Report from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions - Report on the implementation and the mid-term results of the MEDIA Plus and MEDIA Training programmes (2001-2005) and on the results of the preparatory action "Growth and audiovisual: i2i audiovisual"
Date: 2003-11-24
Institutions: European Commission
Subjects: European audiovisual area, artistic profession, audiovisual communications policy, audiovisual programme, cultural promotion, film industry, project evaluation, vocational training

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 24.11.2003
COM(2003) 725 final

REPORT FROM THE COMMISSION TO THE COUNCIL, THE EUROPEAN
PARLIAMENT, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND
THE COMMITTEE OF THE REGIONS

Report on the implementation and the mid-term results of the MEDIA Plus and MEDIA
Training programmes (2001-2005) and on the results of the preparatory action "Growth
and audiovisual: i2i audiovisual"

REPORT FROM THE COMMISSION TO THE COUNCIL, THE EUROPEAN
PARLIAMENT, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND
THE COMMITTEE OF THE REGIONS

Report on the implementation and the mid-term results of the MEDIA Plus and MEDIA
Training programmes (2001-2005) and on the results of the preparatory action "Growth
and audiovisual: i2i audiovisual"

INTRODUCTION

MEDIA Plus and MEDIA Training

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The  MEDIA  Plus  and  MEDIA  Training  programmes  were  established  under  two
Decisions by the European legislature:

Council  Decision  2000/821/EC  of  20  December  2000  on  the  implementation  of  a
programme to  encourage  the  development,  distribution  and  promotion  of  European
audiovisual works (MEDIA Plus – Development, Distribution and Promotion);

Decision  No  163/2001/EC  of  the  European  Parliament  and  of  the  Council  of
19 January 2001 on the implementation of a training programme for professionals in
the European audiovisual programme industry (MEDIA–Training).

The  period  covered  by  MEDIA  Plus  and  MEDIA  Training  was  set  initially  by  the
two  above-mentioned  Decisions  at  2001-2005.  However,  in  order  to  align  the
duration  of  the  MEDIA  programmes  with  that  of  the  financial  perspective,  the
Commission proposed to the Council and the European Parliament on 16/04/031 that
MEDIA  Plus  and  MEDIA  Training  be  extended  until  31  December  2006.  The
Commission's proposal is currently under discussion.

MEDIA Plus and MEDIA Training succeeded MEDIA II (1996-2000) and MEDIA I
(1991-1995).  These  three  generations  of  MEDIA  programmes  had  a  common  aim:
structural  improvement  of  the  competitiveness  of  the  European  audiovisual
programme industry.

With  a  budget  of  200  million  €,  MEDIA  I  enabled  professionals  in  the  Member
States to strengthen their position in their national markets and, at the same time, to
gain access to new forms of transnational collaboration (co-productions, cross-border
cooperation, partnerships, grouping of undertakings, etc.).

MEDIA II had a budget of 310 million €, and its activities centred on three priority
sectors:  vocational  training,  development  of  projects  and  undertakings,  and
transnational distribution of films and audiovisual programmes.

MEDIA Plus and MEDIA Training differ from their predecessors in several respects:

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COM(2003)  191  final,  16/04/03  for  MEDIA  Plus;  COM(2003)  188  final,  16/04/03  for  MEDIA-
Training.

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their budgets have been significantly increased (400 million €, with 350 million for
MEDIA Plus and 50 million for MEDIA Training);

four priorities have been defined: vocational training, development, distribution and
–  new  in  relation  to  MEDIA  II,  which  did  not  identify  it  as  a  specific  priority  –
promotion;

the establishment of pilot projects to profit from new technologies – e.g. digital – is
set out in Article 10 of the Decision establishing MEDIA Plus;

the  reference  period  has  seen  the  integration  of  and  increasing  participation  in
programmes by the accession countries;

finally,  in  parallel  with  MEDIA  Plus,  a  preparatory  action  called  "Growth  and
audiovisual: i2i audiovisual" was tested during 2002 and 2003.

The preparatory action "Growth and audiovisual: i2i audiovisual"

At the Lisbon European Council of 23 and 24 March 2000, the Heads of State and of
Government set a new objective for the Union: to become the most competitive and
dynamic  knowledge  economy  in  the  world.  The  European  Council  called  in
particular upon "the Community and the Member States, with the support of the EIB,
to  make  available  in  all  European  countries  low-cost,  high-speed  interconnected
networks  for  Internet  access  and  foster  the  development  of  state-of-the-art
information technology and other telecom networks as well as the content for those
networks".

Following  up  the  conclusions  of  the  Lisbon  European  Council,  the  EIB  Group
launched the  "Innovation 2000" initiative  to promote investment in the information
society,  research  and  development,  innovation,  competitiveness  and  human  capital.
In  the  context  of  measures  intended  to  develop  information  technologies,  the  EIB
Group  decided  to  support  the  speeding  up  of  the  dissemination  processes,
particularly in the media field, and established the sub-programme i2i audiovisual.

In order to supplement the EIB Group initiative, the budgetary authority authorised
the  Commission  to  run  the  preparatory  action  "Growth  and  audiovisual:  i2i
audiovisual"  on  a  trial  basis.  The  aim  of  this  preparatory  action  is  to  improve  the
competitiveness and creativity of the European audiovisual sector, and to enable it to
adapt  to  new  technologies,  while  reducing  the  banking  and  financial  costs  for
European undertakings in the sector.

