Opinion of the Economic and Social Committee on the ' Proposal for a Council Decision establishing a European Guarantee Fund to promote cinema and television production'
Date: 1996-04-24
Institutions: European Economic and Social Committee
Subjects: EU aid, audiovisual production, cinema, cultural policy, film production













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51996AC0527

Opinion of the Economic and Social Committee on the ' Proposal for a Council Decision establishing a European Guarantee Fund to promote cinema and television production'  


Official Journal C 204 , 15/07/1996 P. 0005 





Opinion of the Economic and Social Committee on the 'Proposal for a Council  Decision establishing a European Guarantee Fund to promote cinema and television production`  ()(96/C 204/03)On 30  January 1996, the Council decided to consult the Economic and Social  Committee, under Article  130 of the Treaty instituting the European Community, on the  above-mentioned proposal. The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing the  Committee's work on the subject, adopted its Opinion on 3  April 1996. The Rapporteur was Mr   Pellarini. At its 335th Plenary Session (meeting of 24  April 1996), the Economic and Social Committee adopted  the following Opinion by 94 votes to three votes against and eight abstentions. 1. Introduction1.1. The Commission's 1994 Green Paper on strategy options to strengthen  the European programme industry, and the subsequent European Audiovisual Conference of industry  representatives (Brussels, 30  June - 2  July 1994), both confirmed the need to strengthen support  measures for this highly specialized 'industry`, which has special cultural significance. 1.2. Two important measures springing from the Green Paper were adopted by the Council: a training  programme for professionals in the audiovisual industry [95/0026 (SYN)], and an incentive programme  for the development and distribution of European cinema and television films [95/0027 (CNS)], more  generally known as Media  II. The funding provided is a total of MECU 310 over five years, to be distributed as loans covering a  maximum of 50 % of project costs (with up to 75 % exceptionally permitted for training) and as  non-returnable grants. 1.3. In its Opinion, adopted on 5  July 1995 at its 327th  Plenary Session, the ESC, despite its  positive assessment of the Commission initiative, was critical of the procedures and instruments of  Media II, noting shortcomings and delays in analysis, the lack of an overall strategy, and  inadequate funding. 1.3.1. Indeed, in the conclusion to the Opinion, the Committee expresses 'its dismay at the  shortcomings in the general analysis of the audiovisual sector's problems, and feels that the  proposals are unlikely to produce structural effects, due to inadequate funding and the sectoral  nature of the proposals themselves`. 1.4. Moreover, the Commission itself considers that the Media programme 'needs to be augmented  further by raising additional resources directly in the market place`, because 'public-sector  incentives are no longer sufficient to mobilize the critical mass of investment needed to make the  audiovisual industry more competitive`. 1.5. To this end financial institutions were consulted and a study on the feasibility of a  Community financial instrument confirmed that the financial sector was interested in action to  support the audiovisual industry. 1.6. The Audiovisual/Cultural Affairs Council held on 21  June 1995 called on the Commission to  draw up a proposal for a decision. This was presented on 14  November 1995. 2. Aims and instruments of the Guarantee Fund2.1. Two interconnected motives underpin the  conception of the Fund: the difficulties encountered by the European audiovisual industry -  composed mainly of small and medium-sized firms - in obtaining financial backing from banks, and  financial operators' need for adequate guarantees covering the risks of investing in the sector. 2.2. The Fund is therefore set up in the form of a guarantee instrument intended to make it easier  to obtain financial backing, whilst encouraging banks and financial operators to invest in the  audiovisual sector. The similar systems already operating, in countries such as France, Spain and  Italy, have a very positive track record and have triggered substantial investment in the sector.  The European Fund should therefore operate in conjunction with national support funds and the  insurance systems already in place. 2.3. The Fund is to 'focus primarily on the production of European cinema and television films`  with priority being given to drama and feature films for both television and cinema, the area in  which Europe lags furthest behind. 2.4. To be eligible for support, projects must have potential for European and international  distribution; productions aimed purely at national markets are thus excluded. 2.5. The recipients of funding are to be European production and distribution companies, who will  have access to it via intermediary financial institutions (banks and associations). 2.6. The ceiling for cover is fixed at 50 % of short term credit (for production) and medium/long  term loans (for production, the constitution of production catalogues and strengthening companies  financially). 2.7. The Commission proposes that implementation, management and administration of the Fund should  be carried out by the European Investment Fund (EIF), which has expertise, both in Community level  guarantee work in general, and specifically in the audiovisual sector, in which a number of the  EIF's member organizations already operate. 2.8. The Commission proposes that the guarantee capital should ultimately reach a total of 200  MECU, including a Community contribution of 90 MECU. This should be adequate to insure financial  resources for audiovisual productions of at least 1 billion ECU. 2.9. The MECU 90 will be deducted from the allocation for Media II and spread over the four year  period 1997-2000. 3. Positive aspects3.1. The audiovisual sector is strategically important because of its  world-wide cultural influence, particularly in view of the globalization of markets. 3.2. The spread of new audiovisual technologies throughout the Union has led to a sharp rise in  demand for televisual fiction, and in its centenary year even the cinema seems to be on the upturn  following years in crisis. 3.2.1. In 1994 the cinema and audiovisual market grew by 9,7 % world-wide, but by 15,8 % in Europe.  According to the European Commission, demand for programmes has expanded from 200 000 hours in 1981  to 650 000 hours in 1992. It is estimated that demand for audiovisual production, currently  standing at ECU 23  billion, will grow to ECU 45 billion by the turn of the century. 3.3. The situation on the supply side is one of spiralling deficit, in the sense that while  American cinema and television production and distribution is going from strength to strength, the  European industry continues to be squeezed both financially and in terms of space and time, with  declining numbers of cinemas in many countries and the growing presence in television schedules of  American fiction. 