the European Audiovisual Observatory set up by Audiovisual Eureka could 
play a useful role in collecting and disseminating information and, even more importantly, 
identifying the most pressing requirements. 
To sum up: 
Improving the transparency of the audiovisual market calls for cooperation 
between the Commission and national authorities responsible for applying the 
rules of competition and cooperation between the Commission and anti-trust 
authorities in non-member countries. 
5.1.2 Measures to promote European programmes 
We have seen that Chapter III of the "television without frontiers" Directive gives the 
European Union the tools to promote the programme industry. The Commission believes 
that this acquis communautaire provides a sound framework for the cross-border 
development of the European programme industry and that it should be retained for the 
time being. 
With an eye to a specific policy to strengthen the programme industry, discussion of the 
legislative framework does not challenge the principle but rather the manner in which 
it is applied, and in particular tighter checks on the application of Community law and 
more effective incentives. 
(i) Tighter checks on the application of Community law 
The credibility and effectiveness of the legislative framework for the audiovisual industry, 
including incentives, largely depend on the effectiveness of checks on whether operators 
are meeting their obligations and the imposition of sanctions if they are not. Limited, 
clearly binding measures are preferable to ambitious mechanisms with no effective 
control. 
Controls (and the imposition of sanctions where necessary) are a matter for national 
authorities in the first instance. In its recent communication47 the Commission reviewed 
the shortcomings of national reports and indicated that it proposed to make its own 
47 See footnote 29. 
36 
checks on the application of Articles 4 and 5. The elements of flexibility built into these 
mechanisms do not rule out the gradual emergence of a common interpretation, possibly 
under the control of the Court of Justice. 
The implementation and enforcement of common rules and the imposition of sanctions 
in the event of non-compliance are vital for the harmonious development of broadcasting 
in Europe. Any differences in the application of the rules in Member States could distort 
competition in the free market for television programmes created by the "television 
without frontiers" Directive. 
In an industry that is developing rapidly, where investment is spread over several years, 
where market shares can be won and lost in short order, operators need a maximum of 
transparency and certainty as to the law. To prevent operators adopting a "fait accompli" 
approach, taking advantage of the lack of precision as to their obligations, the absence 
of sanctions and lengthy procedures, we need to make the monitoring of Community law 
more stringent and more effective by tightening existing controls and sanctions. 
To sum up: 
How can the application of Community law and its monitoring be made more 
effective? 
Apart from uncertainties about the effectiveness and the structural impact of incentives, 
a number of other questions will have to be examined in advance of the deadline set for 
the comprehensive review of the "television without frontiers" Directive. 
Firstly, care will have to be taken to ensure that promotional mechanisms are adapted 
to the new types of service that will be coming on stream earlier than expected thanks 
to the "digital revolution". 
Secondly, some thought will have to be given to whether and how the effectiveness of 
these mechanisms can be improved while retaining the measure of flexibility needed to 
accommodate the diversification of broadcasting in the widest sense of the term. 
(ii) How can incentives be made more effective? 
The discretion allowed the Member States as regards detailed arrangements ("appropriate 
means") for implementing the mechanisms of the Directive has led to significant 
differences in the level of constraints and controls to which broadcasters in the Member 
States, or indeed different types of broadcasters within a single Member State, are 
subject.48 
Given the impact of incentives on the activities of broadcasters, there is a danger that 
excessive differences in treatment could interfere with competition with the free 
movement of broadcasting services. 
48 We are thinking here of the obligations that transcribe the objectives of Articles 4 and 5 at national 
level, not of additional measures which Member States can impose unilaterally (usually for 
language policy reasons) on broadcasters under their jurisdiction. 
37 
* Taking the diversity of broadcasting services into account 
What many see as the main weaknesses of the Directive49 can be attributed in large 
measure to the flexibility needed to cope with a highly diversified industry. The economic 
constraints on broadcasting services are as varied as the services themselves, which can 
be: 
general or thematic 
encoded or unencoded 
funded by licence fees, advertising, subscription, payments for individual 
services, or a combination of these 
long-established or new 
geared to national or transnational audiences 
in major or minor languages 
These essential differences have enormous consequences for the strategies of operators, 
including their policies on production and the acquisition of rights, and need to be taken 
into account. 
It should be noted that the definition of "broadcasting" in the Directive50 covers services 
such as Pay-per-View (PPV)51 or near video on demand but not telecommunications 
services such as video on demand (VOD).52 
Any attempt to increase the effectiveness of mechanisms must therefore reflect this 
reality and the trend towards diversification. There is no incompatibility in principle 
between diversification and incentives for the European programme industry provided 
by the regulations. On the contrary, appropriate mechanisms could promote diversity 
(which is what European audiences want) while guaranteeing a place for European 
programmes. 
The diversity of national realities does seem on occasion to be a bar to the adoption of 
precise definitions at European Union level (for example the notion of "producers 
49 
50 
51 
52 The main culprits are the terms used in Articles 4 and 5: "where practicable", "by appropriate 
means", and "progressively". 
Article 1 states that for the purposes of the directive "television broadcasting" means the initial 
transmission by wire or over the air, including that by satellite, in unencoded or encoded form, of 
television programmes intended for reception by the public. It includes the communication of 
programmes between undertakings with a view to their being relayed to the public. It does not 
include communication services providing items of information or other messages on individual 
demand such as telecopying, electronic data banks and other similar services. 
PPV services are classed as broadcasting in the sense that transmission is by a public service (even 
if the audience is limited to viewers with the right equipment), the viewer's choice being confined, 
technically speaking, to determining the segment of a programme that he wants to disencode and 
actually view. It is a "point to multipoint" communication, that is to say, from a single 
(transmission) point to multiple (reception) points. 