Purpose of this report

The purpose of this report is to:

evaluate the results of the first two years of implementation of the MEDIA Plus and
MEDIA  Training  programmes,  in  accordance  with  Articles  12(3)  and  9(4)  of
Decisions 2000/821/EC and 2001/163/EC respectively. These articles lay down that
the  Commission  "shall,  after  bringing  the  matter  before  the  Media  Committee,
present to the European Parliament, the Council the European Economic and Social
Committee and the Committee of the Regions an evaluation report on the impact and
effectiveness of the Programme on the basis of the results obtained after two years of

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implementation. This report shall be accompanied, if need be, by any proposals for
adjustments";

evaluate  the  initial  results  of  i2i  audiovisual,  in  accordance  with  the  evaluation
obligations attached to preparatory actions, after two years of implementation.

This report:

initially  replaces  MEDIA  Plus,  MEDIA  Training  and  i2i  audiovisual  in  their
economic context;

then  analyses  the  results  of  the  first  two  years  of  implementation  of  these  three
instruments;

finally  identifies  the  adjustments  which  could  be  made  in  order  to  ensure  their
adaptation to structural developments in the European audiovisual sector.

This report covers the period from 1 January 2001 to 31 March 2003. It is based on
the  conclusions  of  the  mid-term  evaluation  of  MEDIA  Plus  and  MEDIA  Training
and  on  the  evaluation  of  the  results  of  the  preparatory  action  "Growth  and
audiovisual:  i2i  audiovisual".  These  two  evaluations  were  carried  out  by  an
independent  consultant  following  an  open  invitation  to  tender  launched  by  the
Commission.2

1. 

A DETERIORATING ECONOMIC AND STRUCTURAL CONTEXT

The economic context for the first two years of MEDIA Plus, MEDIA Training and
i2i audiovisual gave cause for concern. The weaknesses of the European audiovisual
products sector are essentially structural (internal market in which the circulation of
non-national European works is difficult, problems of access to finance). These have
been  aggravated  by  economic  factors  (crisis  in  audiovisual  funding  by  television
stations).  Finally,  new challenges have been added:  adaptation  to  new  technologies
and participation in programmes by the accession countries.

1.1. 

An internal audiovisual market still not operating perfectly

The European audiovisual market is by nature fragmented, far  from a model for an
open, competitive market.

Firstly,  audiovisual  products  constitute  cultural  works  rooted  in  a  national  and/or
regional context and in a language. This diversity certainly gives rise to the cultural
wealth of the European audiovisual sector and to its structure as a highly independent
industry. As the market currently operates, however, it hinders the circulation of non-
national  works  and  prevents  the  European  industry  from  gaining  market  share  in
relation to its competitors.

2

Invitation to tender No S230-182-679, awarded to APRIL.

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Cultural heterogeneity is also illustrated by a dichotomy between countries with low
production  capacity  and/or  a  restricted  linguistic  and  geographical  area,3  where
production  volume  is  naturally  limited  by  the  size  of  their  markets,  and  countries
where production capacity (production volume in relation to the population) exceeds
that of others.4

Finally, the European audiovisual sector consists mainly of small and medium-sized
undertakings, and even micro-undertakings. Their situation is often precarious, being
linked  to  the  success  of  a  single  project.  Their  access  to  external  finance  is  also
difficult,  owing  to  the  risks  attached  to  their  activity:  limited  own  funds,  uncertain
profitability of projects dependent upon factors such as public taste, cultural aspects,
etc.  These  companies  therefore  often  do  not  have  the  resources  to  adopt  and
implement medium-term business strategies.

The European audiovisual industry is reluctant to face up to these handicaps.

Firstly,  it  still  devotes  too  few  resources  to  project  development  (writing,  financial
packaging and drawing up the marketing plan), although this stage, as the example of
the  American  audiovisual  industry  shows,  is  essential  for  the  quality  and  export
potential  of  works.  Development  spending  in  Europe  accounts  for  2  or  3%  of  the
production budgets, compared to 10-12% of the production budgets of the American
majors.

In addition, the lack of training for European audiovisual professionals engenders an
absence of business strategy at European level and, in the context of the introduction
of new technologies, raises the risk of obsolescent qualifications and practices.

Looking  downstream,  the  distribution  sector  remains  fragmented  along  national
lines. This characteristic  makes  it  less  competitive  in  both  the  world  and  European
markets.  Thus  the  average  market  share  for  American  film  distributors  is  50%,
reaching 80% in the United Kingdom and 70% in Germany. This situation justifies
the significant proportion of the budget devoted by MEDIA Plus to distribution.

1.2. 

European works still have circulation problems outside their country of origin

The lack of circulation of non-national European works is the main symptom of the
structural difficulties encountered by the European audiovisual sector.

Taking cinema as an example, it can be seen that American works take most of the
market share in Europe (approximately 66% in 2000)5, followed by national works.
Non-national  European  films  come  a  distant  third,  with  approximately  11%  of  the
market  share.  They  do  not  travel  much  and  are  rarely  seen  by  more  than  50  000
people outside their country of origin.

