Opinion of the Committee of the Regions on the "Report from the Commission to the Council, the European Parliament and the Economic and Social Committee Final Annual Report on progress in implementing the Action Plan for the Introduction of Advanced Television Services in Europe"

(1999/C 374/10)

THE COMMITTEE OF THE REGIONS,

having regard to the Report from the Commission to the Council, the European Parliament and the Economic and Social Committee - Final Annual Report on progress in implementing the Action Plan for the Introduction of Advanced Television Services in Europe (COM(1998) 441 final);

having regard to the decision taken by its Bureau on 15 July 1998, under the fourth paragraph of Article 198c of the Treaty establishing the European Community, to draw up an opinion on the subject and to direct Commission 3 for Trans-European Networks, Transport and Information Society to prepare its work on the subject;

having regard to the draft opinion (CdR 61/99 rev. 1) adopted by Commission 3 on 15 April 1999 [rapporteur: Mr Pella (I-EPP)],

adopted the following opinion at its 30th plenary session of 15 and 16 September 1999 (meeting of 16 September).

1. Introduction

1.1. Council Decision 93/424/EEC of 22 July 1993(1) authorized an Action Plan designed to ensure the accelerated development of the market for advanced television services using the 16:9 format (16:9 being the screen width/height ratio), from the date of adoption of the document up to 30 June 1997.

1.2. The main objective is to develop a critical mass of advanced television services using the 16:9 format and to produce a sufficient and growing volume of high-quality 16:9 programmes, in order to help achieve the best possible audience figures.

1.3. Initially only pay-TV subscribers could watch digital programmes on 16:9 sets: now, however, due to sales of over 2 million sets, 16:9 is present in an increasing number of households, replacing the old, inherently flawed TV screens and providing pictures which come close to cinema quality.

1.4. The 16:9 format therefore represents the major challenge of the decade, offering images far outstripping conventional systems, together with digital stereo sound, ideal for fiction, documentary, sports and cultural programmes.

1.5. The Action Plan decision provides for an annual report on the previous year's activities to be submitted to the European Parliament, the Council and the Economic and Social Committee.

1.6. The first report, for 1994, was presented on 16 June 1995(2); the second, for 1995, was presented on 26 July 1996(3), and the third report, the subject of the present opinion, covering 1996 and 1997, was published last year.

1.7. Community funds of up to 228 MECU were allocated for the mid-1993 to mid-1997 period to contribute to the additional costs of introducing the 16:9 format. Funds could be applied for through calls for proposals. Of this sum, 116,2 MECU went to cofinance 25422 hours of programmes in 16:9: 105,2 MECU to produce 16856 hours of new programmes, and 11 MECU for 8565 hours of remastering.

1.8. The Commission granted the final allocation under the Action Plan on 31 July 1997 - 7,8 MECU to support broadcasting TV programmes in the new format, and 9,5 MECU to stimulate the production of 16:9 programmes.

1.9. The document is the final annual report on the Action Plan, which ended in December 1998 (end date for contracts under Call 97/1).

1.10. An evaluation report will follow in the course of 1999, analysing the impact on the market and the sectors concerned. The call for bids for the drafting of this report should be published during the summer.

2. Content of the report

2.1. The report sets out the results to date in attaining the Action Plan's objectives in broadcasting (Section A) and programme production (Section B).

2.2. In particular, the results of Calls 96/1 and 97/1, covered by the present report, are given.

2.3. Call 97/1 saw the Italian public service broadcaster using the funds available for the first time. The report indicates that it would have been reasonable, on the basis of experience in other countries, to expect the public broadcaster RAI to launch 16:9 broadcasting in Italy, at an even earlier stage. In fact, however, the first broadcasts were made by small regional stations (Call 95/3), with funds under Call 96/1 being allocated to six broadcasters including four regional ones and, for the first time, two at national level (Cecchi Gori Group).

2.4. Both pay TV and public service operators gave strong support to 16:9 broadcasting. Private broadcasters sounded out the format's commercial attractiveness in their existing analogue services, and helped create a sufficient installed base of 16:9 sets among subscribers for the subsequent launch of digital services. In contrast, public broadcasters strengthened the Commission's initial concern that pay-TV broadcasters' smaller audience might make them a less effective way of promoting 16:9 services than free-to-air broadcasters with far larger audiences.

2.5. The two categories receiving funds under the Action Plan for production were independent producers (45 % of funds producing 31 % of programme hours) and broadcasters (55 % of funds for 60 % of programme hours).