VOD services, like all genuinely interactive services, are classed as telecommunications in that 
transmission is in response to individual demand. It is a "point to point" communication, that is 
to say, from a single (transmission) point to a single (reception) point. 
Because it appears to exclude services operated in response to individual demand, the definition 
in the Directive does not cover services such as VOD. 
38 
independent of broadcasters" used to implement structural mechanisms runs up against 
substantial differences in the way the production of television programmes is organized 
in the Member States). In the interests of balance and certainty as to the law, it might 
be a good idea to find minimal definitions to provide a base at Community level, without, 
however, excluding more precise definitions at national level to allow structural objectives 
to be adapted to national realities. 
* Clarification of obligations 
In view of the above, some thought might usefully be given to clarifying obligations in 
relation to the objectives of restructuring. It will no longer be enough to provide a 
framework to encourage the cross-border exercise of certain activities. More focused 
incentives need to be developed. 
Discussion should concentrate on the following: 
how to promote cross-border movements of audiovisual programmes 
(mainly stock programmes to create catalogues which could be exploited 
in numerous formats and markets over a long period); 
how to encourage investment in the production of new programmes or the 
acquisition of rights to recent programmes, notably those emanating from 
"oroducers independent of broadcasters". 
To sum up: "producers independent of broadcasters" 
How can the diversity of services be taken into account?s 
How can intra-European distribution of programmes be encouraged? 
Are clearer common definitions needed? 
Should preference be given to incentives to invest in the production of 
programmes and the acquisition of rights rather than mechanisms based on 
broadcasting time? 
(iii) Media time scales 
Irrespective of any legislative framework, media time scales (the "windows" system) are 
a natural consequence of a determination to maximize earnings from the different ways 
in which a film or television programme can be exploited. 
Decisions to move into a new market (from the big screen to video, from video to pay 
television, from pay television to ordinary television ....) may depend on the type of 
programme and the target audience but the aim, invariably, is to increase earnings. 
Moreover, the introduction of PPV and VOD services as well as the proliferation of new 
formats (videodisc, CD-I, CD-ROM) will create additional steps in the order and 
complicate the options open to rights-holders. Their freedom is an essential element in 
exploiting programmes. 
Other considerations may well interfere with the freedom of rights-holders to maximize 
earnings from each production: 
39 
firstly, the importance of screening in the cinema, where success can determine 
the fate of a production in other markets, combined with a policy of promoting 
cinema-going ("a film must be seen in a cinema") means that there is a tendency 
to protect this way of exploiting productions. 
secondly, the growing importance of investment by broadcasters in cinema 
productions is leading certain commentators to fear the development of "disguised 
television production", making cinema screening purely incidental. 
thirdly, other sectors (the video sector for instance), which feel threatened by new 
ways of transmitting audiovisual programmes, are calling for specific protection. 
Account must also be taken of the various interests affected by the prospect of further 
technological developments. A question mark therefore hangs over the wisdom and the 
substance of Community rules to regulate media time scales. 
To sum up: 
Should Community rules on media time scales be retained, given the need to 
maximize earnings and encourage the emergence of new formats and services? 
Should existing rules be amended and extended to forms of exploitation other 
than broadcasting? 
5.1.3 Should new types of service be covered? 
With the digital revolution will come new types of audiovisual service straddling the 
divide between : 
broadcasting: from a single transmission point to multiple reception points; 
telecommunications: from a single transmission point to a single reception point. 
Although a current of liberalization (deregulation of access to these activities by private 
operators) is spreading through both these communications sectors, the existing rules and 
the philosophy behind the approach to each of them are very different: broadcasting has 
traditionally been subject to many rules as regards content; there are, by contrast, very 
few rules on telecommunications. 
The presence of two sets of legal rules may result in different treatment for what are 
much the same type of services although using different transmission techniques: for 
instance, a near video on demand service using a large number of channels would be 
subject to the broadcasting rules, while genuine video on demand would be subject to the 
rules for telecommunications. 
This could then distort competition between different types of audiovisual service: 
ordinary television broadcasting, pay-television, PPV, near-VOD, VOD, etc. 
40 
Since these new vehicles for the transmission of audiovisual programmes will gradually 
be accounting for a substantial share of revenue, there are those who argue that they 
should play their part, alongside the traditional broadcasters, in the effort to promote 
European programmes. 
In addressing this question, account must be taken of the objectives of rapid development 
of the common information area. The question of coverage for these new services is 
intimately linked to questions of what is appropriate: we must not lose sight of the need 
to develop these services as far as possible while ensuring that the European programme 
industry obtains a fair share of the consequential expansion of the European market. 
Account must also be taken of considerations relating to the overall effectiveness of 
mechanisms for promoting European programmes and technical constraints: PPV and 
near-VOD might be subjected to a promotion mechanism based on transmission time (as 
distinct from actual viewing time), whereas VOD will require quite another approach.53 
Some recommend rules relating to catalogue content, whereas others advocate rules 
relating to investment in the production or purchase of European programmes. 
To sum up: 
How can the relationship between the development of new types of service and the 
development of the European programme industry be optimized? 
Should incentives be developed for new ways of transmitting audiovisual 
programmes (notably those on individual demand, as opposed to broadcasting 
services in the strict sense - "point to multipoint" communication)? What would be 
the appropriate arrangements? 
5.2 Financial incentives at European Union level 
5.2.1 A horizontal approach or sectoral priorities? 
With an eye to the development of a European market in film and television programmes, 
the first issue to be discussed is whether financial incentives should be available to all 
links in the "audiovisual chain" (from screenplay to the various ways of exploiting the 
end-product) or whether they should concentrate on priority sectors. 