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During  the  MEDIA  II  programme,  countries  with  low  production  capacity  and/or  with  a  restricted
linguistic and geographical area were as follows: Austria, Belgium, Denmark, Finland, Greece, Ireland,
Iceland, Liechtenstein, Luxembourg, Norway, the Netherlands, Portugal and Sweden.
United Kingdom, Germany, France, Italy and Spain.
Source: IMCA study.

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The particular result of this situation is a persistent trade deficit in audiovisual works
between Europe and the United States (7–8 billion € each year). It also has a negative
impact on profitability and on the development of the European programme industry.

Yet today, the audiovisual sector has enormous economic development potential, due
to  unceasing  growth  in  demand  and  the  development  of  new  technologies  and
markets. Maintaining obstacles to the development of European supply presents the
risk that this potential will benefit those competing with the European industry, thus
directly penalising employment and growth in Europe.

1.3. 

Deterioration in the economic situation during the period 2001-2002

The  European  audiovisual  sector  is  currently  undergoing  an  economic  crisis
characterised by an increased difficulty in gaining access to finance. The crisis is part
of the world slowdown in growth which began following the events of 11 September
2001.

Taking the example of cinema, it can be seen that funding by television stations fell
significantly during the period 2001-2003. In their programming, stations are tending
gradually  to  replace  cinema  with  national  television  fiction  and  reality  shows.  The
number  of  European  films  pre-financed  by  stations  has  been  reduced  accordingly.
This  trend  has  a  negative  impact  on  creativity  and  on  the  circulation  of  European
films.

In  this  context,  increasing  the  sources  of  finance  for  independent  production,
particularly  through  the  development  of  European  co-productions,  should  be
explored as a possible way out.

1.4. 

New challenges

MEDIA Plus, MEDIA Training and i2i audiovisual are today operating in a market
in which decisive developments are taking place.

On  the  one  hand,  there  is  the  rapid  development  of  new  technologies,  particularly
digital. In this area, the situation for European cinema distribution is giving cause for
concern:  although  there  are  already digital copies of films,  the industry  has  not  yet
begun the transition. Almost all cinemas are still equipped with traditional projection
technology.

The second  characteristic development  is  increasing  participation  during  the  period
2001-2003  by  the  central  and  eastern  European  countries  which  are  shortly  to  join
the European Union. This intake will highlight even more the diverse nature of  the
European market, such is the gap between them and the 15 current Member States.
Investment  capacity,  public  aid  and  orders  are  at  a  much  lower  level  in  these
countries than in the rest of Europe.

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2. 

MEDIA  PLUS,  MEDIA  TRAINING  AND  I2I  AUDIOVISUAL:  OBJECTIVES  ACHIEVED
DURING THE PERIOD 2001-2003

Community intervention in the audiovisual sector since MEDIA I has been based on
a diagnosis of the structural difficulties facing the European audiovisual sector. This
approach  is  still  valid,  as  is  shown  by  the  initial  results  of  MEDIA  Plus,  MEDIA
Training  and  i2i  audiovisual,  and  the  existence  of  financial  support  at  Community
level is more necessary than ever.

2.1. 

Priorities relevant to the structural difficulties facing the European audiovisual
sector

2.1.1.  MEDIA Training

The  emergence  of  a  European  audiovisual  market  and  the  appearance  of  new
technologies  call  for  appropriate  professional  skills.  This  is  the  aim  of  MEDIA
Training, to  train professionals in:  the  application  of  new  technologies,  particularly
digital,  to  production  and  distribution;  economic,  financial  and  commercial
management,  ensuring  the  reliability  of  undertakings  and  oriented  towards  external
markets;  scriptwriting  and  narration  techniques,  essential  for  improving  the  quality
and export potential of European works.

2.1.2.  MEDIA Plus – Development, Distribution and Promotion

Improving  the  development  of  European  works  is  the  sine  qua  non  for  improved
production quality, better suited to international market standards. This is the aim of
the  Development  strand  of  MEDIA  Plus,  helping  to  strengthen  the  structural
competitiveness of the European audiovisual industry.

In the distribution field, the aim of MEDIA Plus is direct action to remedy the chief
symptom of the European industry's weakness: the lack of circulation of non-national
European  films  and  programmes.  The  chief  instrument  remains  support  for  the
distribution  outside  their  country  of  origin  of  European  films,  supplemented  by
measures  aimed  at  cinemas  (Europa  Cinema  network),  TV  broadcasting  and  sales
agents.

In the field of promotion and festivals, MEDIA Plus supports a series of initiatives to
facilitate the promotion of and international market access for independent European
productions.  The  aim  is  to  improve  the  visibility  of  European  output  and  give
European undertakings greater presence in European and extra-European markets.

Finally, support for pilot projects is intended to respond to the needs of the European
audiovisual industry in terms of adapting to new technologies.

2.1.3.  The i2i preparatory action

The  basis  for  i2i  is  the  difficulty  experienced  by  SMEs  and  micro-undertakings  in
accessing  finance  from  banks.  Its  aim  is  to  reduce  banking  and  financial  costs  for
these  essential  players  in  the  European  audiovisual  sector  and  thereby  improve  the
conditions for their development.