2.6. A distinction must be made between new productions and remastering in order to broadcast existing programmes in 16:9. Between 1993 and 1997, the Action Plan cofinanced the production of 16856 hours of new 16:9 programmes, 50 % of which can be stored and repeatedly re-used (including 2223 hours of fiction, 4001 of documentaries and 2515 of cultural events), another 29 % of which were live studio broadcasts (5043 hours shared between games and live chat shows, etc.), and the remaining 20 % of which were sports events (3445 hours), just 1 % (130 hours) were cartoons.

2.7. Broadcasters' and producers' preferences could be summarized as follows: 70 % of the programmes produced by broadcasters were short-life programmes - live studio shows or sports programmes - while the remaining 30 % can be broken down into cultural programmes, documentaries and fiction. 85 % of the independent producers' programmes were documentaries and fiction (i.e. catalogue works). Remaining independent production consisted of broadcasts of cultural events.

2.8. By far the most common format for analogue 16:9 services was 625-line video with 11780 hours, 80 % of which were produced by broadcasters, while the high-definition 1250-line video accounted for only 2779 hours of production (falling by almost half since 1993), and given over principally to high-profile sports events (Olympic Games or world championships), cultural events and documentaries with a creative content. These productions garner much prestige on account of the aesthetic quality of high definition television (HDTV) coupled with the 16:9 format.

2.9. Remastering entails the transfer, onto a master compatible with 16:9 broadcasting, of programmes originally produced on another master (nearly always cinema film). Extensive use was made of this process, particularly in the launch phase of 16:9 broadcasting (8565 programme hours). This is because it enabled programming schedules to be filled immediately much more cheaply than with new productions, and could be done very rapidly using a good quality original.

2.10. With the constant growth of the 16:9 market, the European catalogue for the new format offers a growing volume of programmes, and distribution will, in time, enable supply to be expanded while reducing demand for programme conversion. Conversions fell from 12 % of hours under Call 93/1 to 4 % under Call 97/1; demand for conversion is consequently set to fall to negligible levels.

3. The Communication and future approaches

3.1. The aim of the Action Plan was to boost the market penetration of 16:9 sets, and with an installed base of some two million sets forecast for 1997, the Commission is convinced that the format has a commercial future. It considers that the market has achieved major progress, and has therefore not planned a sequel to the Action Plan. Now that wide-screen exists in the home, it is no longer just an interesting technical possibility: it is part of the market not only in Europe, but also in Japan and the United States.

3.2. The European audiovisual industry will, over the next few years, be faced with increasing world competition in producing both the technical hardware and 16:9 programmes.

3.3. Technological innovation will also pose a permanent challenge as it represents the only way of keeping the European industry in this sector competitive on world markets. The on-going digital revolution is an aspect of considerable importance: it is set to make a vital contribution to enhanced picture quality for television production in the new format.

3.4. Consequently, it is essential that the European states strive to develop a system of partnership in the coming years, with the aim of optimizing and combining research and production work. This would give Europe a competitive edge over similar US and Japanese productions.

3.5. The Commission argues that the Action Plan was effective in helping to introduce the new format and prepare users, broadcasters and producers for the launch of digital 16:9 services.

3.6. Marketing of digital 16:9 screen sets boosted sales significantly during 1998. Substantial growth is currently taking place in Great Britain and to an even greater extent in the Netherlands and Belgium. The highest rate of penetration has been achieved with 6,5 % of the 6500000 Dutch users, representing some 400000 new sets.

3.7. Pay-TV subscribers are in general the principal purchasers of 16:9 sets. Pay broadcasters in France, Belgium and the Netherlands are producing and broadcasting an ever-increasing number of programmes in the new format. The main British networks, including the BBC, expect to switch rapidly to 16:9.

3.8. 16:9 programming will be best placed for the possible introduction of high-definition TV in Europe: the United States have already adopted special regulations to accelerate HDTV production and broadcasting. It is likely that the choices made across the Atlantic will also have an impact in Europe.

3.9. If Europe is not simply to fall in line with choices made elsewhere, it will have to take account of current guidelines in non-European countries, and seek to become a leading, fully informed player on the international scene. It must be equipped with effective technological research and 16:9 programme production tools.

3.10. It should be noted that the main European TV manufacturers (Thomson and Philips) are also active in the United States. According to the European Commission, the US will focus more on small HDTV screens for the mass market, while there will be a growing niche market for big screens ("home-theatre").

4. Conclusions and recommendations

4.1. The Committee congratulates the Commission on its outstanding report, which offers a broad and comprehensive picture of the results achieved in 16:9 broadcasting. It is full of ideas, and puts forward a detailed picture of the future of television broadcasting and the ancillary industry over the next few years.

4.2. The Committee agrees with the Commission that adequate penetration of the European 16:9 format market has been achieved, partly reflected in the number of sets: sales of wide-screen sets rose from 220000 in 1995 to 800000 in 1997, with sales expected to rise to 3500000 in 2000.