(i) A horizontal approach 
Because the "crisis" in the European industry affects all links in the chain, incentives for 
each phase of the production/exploitation process would be justified. 
Adopting a sectoral approach, the MEDIA programme has endeavoured to identify the 
main shortcomings of this process (with due allowance for the specific needs of areas 
53 For PPV services, transmission time and content cover all broadcasts without reference to 
individual viewing time. For VOD services, by contrast, transmission time and content are 
determined by individual viewing time and are not known until after the event. 
41 
such as animation or issues such as the utilization of new technologies in programme 
production) and devise incentives that could overcome them. 
(ii) Priority sectors 
An alternative, more macro-economic approach would be to identify priority links in the 
"audiovisual chain" and concentrate the bulk of available resources on these and in this 
way apply "leverage" to the entire chain. 
The views canvassed by the Commission during the preliminary consultations suggest that 
the following could be regarded as priorities in the context of building a stronger 
European programme industry: 
the production of programmes adapted to the requirements of the European market 
presupposes considerable investment in the development of projects, given the 
variety of audiences and the range of potential formats (notably multimedia); 
optimum exploitation of programmes on the European market (using all possible 
forms and means of transmission) presupposes a major marketing effort and the 
creation of European distribution networks capable in the long term of investing 
in production and compiling a rights catalogue: 
promotion of programme distribution within Europe and allowance for the specific 
needs of countries with a limited language area presuppose a special effort to 
develop dubbing and subtitling, with emphasis on quality; 
the development of a European programme industry presupposes the mobilization 
of funds not only within the industry itself but also from private investors active 
in other sectors of the economy; such funds could be attracted to the industry by 
the use of financial engineering techniques: 
the transnational approach to audiovisual production and distribution and the 
diversification of distribution networks calls for comprehensive, market-oriented 
training programmes geared to the market and new information technologies. 
These five priority targets do not rule out action in other areas, but the case for making 
them the focus of attention to stimulate the development of the European programme 
industry should be analysed. 
42 
To sum up: 
Should the horizontal approach to financial incentives be continued, covering all 
phases of the creation/production/distribution/exploitation process, or should funds 
be concentrated on a number of priority phases to apply leverage to the process as 
a whole? And if so, on which? 
In particular: 
How can the development of projects be improved in a European context? 
How can pan-European distribution of programmes be encouraged and the 
compartmentalization of national markets be brought to an end? 
How can high-quality dubbing and subtitling be promoted? 
How can investment be encouraged? 
How can training be geared to the market and new information technologies? 
5.2.2 Priority for companies or priority for projects? 
The programme industry is an industry of prototypes. Another peculiarity is the fact that, 
generally speaking, the consumer "pays" for a product sight unseen (when he buys a 
cinema ticket, for instance). It is heavily dependent on talent and each prototype 
presupposes considerable risk-taking. 
If this reality is taken into account, two distinct approaches to financial incentives 
emerge: 
The first approach involves supporting a maximum number of programmes to give as 
many talented people as possible a chance, thereby increasing diversity. Under this 
approach, financial incentives serve to lessen the risks of production without paying too 
much attention to exploitation of the programmes produced. Taken to extremes this 
approach can have the perverse effect of programme production which takes no account 
whatsoever of markets and audiences. Programmes are indeed produced each year in 
Europe which, at best, are presented at festivals but are never exploited in any other way. 
The second approach involves giving priority to activities that could strengthen the base 
of companies with potential for a number of programmes, thereby helping them to spread 
the inherent risks, provided that development of the programmes is market-oriented. 
Under this approach the crucial problem is not the activity subsidized (production, for 
instance) as such (the increase in the number of products, for example) but the conditions 
in which the activity is carried out: the creation and maximum exploitation of catalogues, 
the health of the companies involved and the strengthening of their base. Taken to 
extremes this approach can also have the perverse effect of discrimination between 
companies on the basis of their overall activities distorting competition between operators. 
The project-by-project approach (whether in production or distribution) facilitates the 
activities it sets out to encourage but has no lasting effect on company structures. 
By contrast, an approach which looks at the overall activities of companies and their 
success on the European market, or provides incentives to groups of companies for 
43 
instance, sparks growth, gradually increasing company potential whether in terms of 
catalogues, risk-sharing or training capacity. 
To sum up: 
Should the project-by-project (creation, production, distribution or exploitation) 
approach be continued for financial incentives? 
or 
Should priority be given to companies, taking the whole range of their activities 
into account? 
5.2.3 What should the scale be in terms of territory, time and funding? 
The definition of incentives designed to improve structures on the European market must 
be based on appropriate criteria in terms of market size, the time factor and the level of 
funding. 
(i) Market size 
If the goal of restructuring the European programme industry is to be achieved, the 
mechanisms to be put into operation should reflect a genuine European dimension. It is 
true that a limited territorial ambition (confined, for example, to projects involving the 
companies and markets of three Member States, two of them belonging to the same 
language area) does encourage cross-border activities, but it does not lead to a genuine 
"experience" of the European market, nor does it have a radical effect on the economics 
of projects subsidized. 
(ii) The time factor 
The time factor is an essential element of any industrial policy: 
firstly, the life of the mechanisms chosen must coincide with the end of the 
"transitional phase", when the ultimate goal of restructuring should have been 
attained; 
secondly, in the case of financial incentives which make provision wherever 
possible for repayment as soon as a profitability threshold has been reached, the 
timing of repayment should reflect the scale of the risks taken by companies in 
response to the provision of incentives. 