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2.1.4.  Proof of the relevance of European priorities: ever-increasing demand from market

players

Applications for financial support from MEDIA continue to increase, particularly in
the  development  and  distribution  field.  Taking  the  development  sector  as  an
example, 352 projects were submitted in 2001, 574 in 2002 and 778 in 2003, i.e. an
increase of 120% over 2001.

Participation  in  the  programme  by  the  new  (accession)  countries  is  not  enough  in
itself  to  explain  this  rapid  growth.  It  is  also  due  to  a  greater  perception  by
professionals  of  the  need  to  integrate  the  European  dimension  into  their  economic
activity.

The  downside  to  this  success  is  the  increase  in  unmet  needs.  Again  taking
development  as  an  example,  while  the  number  of  applications  increased  by  120%
during  the  period  2001-2003,  the  budget  increase  linked  to  the  participation  of  the
accession countries enabled only a 33.5% increase in the number of projects funded
(from 209 in 2001 to 279 in 2003).

2.2. 

Initial results showing that MEDIA Plus, MEDIA Training and i2i audiovisual
are achieving their objectives

The  results  set  out  below  provide  an  overview  of  the  implementation  of  MEDIA
Plus, MEDIA Training  and i2i audiovisual during the period 2001–2003. However,
trends  in  the  audiovisual  sector,  which  extend  far  beyond  this  period,  mean  that  a
quantified assessment of the economic, social and professional impact of these three
support mechanisms is not yet available.

2.2.1.  Results of the Training strand

MEDIA  Training  makes  a  decisive  contribution  to  the  existence  of  training  with  a
European dimension. Community financial support represents on average 49% of the
costs of training and is vital for the viability of the projects supported.

42% of the training given relates to new technologies, 32% to management and 27%
to writing techniques.

The quality of training – mostly continuing training – is high. The impact in terms of
improving  the  skills  and  technical  know-how  of  professionals,  particularly  in  the
field  of  new  technologies,  is  confirmed  by  the  broad  sample  of  beneficiaries
questioned by the external consultant as part of the mid-term evaluation.

Training  also  provides  an  opportunity  for  participants  to  forge  links  with  potential
partners, particularly with a view to setting up European co-productions.

2.2.2.  Results of the Development strand

Development objectives are met both by raising the awareness of professionals as to
the  importance  of  the  development  phase  and  by  giving  them  access  to  additional
financial  resources  (support  from  MEDIA  represents  on  average  16%  of
development costs). This aid is sufficient to reduce the risks assumed by independent
producers.

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The instruments used in the development strand are well suited to the reality in the
sector (slate funding for medium-sized, individual projects for undertakings of more
modest size).

is  satisfactorily  distributed  between 

Support 
the  different  genres  (fiction,
documentary,  animation,  multimedia).  The  rate  of  entry  into  production  for
supported projects is high and confirms the benefits of development support.

2.2.3.  Results of the Distribution strand

2.2.3.1.  Cinema distribution

The  two  existing  systems  (selective  support  and  automatic  support)  produced
satisfactory results in line with objectives: 90% of the films distributed outside their
national  territory  during  the  reference  period  for  the  evaluation  received  help  from
MEDIA.

(cid:1)  Selective support for cinema distribution

On  average,  beneficiaries  received  support  amounting  to  27%  of  the  distribution
costs incurred, i.e. substantially covering risks.  There  were  on  average  5.5  national
distribution campaigns per film supported.

(cid:1)  Automatic support for cinema distribution

The aid generated increased from 12.2 million € to 20 million €, due to the successes
registered  by  European  cinema  over  these  two  years.  70%  of  reinvestments  were
used  for  guaranteed  minima,  28%  for  P&A  and  1%  for  co-productions.
Reinvestments mainly benefited French and United Kingdom works, but films from
countries  with  a  low  production  capacity  and/or  a  restricted  linguistic  and
geographical area generated more support than they generated in receipts.

2.2.3.2.  Sales agents

This  is  the  most  recent  measure  under  the  distribution  heading.  Few  applications
were  submitted  and  selected  during  the  two  reference  years  (17  projects  selected
each year). These results should be seen in relation to the number of European sales
agents  (about  50).  But  they  make  a  quantified  and  representative  evaluation  of  the
measure difficult.

It  can  be  stated,  however,  that  it  meets  a  real  need.  It  touches  on  questions  of
commercialisation  and  international  sales  of  European  works,  which  are  nowadays
decisive for the audiovisual sector and its consolidation.

2.2.3.3.  TV broadcasting

Support for TV broadcasting met its objective in helping to stimulate the production
of television works with a European outlet.

Each  work  supported  brought  together  on  average  6.4  broadcasters.  Support  from
MEDIA represented up to 20% of the production costs for documentaries and 12.5%
for fiction and animations. Documentaries were the genre most represented.

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While  distribution  has  improved  in  relation  to  MEDIA  II,  support  for  TV
broadcasting still mainly benefits producers in a limited number of countries (France,
Germany  and  the  United  Kingdom).  This  concentration  is  a  consequence  of  the
criterion  of  producer  independence  (maximum  duration  of  ownership  of  rights  by
broadcasters set at seven years) applied in the context of project selection. Practices
in terms of ownership of rights by broadcasters still vary widely between countries.