4.3. The Committee endorses the Commission's view that the European audiovisual industry must cope with international competition by devising strategies and actions aimed at constantly pushing forward with technological innovation and reaching the level of development crucial to ensuring that it can hold its own against this competition.

4.4. The Committee is pleased to note that in those European countries where broadcasters have encouraged the introduction of wide-screen sets ready for digital services, the Action Plan has guaranteed the market availability of digital services in this format. The overlap between the profile of pay-TV subscribers and purchasers of 16:9 sets suggests that market convergence between the two sectors is almost complete: the new format is set to surf the crest of the digital wave.

4.5. The Committee notes the speed with which 16:9 broadcasting is spreading around the world, especially in Japan - where 50 of sets are in the 16:9 format - and the United States, where a "courageous" initiative has been launched, proposing its own, fully digital HDTV system which can be broadcast on existing channels via signal compression, but without the need for satellite distribution, which is significantly more expensive and complicated to organize.

4.6. Now that there is an installed base of wide-screen sets in Europe, whose owners were initially able to take advantage of the wave of digital programmes launched by pay broadcasters via cable and satellite, the Committee believes that the second phase should focus on free terrestrial broadcasts. The COR feels that the introduction of digital terrestrial broadcasting techniques (DAB, DVB-T) requires coordinated transitional arrangements, taking particular account of consumer protection considerations. Appropriate strategies must therefore be developed in the Member States, in conjunction with regional and local authorities and involving broadcasters, associations and industry, to replace analogue broadcasting by digital. Based on that, the Committee of the Regions would like to see all Member States address this issue and give considered backing to a joint European approach.

4.7. In the Committee's view, given that the electronics market has now reached saturation point (with a very high people/TV set ratio) and prices are tending to stabilize, growth can only come from technical innovation: competitiveness can be based exclusively on offering enhanced services for the same price. It is therefore important to note that if HDTV advances are to trigger effective, large-scale change, they must involve the entire image production chain and commit themselves to a fully digital image, as US and Japanese standards have done.

4.8. The Committee is convinced that if Europe hopes to obtain similar results, it must foster 16:9 services, especially on the less mature markets.

4.9. The Committee hopes that the Commission will support production and contribute in various ways to developing European 16:9 audiovisual catalogues for documentaries, cultural events or minority sports, as works of this kind can be used over long periods of time, enabling millions of citizens to become familiar with the local scene (regions and municipalities), ranging from customs and traditions, or history and culture, to the local economy and tourism.

4.9.1. In an effort to make local government information more accessible to public, telephone call centres have been developed in recent years. However, due to the recorded-question/push-choice process it is often difficult or time-consuming to retrieve the desired information. With the advent of digital and interactive television, this is an appropriate opportunity to call on the Commission to assist the production of local programme content and interactive services.

4.10. Following the final report on the level of penetration of 16:9 programming to be published by the end of the year, the Committee would urge the Commission to continue supporting and encouraging the introduction of new technologies into the audiovisual sector, as well as the establishment of new broadcasters - especially at regional and local level - in view of the wealth of opportunities forecast for Europe in this area. To this end, the strategy employed in the United States, which offered valuable incentives to all broadcasters who rapidly adopted the new digital transmission standards, merits close examination.

4.11. Since a range of wide-screen sets are now on the market, the Committee would also urge broadcasters and producers to work closely together in a genuine partnership on the new format, working synergically to generate a viable supply of programmes, thereby enabling 16:9 services to be made generally available throughout Europe.

4.12. The Committee hopes that the European audiovisual industry will be able both to modernize and expand in the face of international competition. If it is to succeed it must pass the threshold beyond which an autonomous impetus resulting in generalised 16:9 services in Europe can be generated.

4.13. The Committee is convinced that the trickiest obstacle to greater 16:9 penetration is predominantly economic: the technology needed is very expensive, and the associated applied research demands funds on a scale that even the biggest private operators on the market do not have readily available. Under these circumstances, it is imperative that every effort be made to adjust to the future in a coordinated manner, in order to achieve the European dimension that is essential if the European audiovisual industry is to hold its own on the world market.

4.14. The Committee considers that the Commission should assist the development of existing efforts by arranging further funding calls as a sequel to the Action Plan - and not only in the area of advanced television services, but also in the radio sector, where private financial resources are very limited.

4.15. The Committee agrees with broadcasters in considering the 16:9 format to be a key factor in identifying digital broadcasting as the "television of the future", since - as the report shows - digitalisation is now an increasingly widespread fact.

Brussels, 16 September 1999.

The President

of the Committee of the Regions

Manfred DAMMEYER

(1) OJ L 196, 5.8.1993, p.48.

(2) COM(95) 263 final, 16.6.1995.

(3) COM(96) 346 final, 26.7.1996.