(iii) The level of funding 
The effectiveness of financial incentives is very much dependent on the concept of a 
"critical mass" (a term referring to both the total amount of funding and the individual 
amounts allocated under support mechanisms). 
If the amounts are too small, the industry will use them to compensate for its 
shortcomings without changing its basic structure. 
44 
If they are too large, they will shield businesses from economic risk and have a 
perverse effect on the market. 
The type of mechanism used often depends on the funding available. 
Smaller sums generally necessitate a selective approach whereas, with larger sums, 
a more automatic mechanism can be operated, which will be triggered by market 
indicators. 
To sum up: 
The mechanisms which must be applied in order to bring about changes in 
structures at European Union level must have a genuine European dimension and 
be adequately funded in order to provide the "critical mass" required to achieve the 
objectives within a reasonable length of time. 
5.2.4 The European market and cultural diversity 
Given the cultural importance of the audiovisual industry, the Commission believes that 
it is vital to ensure that an industrial policy in this area does not lead to multi-speed 
development which would sideline Member States (or regions) with low audiovisual 
production capacity or a restricted language area.54 It is important that all regions of the 
Union should be involved in the development of the audiovisual industry. 
As to the programme industry, the creation of a genuine European market is the best way 
of responding in the long term to various structural handicaps: 
with the development of the European market, the size of the national market will no 
longer be an impediment to talented people who, irrespective of their country of origin, 
will have to appeal to European audiences; 
furthermore, the success and profitability of the European market will open the door to 
new markets outside Europe where producers of different countries and languages, big 
or small, will find a natural outlet (for example, the Spanish- and Portuguese-speaking 
areas of Europe may be relatively small but the world market for material in these two 
languages is much bigger). 
In this connection the need to develop dubbing and subtitling - in terms of both number 
of programmes and quality of the product55 - in order to increase the movement of 
programmes within the Community becomes a priority objective. 
However, conective mechanisms could be envisaged during the "intermediate phase" of 
the development of a European market. 
54 
55 This is a particularly topical issue in the context of the accession to the European Union of further 
countries with low production capacity or a restricted language area. 
See 3.3.1 "Overcoming the language barriers". 
45 
Subject to compatibility with Community law, these mechanisms could take one of two 
forms: "positive discrimination" within the framework of measures available to all 
companies of the Union without distinction, or specific measures. 
To sum up: 
How can the European Union cater for the special problems of countries with low 
production capacity or a restricted language area? 
Should they be catered for under mechanisms applicable across the board, or 
Should specific mechanisms be developed? And if so, what form should they 
take? 
5.2.5 Involvement in the development of new markets 
For an industry that aims to be competitive on the world market, a presence on as many 
national markets as possible is just as vital as distribution in all formats. In the case of 
the programme industry this requirement is reinforced by the fact that the supply of 
audiovisual programmes is gradually shaping the tastes of European audiences. 
Apart from the Community market where it is inappropriate to speak of exports, some 
outside markets are economically promising but difficult to penetrate (the US market for 
instance) while others are in the process of development or reconstruction. Whatever the 
stage of development reached by these markets, any links that European companies can 
establish to secure access to new markets for their programmes will prove to be trump 
cards for the European industry in the medium or long term. 
Be that as it may, long-standing historical and cultural links with the countries of Central 
and Eastern Europe, the cinematic and audiovisual traditions that survive there, and the 
prospect of gradual economic integration in the region,56 would argue in favour of the 
European Union giving priority to these markets. 
(i) Reconstruction and development aid 
Basically, economic relations between the European Union and these countries are built 
on the reconstruction and development aid that they so desperately need. This could be 
extended to industries like the audiovisual industry, under the Community's Phare and 
Tacis programmes for instance, provided the measures introduced are consistent with 
priorities jointly agreed with the authorities of the countries concerned. 
Producers and companies in the European Union and in Central and Eastern Europe have 
a shared interest in the development of an audiovisual market in the region and action 
by the Union could help to speed matters. 
56 Cf the legal framework provided by the "Europe Agreements" with Poland, Hungary, Romania, 
the Czech Republic and Slovakia. Support measures might also be possible under the "Regional 
economic integration agreements", provided they are not regarded as export subsidies. 
46 
(ii) Extension of the Community's financial incentives 
In this context, a possible first step might be to extend the Union's financial incentives 
to companies in Central and Eastern Europe. But this approach (aside from the familiar 
problems of the inadequacy of the legislative frameworks still being developed in these 
countries, notably in the area of copyright) faces two major obstacles: 
first, differences in the level of development of audiovisual industries and 
exploitation networks in the two halves of Europe mean that mechanisms adapted 
to the situation in the Union would not necessarily work in Central and Eastern 
Europe; 
second, given the limited funds that these countries could contribute in relation 
to the number of companies capable of submitting projects that would qualify for 
support, an extension of these mechanisms could lead to financial transfers that 
would undermine their effectiveness within the Union. 
(iii) A new partnership 
This being so, a different approach should be envisaged. This is why the Commission 
intends to consider whether it is advisable and feasible to provide incentives for Union 
companies to move into these countries. 
Other industries - notably the American industry - have pursued a policy of "occupying 
the ground" in the area of infrastructures (cinema chains, cable companies, 
telecommunications ...) and low-cost programmes. 
If the European Union were to encourage equal partnerships between companies from the 
two halves of Europe, this could help to revive our industries, notably the programme 
industry, and strengthen cultural ties. 
To sum up: 
With an eye to the development of the audiovisual market in the countries of 
Central and Eastern Europe: 
Should action by the European Union be confined to development and 
reconstruction programmes for industry in general (and hence, potentially, the 
audiovisual industry)? 
or 
Should the Community's financial incentives be extended to professionals in these 
countries? 
or 
Should specific instruments be developed to encourage initiatives by Community 
companies in these countries in a spirit of partnership? 