2.2.3.4.  Cinemas network (Europa Cinemas)

The  results  of  this  action  during  the  period  2001-2003  are  in  line  with  the  aims
pursued. 700 cinemas  were supported. European  ticket  sales increased  by  18%  and
represent 59% of the total. In 2002, cinemas in the network scheduled an average of
38% non-national European works. Market share for non-national European films in
cinemas not participating in the network was only 8%.

Overall, there is a positive correlation between the number of cinemas supported by
MEDIA  in  a  country  and  the  market  share  for  European  films  in  that  country.
MEDIA  makes  a  clear  contribution  to  reducing  the  potential  risk  of  showing  non-
national European films.

2.2.4.  Results of the Promotion and Festivals strand

This  strand  proved  its  effectiveness  in  terms  of  the  circulation  of  non-national
European works and their dissemination to the public.

44%  of  the  projects  supported  were  aimed  at  promotion  measures,  and  56%  at
markets/festivals.  On  average,  80%  of  European  works  were  scheduled  in  the
festivals supported, giving this strand a high European added value.

2.2.5.  Results of the Pilot Projects strand

The pilot projects supported were few in number (five projects) but represented 3.2
million €.  MEDIA participation  amounted on average  to 20.78%  of  their  costs.  On
average, four European countries were involved in their implementation.

The  mid-term  evaluation  underlines  the  relevance  and  strategic  importance  of  the
problems dealt with by the pilot projects: digitisation of undertakings in the field of
projection, online distribution or archive services. It also highlights the existence of a
significant shortfall in terms of digital content and equipment for cinemas.

2.2.6.  Results of the preparatory action i2i audiovisual

The  period  covered  by  the  evaluation  contained  only  one  selection  exercise.  40
projects  were  supported,  totalling  approximately  1  million  €.  Average  MEDIA
support per project selected was 25 000 €.

The action enabled effective compensation for a proportion of the difference between
the  interest  rates  applied  to  micro-undertakings  and  those  applied  to  larger
undertakings.  i2i  also  made  it  possible  to  reduce  the  cost  of  access  to  performance
guarantees.

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2.3. 

Benefits linked to the existence of financial support at European level

The benefits of financial support at Community level go beyond providing European
professionals with sources of finance in addition to national aid.

In addition, the existence of European support did not act against European cultural
diversity: on the contrary, it aimed to give undertakings in the audiovisual sector the
resources to take maximum advantage of a unified market while respecting national
characteristics.

2.3.1.  The taking into account by professionals of a European dimension

The benefits linked to the existence of financial support at European level relate first
of  all  to  the  integration  of  a  European  dimension  in  the  projects  supported,  which
would  not  exist  if  the  selection  machinery  used  for  MEDIA  did  not  favour  this
aspect. Awareness of the existence of a European market is one of the preconditions
for  players  to  make  the  most  of  its  potential  and  improve  the  circulation  of  non-
national European works.

We  are  therefore  gradually  seeing  a  true,  far-reaching  change  in  the  attitudes  and
practices of European audiovisual professionals and the undeniable beginnings of the
networking of these professionals at European level.

2.3.2.  Restoring the balance between European countries

Community  support  also  has  an  impact  on  national  economies:  it  enables  a
restoration of the balance between small countries, where national aid is often non-
existent  or  at  a  very  low  level,  and  large  countries.  As  noted  in  point  1.1.,  the
diversity  of  these  different  markets  is  one  of  the  weaknesses  of  the  European
audiovisual sector.

In  order  to  take  account  of  the  particular  needs  of  countries  and  regions  with  low
production  capacity  and  restricted  linguistic  areas,  a  flexible  policy  of  positive
discrimination,  with  no  quantified  a  priori  objectives,  has  also  been  established
within the framework of the programme. This system, which enables countries  and
regions with low production capacity and restricted linguistic areas to benefit from a
percentage of European aid greater than their weight in the European market, helps
to  create  the  conditions  for  a  long-term  convergence  of  productive  structures  at
Union level while preserving cultural diversity.

2.3.3.  Beneficial complementarity between national aid and Community support

Community financial support has a transnational  dimension  which is not present in
national aid systems.

The latter remain mostly oriented towards supporting national production or, in the
distribution  field,  national  films.  For  its  part,  MEDIA  exclusively  encourages  the
distribution of non-national European films. In the field of cinema showings, national
aid basically funds the structures, while MEDIA aid consists of an incentive to show
European films. With regard to development, an essential phase for the quality  and
export  potential  of  a  work,  national  aid  is  only  just  starting  to  develop  and  still
involves only a small number of countries.

11

In the absence of Community financial support, there would therefore be a high risk
that the potential of the internal market will not be exploited or that, on the contrary,
would be exploited but by non-European companies, with negative consequences for
growth and employment in Europe.

3. 

PURSUING  THE  ADAPTATION  OF  MEDIA  TO  THE  NEEDS  OF  THE  EUROPEAN
AUDIOVISUAL INDUSTRY

Since  the  launch  of  MEDIA  I,  the  MEDIA  programme  has  proved  its  capacity  to
adapt  to  trends  in  the  European  audiovisual  market.  This  approach,  ensuring  the
effectiveness  of  the  programme  and  maximising  its  structuring  effects,  should  be
pursued with regard to MEDIA Plus and MEDIA Training.