3.3.1. In 1994 American producers' takings reached $20 billion; they helped the US balance of  payments to the tune of $4 billion. The European Union imports 60 % of its films from the USA and has a trade deficit of $4,2 billion  and a negligible share of the world market. 3.4. The structural weakness of the European audiovisual industry is at its most pronounced when it  comes to product distribution. The proportion of the total project budget going towards publicity  and distribution - nearly 50 % in some cases - is far higher in America than it is in Europe. 3.5. It is thus clear that quality productions which appeal to the public are not in themselves  enough; they must be adequately publicised and programmed. Films often have to wait many months or  even years before they can find cinemas willing to screen them, and then perhaps only for a few  days. 3.6. Europe is currently witnessing the concentration of film production and distribution and also  cinema chain ownership in the hands of a few big companies. To this must be added that the same  companies may also own major television networks; more and more frequently, small-scale producers  are finding insurmountable obstacles to getting their work on screen, with a consequent failure to  cover costs. This causes further problems for producers and film-makers, since subsequent projects  have still greater difficulties finding backing, leading to a vicious circle of concentration on  one hand and weakness on the other. 3.7. The creation of a guarantee fund must therefore be greatly welcomed, in the first instance  because it puts the cultural industry in general and the audiovisual sector in particular back on  the political agenda. 3.8. The success of a cinematographic production depends on the creative input, but also on the  overall investment that a company is prepared to make in the sector. 3.9. An effective European audiovisual policy undoubtedly needs not merely to be based on products  with high cultural value, but also to offer good scope for returns on investment, and so encourage  more of it. This can be done by increasing the potential penetration by European audiovisual  products into the cinema, TV and domestic video markets. Otherwise, European cinema is destined to  fill ever-diminishing niche markets, just when the growth in demand for programmes is opening up  new vistas for the whole audiovisual industry. 3.9.1. In this light the Guarantee Fund is in a position to use its selection criteria to encourage  creators and producers to pay more attention to meeting popular demand in order to provide an  acceptable commercial return. 3.10. The encouragement of new private investment is also positive, as is the Fund's potential for  consolidating businesses in the sector. This should help to develop a European audiovisual industry  capable of responding to growing internal demand and of competing with the American majors in the  international marketplace. 3.11. The 'condition` that, for projects to receive support from the Funds, they must have European  and international market potential is also significant, in that it could help to overcome cultural  barriers and encourage the production of works with wider appeal. 4. Conclusions4.1. Firstly, the source of funding - the MECU 90 subtracted from the  appropriation for Media II (already reduced to MECU 310) - seems strange. This clearly contradicts  the emphasis repeatedly laid in the introduction to the Memorandum on the structural weaknesses of  the sector and the need to strengthen it. The ESC therefore considers that the Fund should be  allocated its own independent resources from the Community budget. 4.2. It is also disputable whether enough money has been set aside to achieve the Fund's goals.  This is not so much a matter of ascertaining whether 90 MECU is enough, as of considering the  potential danger of overstretching the resources if - alongside the film industry proper -  producers of TV drama are also able to benefit from the Fund. There is actually a declaration in the Explanatory Memorandum (C.1, third paragraph) which even  appears, by the use of the word 'sceneggiati` ('drama`) in the Italian version, () to suggest that  priority be given to television productions. 4.3. There is a need to identify more clearly which types of producer are to benefit from the Fund;  a choice has to be made between large-scale productions capable of competing internationally with  the Americans, or the independent producers and film-makers who represent the best of European  culture, and whose genuine masterpieces have earned them a place in the world market in recent  decades. 4.4. Therefore small and medium-scale production companies should be favoured, with emphasis on  plans for more films in order to be able to balance possible successes and failures and to limit  risks. 4.5. On this point it should be noted that it is not necessarily huge and costly productions which  turn out to be hits in the international market. By way of demonstration some of the  multimillion-dollar flops of recent years (mainly of American origin) should be compared with the  great success enjoyed by high quality European films made on shoestring budgets. 4.6. The cultural development aspect of the operation should be stressed along with the economic  wisdom of producing programmes as a defence against a commercial invasion. From this point of view  the Fund should be restricted to cinema alone, excluding audiovisual productions (serials and  dramas) made exclusively for television. 4.7. Since distribution is a major weakness of the European film industry, it might be worth  earmarking a substantial proportion of the resources for helping with the creation of European  distribution consortia. 4.8. Particular attention should be paid to the 'young` cinema, for which a proportion of the  funding could be set aside. 4.9. Since (as outlined above) the appropriation is limited, it might be worth considering offering  a level of cover within a band between 20 % and 50 %, so that the Fund is able to assist a larger  number of productions while limiting the risks of investment and thus encouraging banks to become  involved. 4.10. Any reinsurance of the investment risk must not be charged to the intended beneficiaries but  to the Fund itself, otherwise the funding will lose much of its value. 4.11. Finally, it is important that repayments to the Fund should only become due after all other  items of expenditure have been covered. Done at Brussels, 24  April 1996. The Presidentof the Economic and Social CommitteeCarlos FERRER() JO no  C   41, 13. 2. 1996, p.  8.  () (Translator's note: 'sceneggiati e lungometraggi` (drama and feature films) is rendered in the  English version of the Commission document as 'works of fiction` and specifically 'whether for  cinema or television`).