47 
5.3 Convergence of national support systems? 
Action taken by Member States is, in many respects, the decisive factor behind structural 
change in the audiovisual sector. This is the case as regards financial incentives, where 
national support mechanisms, all together, can act as a powerful lever to strengthen the 
programme industry. 
National policies are first and foremost directed at national objectives: 
cultural objectives: preservation of quality and diversity in programming, language 
issues, support for creativity, promotion of national and local identities; 
industrial objectives: development of the national programme industry, 
development of services and new outlets, introduction of new technologies, etc. 
The objective of developing a European programme industry by no means runs counter 
to these objectives; on the contrary, the long-term viability of the Member States' 
industrial and cultural policies depends on it. 
What is more, if national policies incorporate the European dimension, they can 
contribute substantially to the effectiveness of measures adopted by the European Union, 
whereas if they withdraw into a purely national structural and market strategy they will 
seriously jeopardize the prospects for success in Europe and even more so in the world 
at large. 
It would therefore seem appropriate to give thought to a comprehensive strategy with a 
view to achieving optimal economic impact of these systems. 
5.3.1 A forum for exchanges and thought 
Without questioning Member States' autonomy in such matters, it would be consistent 
with the idea of developing the European programme industry by means of a collective 
effort by all actors in the Union if thought could be given to the contribution that 
Member States, at their different levels of authority, can make to jointly defined 
objectives. 
The Commission proposes to lead the discussions with the Member States' competent 
authorities in a spirit of cooperation. A forum would have to be set up for debate on 
subjects of interest to all, where it would be possible to discuss each other's experiences, 
analyse the effectiveness and limitations of existing national systems and ultimately study 
the possibilities and advantages of convergence towards common objectives. 
At a later stage in what will be a gradual process, the Commission could formalize these 
exchanges or their conclusions, by initiating the institutional procedures for the adoption 
of recommendations or other common measures. 
5.3.2 What are the priority themes for exchanges and thought? 
We have already seen that Community regulations contain common rules for promoting 
the production and distribution of European programmes. Moreover, the Community has 
always been favourably disposed towards national support systems provided they do not 
48 
undermine the common interest or contravene Treaty provisions on free movement of 
individuals and services and right of establishment.57 
Above and beyond this legal approach reflection and exchanges can be developed in 
pragmatic fashion along two lines, with a view to optimizing the overall effectiveness of 
national support systems: convergence in the priorities for programme industry support, 
and convergence in financing such systems? 
(i) Convergence in the priorities of national support systems 
National systems do, to differing degrees, contribute towards strengthening the 
programme industry. Exchanges of experience and ideas between Member States about 
the operation of these systems and the priorities assigned to them could be a source of 
mutual enrichment leading to an appreciable improvement in effectiveness. 
A number of topics could be suggested for consideration. 
The strength of the national programme industries will depend on their ability to 
constitute large catalogues of programmes that can be used on a variety of markets 
(geographical and technical). 
This being the constraint, the chief problem is obviously not production itself (in 
quantitative terms) but the conditions in which material is produced and exploited.58 
In this area the Commission proposes that thought be given to the way in which national 
support mechanisms can take account of the need to be market-oriented at the 
project-development stage and the need to stimulate the formation, compilation and 
maximum exploitation of programme catalogues. 
In the same vein, the Commission also proposes that questions concerning 
market-oriented training and the dissemination of new information and communications 
technology be addressed. 
In addition to this discussion about the thrust of national support mechanisms, another 
suitable subject for attention would be the arrangements for granting financial support. 
The Member States use a whole range of techniques (advances against box office takings, 
selective aid, automatic aid, etc.). It would be interesting to compare their effectiveness. 
Taking account of the European dimension entails consideration of the openness of 
criteria of eligibility for national support mechanisms: can, for instance, the success of 
a cinema or television programme outside the national territory be relevant to national 
firms' transnational ambitions? 
57 
58 It is worth recalling that the Union Treaty contains a clause which confirms this approach, namely 
the insertion of point (d) in Article 92(3) of the EC Treaty which includes "aid to promote culture 
and heritage conservation where such aid does not affect trading conditions and competition in the 
Community to an extent that is contrary to the common interest" among the types of aid which 
may qualify for exemption. 
The strategic question of catalogues applies also to existing material. An inventory should be taken 
so as to maximize market potential. 
49 
There are other considerations that militate in favour of at least some degree of 
convergence between national mechanisms. Transnational co-production and 
co-distribution arrangements will be all the easier to establish if national support 
mechanisms run along parallel lines. The complexity of co-production agreements is 
largely the result of the wide variations between them. 
This list is not exhaustive? As the aim is to identify topics of common interest, it will 
clearly be for the Member States to say in what areas they think that a pooling of ideas 
may enrich their own experience. 
(ii) Convergence in financing national support systems 
The concept of a critical mass as applied to the financing of an industrial-type policy 
does not preclude consideration of questions of subsidiarity in relation to the origin of 
takings or to the implementation and management of distribution arrangements. In other 
words, determination of the critical mass must reflect both the mechanisms to be put in 
place at European Union level and those operating with comparable or closely inter­
related objectives at national level. The aggregate amount must reflect the appropriations 
available from the Community budget and those available in national budgets to promote 
industrial restructuring objectives. 
The transition from a micro-economic strategy to a macro-economic strategy presupposes 
a qualitative shift in the definition of financial support mechanisms as well as a 
quantitative shift in the resources deployed. 
To deal with this and to release finance corresponding to the requisite critical mass, 
thought must be given to the different forms of funding that can be envisaged. 