Concentration  on  the  current  priorities  (training,  development,  distribution  and
promotion)  should  be maintained, responding  to the fragmentation of  the  European
audiovisual market. This should be the basis for discussing likely adjustments to the
Community action.

The following proposals for adjustments may in most cases be implemented without
the need to amend the Council Decisions establishing the MEDIA Plus and MEDIA
Training programmes. They could therefore take effect rapidly, from the end of 2003
or the beginning of 2004.

Other  proposals  require  an  amendment  to  the  Council  Decisions.  They  could  be
integrated  into  the  Commission's  proposals  aimed  at  renewing  the  MEDIA
programmes before 2007.

3.1. 

Facilitating  access  to  finance  for  SMEs  and  micro-undertakings  at  all  stages
(development, distribution and promotion)

Access  to  finance  is  a  real  problem  for  the  European  audiovisual  sector,  which
mainly  comprises  SMEs  and  micro-undertakings.  This  finding  underlies  the
preparatory action i2i audiovisual.

This is a horizontal problem, in that it affects the audiovisual sector's main activities,
namely  development  and  production  on  the  one  hand  and  distribution,  including
sales agents, and promotion on the other.

For this reason, the preparatory action i2i should be integrated into the MEDIA Plus
programme.  A  new  instrument  dedicated  to  access  to  finance  should  thus  be
available  within  the  framework  of  each  strand  of  MEDIA  Plus  (Development,
Distribution,  Promotion).  In  addition,  and  to  increase  the  consistency  of  the
Community's  action,  criteria  aimed  at  encouraging  the  circulation  of  non-national
European works should be introduced for the selection of projects.

This  adjustment  could  enter  into  force  from  2004,  without  amending  Council
Decision  2000/821/EC  of  20/12/00  establishing  MEDIA  Plus,  particularly  with
regard to the integration of the development strand.

12

3.2. 

Training

3.2.1.  Establishing synergy between training organisations and  forging  links  with  cinema

schools

The  networking  of  European  training  organisations  should  continue,  in  accordance
with the aims of MEDIA Training.

In  addition,  cooperation  should  be  established  with  cinema  schools  and  initial
audiovisual training establishments. These schools are well established and have long
experience, collaborative networks and strong links with the profession.

Establishing  these  synergies  would  enable  a  further  improvement  in  the  quality  of
teaching  and  reduce  the  structural  costs  of  training.  In  particular,  the  creation  of
master's  degrees  or  specific  modules  with  an  international  dimension  could  be
supported.

Finally, these synergies could provide a framework for the mobility of students and
trainers within Europe.

3.2.2.  Adjusting teaching content to the needs of the profession

Use of new technologies is one of the sectors  for which training should be stepped
up.

More  generally,  however,  it  would  be  worthwhile  to  have  a  rapid  and  precise
overview of the profession's training needs – particularly in the accession countries –
in order to adapt MEDIA Training to the actual situation in the sector.

3.2.3.  Raising  the  ceiling  for  the  Community  contribution  in  order  to  meet  the  specific

needs of the accession countries

Currently,  the  MEDIA  contribution  cannot  exceed  50%  of  the  cost  of  training
measures  in  large  countries  and  60%  in  regions  or  countries  with  low  production
capacity  and/or  a  limited  linguistic  and  geographical  area.  Additional  funds  come
from  the  beneficiary  organisations'  own  funds,  national  public  aid,  costs  of
participation paid by the participants and a number of private sponsors.

In  the  case  of  the  accession  countries,  finance  presents  a  real  problem.  Training
organisations  have  few  financial  resources  of  their  own  and  national  aid  is  non-
existent  or  very  low.  In  addition,  training  organisations  cannot  make  financial
adjustments by simply increasing the fees paid by students.

In order to face up to this situation, and bearing in mind the importance of training
for professionals,  it would  be  worthwhile  temporarily  increasing  the  ceiling  for  the
Community contribution to 75% for measures supported in the accession countries.

In contrast to the two preceding proposals for adjustments, such an increase requires
an  amendment  to  Council  Decision  2001/163/EC  of  19/01/01  establishing  MEDIA
Training.  It  could  be  integrated  into  the  Commission  proposals  concerning  the
renewal of MEDIA in 2007.

13

3.3. 

Development

3.3.1.  Creating support for pre-production

Pre-production  is  becoming  an  increasingly  decisive  and  specific  stage  of
development: the need to seek finance leads producers to look outside their country
of origin, particularly with the aim of concluding co-production agreements.

This  beneficial  development,  in  introducing  a  true  European  dimension  to
development, is not properly taken into account in existing instruments. For example,
the  fees  of  the  consultants  or  lawyers  required  for  setting  up  financial  partnerships
are not eligible.

Integrating i2i into the development priority could be an opportunity to define within
that  priority  a  new  instrument  specifically  oriented  towards  support  for  pre-
production expenditure.

3.3.2.  Raising the aid ceilings to reflect the realities in the sector more closely

In  the  development  field,  existing  instruments  are  well  adapted  to  the  needs  and
realities  of  the  sector.  In  particular,  slate  funding  provides  flexible  finance  for
medium-sized undertakings.

Increasingly, existing ceilings turn out to be unsuited to the new market conditions,
namely  increased  development  costs  linked  to  the  use  of  new  technologies,
particularly for animation and multimedia.

Raising  the  current  ceilings  should  therefore  be  considered,  particularly  for  slate
funding.  Such  an  increase  would  also  strengthen  the  structuring  role  of  this
instrument for SMEs.

3.3.3.  Recognising the complementarity between the Development and Training strands of

MEDIA Plus

Training,  whether  in  commercial  management,  marketing  or  writing,  may  be
considered an integral part of the expenditure and development actions of a project.
For example, a project in development may benefit from advice given to its author in
a writing workshop.

For  these  reasons,  it  would  be  worthwhile  introducing  a  link  between  the  Training
and  Development  strands.  Training  expenditure,  for  example,  could  be  included  in
the items eligible for development aid.

The  adjustments  envisaged  for  the  development  strand  do  not  require  any
amendment to the legal basis for MEDIA Plus and could enter into force rapidly.

14

3.4. 

Distribution

3.4.1.  Establishment of slate funding in the distribution field

In  the  current  system,  European  films  with  a  limited  audience  generate  little
automatic  support  and  have  difficulty  in  attracting  selective  support.  The  latter
includes an obligation to have at least three European distributors for a film, which
constitutes an obstacle for films with a risk profile.

In  order  to  remedy  this  situation,  it  would  be  worthwhile  designing  a  new  type  of
support based on the slate funding used in development.

Distributors would be granted a budget for distribution, over a period of one or two
years, of a catalogue of European films with a higher risk profile, with no constraints
in terms of the number of European distributors appointed.

Such  an  adjustment  requires  an  amendment  to  Decision  2000/821/EC  of  20/12/00
establishing MEDIA Plus and could be seen as part of the renewal of the programme
for 2007.

3.4.2.  Restructuring and enlargement of the "sales agent" measure

After two years of implementation, it is clear that most MEDIA aid is concentrated
on a single country: France. Although this concentration partly reflects the reality of
the market and the importance of French agents in Europe, the introduction of a non-
national  dimension  –  particularly  for  reinvestments  –  could  make  it  possible  to
rectify this situation and bring a true European added value to the sector.

With  this in  mind, the "sales  agent"  measure  could  be  restructured  with  the  aim  of
encouraging coordination between producers, distributors and sales agents. The basis
for this proposal is as follows: an appropriate approach to commercialisation places
promotion ahead of production. It involves first of all knowing the types of audience
for which films are designed and measuring the commercial prospects and potential
receipts  in  different  markets.  It  then  consists  of  promoting  and  selling  these  films,
through
the  audience  and  developing  market  shares,  particularly 
attracting 
prospecting.

In  many  cases,  however,  producers  do  not  include  promotional  material  in  their
strategies  and  distributors  do  not  have  the  financial  resources  necessary  to  remedy
this  shortcoming.  Finally,  sales  agents  do  not  have  the  means  to  promote  their
products effectively.

The new "sales agents" measure would enable financial support for putting together a
basic  promotional  kit  comprising:  an  initial  sub-titled  copy,  the  M&E  ("music  and
effects") track, promotional material, etc.

This adjustment does not require any amendment to the legal basis for MEDIA Plus
and could enter into force rapidly.

The measure should also be extended to sales agents specialising in TV programmes,
but  this  amendment  requires  an  amendment  to  the  legal  basis  for  MEDIA  Plus.  It
could be seen as part of the renewal of the programme for 2007.

15

3.4.3.  Raising aid ceilings

The number of copies per film and the costs of distribution are nowadays increasing
significantly.

To  reflect  this  trend,  it  would  be  worthwhile  raising  the  Community  aid  ceilings
currently in force.

This  adjustment  does  not  require  an  amendment  to  Decision  2000/821/EC  of
20/12/00 establishing MEDIA Plus and could enter into force rapidly.

3.4.4.  TV  broadcasting:  opening  up  the  system  further  by  amending  the  rules  concerning

the transfer of rights

In the current system, application of the producer independence criterion (transfer of
rights to broadcasters limited to seven years) has the effect of concentrating support
to the benefit of French (40% of the support allocated), German and United Kingdom
producers.

In  order  to  remedy  this  distortion  and  adapt  support  to  the  actual  situation  in  the
television  sector  in  some  States  participating  in  the  programme,  it  would  be
worthwhile  introducing  greater  flexibility  into  the  definition  of  the  criterion  of
producer independence.

This adjustment could enter into force in the context of MEDIA Plus.

3.4.5.  Using the cinema network to promote European cinema

Measures to promote European cinema could be planned and coordinated within the
network of cinemas supported by MEDIA. The aim would be to capitalise as much
as  possible  on  the  network's  success  with  the  public.  For  instance,  there  could  be
coordinated operations for launching films.

This adjustment could enter into force rapidly in the context of MEDIA Plus.

3.5. 

Promotion and festivals

3.5.1. 

Strengthening the presence of European professionals in key markets

Community  support  should  be  targeted  at  key  markets  where  the  presence  of
European professionals may have maximum impact in terms of sales and exports.

3.5.2.  Promoting  cultural diversity and encouraging  public education  in  the  visual  image

through broad support for festivals

Under  the  current  eligibility  criteria,  70%  of  the  films  scheduled  for  festivals
supported by MEDIA should be European. In practice, 80% are.