National support mechanisms are funded either from the central government purse or 
from the redistribution of a proportion of takings. 
This second formula - a form of compulsory saving - consists of charging a parafiscal 
levy on the proceeds of exploitation of material at certain stages of its life (cinema 
takings, advertising receipts or broadcasters' turnover, video rentals) and redistributing 
them to programme industry operators by means of support mechanisms. Any such levy 
must abide by the policy followed hitherto by the Commission in relation to charges 
earmarked for specific purposes. 
The value of such a system is two-fold: 
first, it takes account of the actual dimension of the market provided the levy is 
charged on a significant proportion of audiovisual programmes; 
second, the involvement of the "payers" (all services subject to the levy) in the 
audiovisual industry both requires and to some extent ensures that the 
redistribution mechanisms operate in an economically sound way. A broadcaster 
will be all the more willing to hand over part of his revenue if the redistribution 
mechanisms give him something in return in the form of greater availability of 
attractive programmes at competitive prices. 
50 
As systems of this type already exist at various levels in a number of Member States, and 
in view of their economic virtues, the Commission proposes that the Member States' 
authorities and operators in the sector join with it in considering whether something 
similar could be developed at Union level. 
The establishment of such a system throughout the Community would not overburden 
national or Community budgets but would provide financial leverage commensurate with 
the industrial structure interests at stake. 
If the principle were agreed, a certain level of Community coordination could be 
envisaged in the longer term. 
The Commission is fully aware of the political sensitivity and the technical difficulties 
of any such scheme. It merits thought, however, in view of what is at stake. 
It should be stressed that the questions of whether such a system could or should be set 
up throughout the Union remain open. It would be more a matter of looking into 
possibilities of coordinating Member States' schemes than of proposing a new financial 
instrument at Union level. To start with, a list of existing systems would have to be 
drawn up and their characteristics analysed. 
To sum up: 
Should a cooperative framework for exchanges and thought be set up with a view 
to improving national systems of support for the programme industry and 
promoting their convergence? 
What should be the priority themes? 
Should such an exercise promote: 
common priorities in national support systems? 
a gradual move towards a European dimension? 
debate on funding arrangements? 
51 
CONCLUSION 
The Commission is aware that a change in attitude is the primary erïort that must be 
made if the European Union elects to invest in the future of the programme industry via 
a policy designed to strengthen it structurally. 
The change of attitude must, of course, begin with the institutions of the Union and 
national authorities, particularly in the way they approach the elaboration of 
comprehensive policies on the communications industries. But the industry itself must 
make an effort too. 
Reconciling the cultural and the economic, the product and the audience, the small 
business structure and the industrial constraints - these are no mere buzz-words to conceal 
the complexity of the transition that the industry must make if it is to survive. Europe 
must have confidence in its talents and give them the proper means to flourish throughout 
Europe and the world. 
It is in that spirit that the Commission is presenting this Green Paper to the European 
institutions. There will also be extensive consultations with the industiy. 
This will allow the Commission to canvass the views of individual operators and 
organizations representing the industry at European level. 
In the audiovisual sector, and more especially in the programme industry, the Commission 
has to deal with a large number of trade organizations whose representativeness at 
European level and ability to present the views shared by the companies they represent 
vary enormously. In the long run the dialogue with the industry would be much easier 
if there were a more orderly structure in these organizations. 
A first step will be the organization of a European Audiovisual Conference in Brussels. 
The results of this could be refined in another round of consultations. 
At the end of the consultation process the Commission will draw its conclusions. It will 
then brief the European institutions as a preliminary to presenting proposals for practical 
action to be taken, pursued or boosted at European Union level. 
52 
SUMMARY 
With the audiovisual sector undergoing far-reaching and rapid change, brought on in 
particular by technological developments, the Green Paper entitled "Strategy options to 
strengthen the European programme industry in the context of the audiovisual policy of 
the European Union" focuses on a strategic aspect of the sector. 
The film and television programme industry has two specific characteristics: 
films and television programmes are not products like any others: as the prime 
vector of culture and living testimony to the traditions and identity of each 
country, they deserve encouragement. 
Current developments are making these programmes a key factor in the strategy of the 
most powerful operators in the audiovisual sector. 
The convergence of the programme industry, broadcasting services, cable and 
telecommunications operators, the publishing industry and manufacturers of information 
and communications technology equipment is behind the appearance of new products, 
new audiovisual services which are leading us into a new information society. 
Although it is not yet possible to fully measure these phenomena which are developing 
throughout the world, there are a number of fundamental points which can be made 
concerning the future of the European programme industry: 
it must be competitive in an open, worldwide market; 
it must be forward-looking and be involved in the development of the information 
society; 
it must illustrate the creative genius and the personality of the people of Europe; 
it must be capable of transforming its growth into new jobs in Europe. 
The aim of the Green Paper is to launch a debate on the following theme: 
How can the European Union contribute to developing a strong, forward-looking 
programme industry (both for the cinema and for television) that can compete on 
world markets and help European culture to flourish and create jobs in Europe? 
At this point in time the Commission is endeavouring, with the help of a series of 
forward studies - the White Paper on Growth, Competitiveness and Employment being 
foremost among them - to devise the basic guidelines for a European Union policy on 
communication, taking account of technological change brought about by digitalization, 
the convergence of industries in a single information area (information, infrastructures, 
applications) and changes in market structures (alliances and mergers). 
53 
This Green Paper is one such exercise. Input has come from three sources: a 
Think Tank set up by the Commission, trade organizations and the Member States. 