The  benefits  to  be  derived  from  this  in  terms  of  promoting  cultural  diversity  and
educating  the  European  audience  are  evident,  and  dovetail  perfectly  with  the  aims
pursued  by  Article  151(4)  of  the  Treaty.  The  aim  is  to  maximise  the  benefit  while
reserving  a  broad  distribution  of  MEDIA  support  for  festivals  within  European
territory.

16

3.5.3. 

Improving  the  visibility  of  the  MEDIA  programme  with  a  view  to  making  it  into  a
label for European cinema

Better knowledge by the public of the MEDIA programme could make it into a true
label  for  European  films,  associated  with  a  high-quality  image  and  a  European
identity.

This  aim  could  be  achieved,  for  example,  by  giving  more  publicity  to  the  MEDIA
Prize.

All the adjustments proposed for the promotion strand could be established rapidly in
the context of the MEDIA Plus programme.

3.6. 

Pilot projects

Pilot  projects  may  make  a  contribution  to  all  strands  of  MEDIA.  This  dimension
should not be overlooked.

Two priorities should receive particular attention.

On  the  one  hand,  the  budget  line  currently  available  in  the  distribution  strand  for
online  distribution  could  be  mobilised  in  order  to  stimulate  the  creation  of  digital
content and the use of online distribution by the European industry.

On  the  other  hand,  as  regards  cinema  distribution,  the  establishment  of  a  true
network  of  European  digital  cinemas  equipped  to  meet  the  needs  of  the  European
industry should be encouraged.

These adjustments could enter into force rapidly in the context of MEDIA Plus.

3.7.  Maintaining  centralised  management  of  Community  aid,  tempered  by

strengthening the role of the MEDIA Desks

3.7.1.  Advantages of centralised management of Community aid

Community  aid  is  nowadays  distributed  and  managed  at  a  central  level  by  the
European Commission.

This centralised operation is well-suited to the purposes of European aid, which are
to  stimulate  the  introduction  of  a  transnational  dimension  in  the  European
audiovisual profession and improve the operation of the internal market. It should be
maintained.

3.7.2.  Exploiting the potential offered by the MEDIA Desks

Centralised management of Community aid could be supplemented by strengthening
the role of the MEDIA Desks.

MEDIA  Desks  are  established  in  all  States  taking  part  in  the  MEDIA  programme.
They  are funded jointly by  the Member States  and the  MEDIA  budget. Their main
function today is to establish a relay between the European Union and professionals
in each participating State, with the particular aim of enabling them to be informed as
to the machinery for Community support.

17

The potential offered by the MEDIA Desks – placed at the heart of national markets,
they are well-placed to know their needs and characteristics – should be exploited to
a greater  extent.  In  particular,  the  MEDIA  Desks  could  provide  useful  statistics  on
national markets or become relays for a more voluntarist communication policy.

These  adjustments  could  be  made  without  amending  Decision  2000/821/EC  of
20/12/00 establishing MEDIA Plus and enter into force rapidly.

18

4. 

CONCLUSION: SUMMARY OF ADJUSTMENTS ENVISAGED AND TIMETABLE

ADJUSTMENTS TO BE MADE IN THE CONTEXT OF EXISTING
PROGRAMMES: MEDIA PLUS AND MEDIA TRAINING

TIMETABLE

Facilitating access to funding for SMEs and micro-undertakings
Integrating  the  preparatory  action  i2i  audiovisual  into  the  strands  of
MEDIA Plus
Training
Establishing  synergies  between  training  organisations  and  with  cinema
schools
Having an overview of training needs
Development
Creating support for pre-production when integrating i2i audiovisual into
the development strand
Raising Community aid ceilings
Introducing a link between the development and training strands

Distribution
Restructuring the "sales agents" measure
Raising aid ceilings
TV broadcasting: amending the rules concerning the transfer of rights to
broadcasters
Using the Europa Cinema network to promote European cinema
Promotion and festivals
Targeting Community support at key markets
Promoting  cultural  diversity  and  encouraging  public  education  in  the
visual image through broad support for festivals
Raising the profile of the MEDIA programme with a view  to  making  it
into a label for European cinema
Pilot projects
Using  the  "online  distribution"  budget  lines  to  stimulate  the  creation  of
digital content and the use of online distribution by the European industry
Encouraging the creation of a network of European digital cinemas
Strengthening the role of the MEDIA Desks

4th quarter of 2003

2nd half of 2004

1st quarter of 2004

4th quarter of 2003

4th quarter of 2003
4th quarter of 2003/1st
quarter of 2004

4th quarter of 2003
1st half of 2004

2004
2004

2004

2004

2004

1st half of 2004
1st half of 2004
2004

ADJUSTMENTS TO BE INTEGRATED INTO COMMISSION PROPOSALS
FOR FUTURE MEDIA PROGRAMMES

TIMETABLE

Training
Raising the ceiling for the Community contribution to training measures
in the accession countries
Distribution
Establishing  slate  funding  to  support  the  distribution  of  European  films
with a risk profile
Extending the "sales agents" measure to television

4th quarter of 2003

4th quarter of 2003
4th quarter of 2003

19