It is clear from the diagnosis of the present situation that the European programme 
industry has failed: 
to overcome its atomistic local market structure or to promote intra-European 
distribution of programmes; 
to get out of its chronic loss-making situation and to attract significant flows of 
European or foreign investment. 
In this crisis situation, the digital revolution will reinforce a number of trends already at 
work on the audiovisual market: 
the growing individualization of supply and the bigger role of individual 
consumption as a component of the industry's revenue structure; 
internationalization and globalization of the programme industry and related 
industries; 
the growing need for rich catalogues in terms of both quantity and quality. 
The combined result of these trends will be the need for an industry policy approach that 
provides the means of satisfying every market segment and every audience in Europe, 
bearing in mind the variety of formats and services which are in the pipeline. 
This approach is a logical extension of the strategy outlined in the Commission's 
White Paper for the creation of a European information area to foster the development 
of new markets for services. 
Apart from the global approach and the allowance made for European characteristics, the 
audiovisual policy of the European Union must include new priorities: 
bringing the new technologies to companies working in the industry; 
creating a competitive environment for services; 
developing communication infrastructures; 
developing appropriate forms of training. 
Although there is a risk of being sidelined into market segments that are too small to 
allow full benefit to be derived from the growth of the industry world-wide, the European 
programme industry does have a number of valuable trump cards, particularly the quality 
and diversity of its production capacity which is so important at a time of 
individualization of supply. 
As part of a collective effort of all actors in the European Union, the Union policy will 
have to encourage the development of a diversified European market for programmes and 
at the same time prompt an appropriate response from the programme industry. 
To this end: 
54 
The European Union should press ahead with the introduction of technologically 
advanced information infrastructures to give consumers a wider choice and create new 
openings for the programme industry. 
At the same time, to ensure that the development of extensive distribution networks does 
not work to the sole advantage of non-European programme industries, forcing its own 
industry to retreat into local markets with limited economic potential and cultural 
influence, the European Union must mobilize its resources to invest in the development 
of a programme industry capable of competing at home and on the world market acting 
as a vehicle for its culture, creating jobs and generating profits. 
What is needed, therefore, is a medium/long-term policy with the ultimate aim of making 
the industry profitable again in an open, dynamic world market. 
Existing instruments at Community and national level, both for financial and other forms 
of support, have helped the industry survive but have provided no incentive to make the 
necessary restructuring effort. 
The audiovisual industry, like other industries affected by internationalization and 
globalization, notably in the context of technological change, will have to face pressures 
for liberalization in the years ahead. 
For this reason, the European Union must lose no time in devising and implementing an 
ambitious industrial policy focusing on the following objectives: 
putting an end to the partitioning of national markets; 
guaranteeing real choice to the European public; 
optimizing opportunities in an industry with a future; 
securing the long-term profitability of a loss-making industry. 
In order to outline such a policy, the Commission wishes to open a debate on a series of 
options under three heads: the rules of the game, financial incentives, and the 
convergence of national systems. 
1. Options for the rules of the game 
With a view to a European Union policy to boost the programme industry, the 
development of the market by the establishment of infrastructure, the liberalization of 
services and the removal of obstacles to the single market is the first objective. 
Improving the transparency of the audiovisual market calls for better cooperation between 
the Community and national authorities responsible for applying the rules of competition 
and cooperation between the Community and anti-trust authorities in non-member 
countries. 
The Commission believes that existing rules in the European Union to promote European 
programmes provide a sound framework for the cross-border development of the 
programme industry that should be retained for the time being. 
55 
However, there are a number of questions about the effectiveness of these tools: 
How can the application of Community law and its monitoring be made more 
effective? 
How can the diversity of services be taken into account? 
How can intra-European distribution of programmes be encouraged? 
Are clearer common definitions needed? 
Should preference be given to incentives to invest in the production of 
programmes and the acquisition of rights rather than mechanisms based on 
broadcasting time? 
Should Community rules on media time scales be retained, given the need to 
maximize earnings and encourage the emergence of new formats and services? 
Should existing rules be amended and extended to forms of exploitation other 
than broadcasting? 
Moreover the emergence of new audiovisual services straddling the divide between 
broadcasting and telecommunications raises new issues: 
How can the relationship between the development of new services and the 
development of the European programme industry be optimized? 
Should incentives be developed for new ways of transmitting audiovisual 
programmes (notably those on individual demand, as opposed to broadcasting 
services in the strict sense - "point to multipoint" communication)? 
2. Options for financial incentives 
With a view to a European Union industrial policy to boost the programme industry: 
What principles should govern financial support? 
56 
Should the horizontal approach to financial incentives be continued, covering all 
phases of the creation/production/distribution/exploitation process, or should funds 
be concentrated on a number of priority phases to apply leverage to the process as 
a whole? And if so, on which? 
In particular: 
How can the development of projects be improved in a European context? 
How can pan-European distribution of programmes be encouraged and the 
compartmentalization of national markets be brought to an end? 
How can investment be encouraged? 
How can training be geared to the market and new information technologies? 
Should the project-by-proiect (creation, production, distribution or exploitation) 
approach be continued for financial incentives? 
or 
Should priority be given to companies, taking the whole range of their activities 
into account? 
Apart from the need to promote dubbing and subtitling, in terms of both quantity and 
quality, to promote intra-Community distribution of European programmes, what can be 
done to ensure that cultural diversity is preserved? 
How can the European Union cater for the special problems of countries with low 
production capacity or a restricted language area? 
Should they be catered for under mechanisms applicable across the board? 
Should specific mechanisms be developed? And if so, what form should they 
take? 
The strengthening of the programme industry inevitably assumes a worldwide dimension, 
hence certain specific questions in the context of gradual integration with Central and 
Eastern Europe? 
57 
With an eye to the development of the audiovisual market in the countries of 
Central and Eastern Europe: 
Should action by the European Union be confined to development and 
reconstruction programmes for industry in general (and hence, potentially, the 
audiovisual industry)? 
or 
Should the Community's financial incentives be extended to professionals in these 
countries? 
or 
Should specific instruments be developed to encourage initiatives by Community 
companies in these countries in a spirit of partnership? 
3. Convergence of national support systems ? 
Given the decisive role played by the authorities at different levels in the Member States 
on the structure of the audiovisual sector and in particular the potential impact of the 
systems of support for the programme industry, the Commission proposes that thought 
be given to the question of whether the convergence of national support systems is 
appropriate and feasible. 
Should a cooperative framework for exchanges and thought be set up with a view 
to improving national systems of support for the programme industry and 
promoting their convergence? 
What should be the priority themes? 
Should such an exercise promote: 
common priorities in national support systems? 
a gradual move towards a European dimension? 
debate on funding arrangements? 
58 
ANNEXE I 
CONTRIBUTIONS TO THE GREEN PAPER 
ON AUDIOVISUAL POLICY 
L PROFESSIONAL CIRCLES 
1) Organisations representing the industry at European level replying to 
questionnaire sent by Mr. Pinheiro. 
- ACT : (Association of Commercial Televisions in Europe) 
Included replies of : TF1 & ANT 1 (Antenna TV - GR). 
Noted that others, such as ITV and Fininvest, were sending their contributions 
directly. 
- ECCA (European Cable Communication Association) 
- EPC : (European Publishers' Council) 
- FEITIS : (Fédération Européenne des Industries Techniques de l'Image et du Son) 
Submissions of French members FITCA & SNVC 
German member VTFF 
Italian member UNITC 
- FERA : (Fédération Européenne des Réalisateurs de l'Audiovisuel) 
- FIAD : (Fédération Internationale des Associations de Distributeurs de films) 
- EBUAJER : (European Broadcasting Union/Union Européenne de Radio - Télévision) 
(some members also sent separate contributions) 
- UNIC : (Union Internationale des Cinémas) 
Noted that they had forwarded the questionnaire on to their European members 
to respond directly. 
- FIAPF : (Fédération Internationale des Associations de Producteurs de Films) 
- CEA : (Cinema Exhibitors Association) 
- CEPI : (Coordination of European Independent Producers) 
2) Organisations involved in the MEDIA programme replying to the questionnaire 
sent by Mrs Flesch. 
- EFA : (European Film Academy) 
- BABEL : (Broadcasting Across the Barriers of European Language) 
59 
- CARTOON : (European Association of Animation Film) 
- DOCUMENTARY : (Project for the Creative Documentay) 
- EAVE : (Les Entrepreneurs de l'Audiovisuel Européen) 
- EURO AIM : (Association Européenne pour un marché de l'Audiovisuel Indépendant) 
- EMG : (Euro Media Guaranties) 
- EFDO : (European Film Distribution Office) 
- EVE : (Espace Video Européen - The Irish Film Institute) 
- GRECO : (Groupement Européen pour la Circulation des Oeuvres) 
- LUMIERE : (Sauvegarde et survie du patrimoine cinématographique européen) 
- MAP TV : (Mémoire - Archives - Programmes TV) 
- MEDIA SALLES : (Encouragement de l'exploitation cinématographique en Europe) 
- SCALE : (Small Countries improve their Audiovisual Level in Europe) 
- SCRIPT : (European Script Fund) 
- CLUB : (Club d'investissement Media) 
- SOURCES : (Stimulating Outstanding Resources for Creative European Screenwriting) 
3) Other firms and organisations having sent a contribution. 
- BT : (British Telecom) 
- Central Television : (United Kingdom) 
- Chambre Syndicale des Producteurs et Exportateurs de Films Français 
- EACEM : (European Association of Consumer Electronics Manufacturers) 
- IFFS : (International Federation of Film Societies) 
- Fédération Nationale des Cinémas Français 
- Fininvest Comunicazioni : (Italy) 
- France Telecom 
- American Film Marketing Association 
- EUREKA Audiovisuel 
- GESAC : (Groupement Européen des Sociétés d'Auteurs et Compositeurs) 
60 
- GNS : (Genootschap van Nederlandse Speelfilmmakers) 
- ITV Network Centre : (United Kingdom) 
- IVF : (International Video Federation, Europe) 
- TV5 : (France) 
Including the contribution of the "Bmges Group" of trans-national European 
public service satellite chains, comprising : 
- BBC TV World 
- RAISAT 
- DEUTSCHE WELLE TV 
- RTVE INTERNATIONAL 
- TRT INTERNATIONAL 
- EURONEWS 
- RTP INTERNATIONAL 
-3 SAT 
-TV5 
- ZDF : (Germany) 
H. MEMBER STATES 
BELGIUM : Etat fédéral et Communautés 
DANMARK : Permanent Representation to the European Union 
GERMANY : Federal Ministry of Economy 
FRANCE : Permanent Representation to the European Union 
IRELAND : Permanent Representation to the European Union 
ITALY : Department of Information 
LUXEMBOURG : Permanent Representation to the European Union 
NETHERLANDS : Permanent Representation to the European Union 
PORTUGAL : Permanent Representation to the European Union 
UNITED KINGDOM : Permanent Representation to the European Union 
61 
ISSN 0254-1475 
COM(94) 96 final 
DOCUMENTS 
EN 15 
Catalogue number : CB-CO-94-106-EN-C 
ISBN 92-77-66763-X 
Office for Official Publications of the European Communities 
L-2985 Luxembourg