COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS ON OPPORTUNITIES AND CHALLENGES FOR EUROPEAN CINEMA IN THE DIGITAL ERA
Date: 2010-09-24
Institutions: European Commission
Subjects: audiovisual production, film industry, film production

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EUROPEAN COMMISSION 

Brussels, 24.9.2010 
COM(2010) 487 final 

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

ON OPPORTUNITIES AND CHALLENGES FOR EUROPEAN CINEMA IN THE 
DIGITAL ERA 

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

ON OPPORTUNITIES AND CHALLENGES FOR EUROPEAN CINEMA IN THE 
DIGITAL ERA 

1. 

INTRODUCTION 

European  cinema  plays  an  important  role  in  shaping  European  identities  at  the  core  of  the 
European  Agenda  for  Culture.  The  audiovisual  landscape  is  mutating  rapidly  worldwide, 
opening up myriad opportunities for the European cinema and audiovisual industry provided 
that  the  inherent  challenges  of  investment  in  equipment,  training  and  new  models  can  be 
overcome.  Digital  technologies have already made  European audiovisual works more easily 
accessible  outside  their  country  of  origin  thanks  to  new  ways  of  transporting  audiovisual 
content (such as video on demand and catch up TV). The competitiveness of the audiovisual 
content industry in Europe will strongly depend on the use of these new technologies in the 
distribution stage.  

Under the new Europe 2020 strategy for smart, sustainable and inclusive growth1, the Digital 
Agenda  for  Europe2  (one  of  its  seven  flagship  initiatives)  aims  at  creating  a  digital  Single 
Market  so  that  commercial  and  cultural  content  and  services  can  flow  across  borders  and 
European  citizens  can  fully  enjoy  the  benefits  of  the  digital  era.  One  of  the  ICT-enabled 
benefits for Europe is a wider and cheaper distribution of cultural and creative content.  

Furthermore,  as  stated  in  the  Green  paper  "unlocking  the  potential  of  creative  and  cultural 
industries"3, cultural contents play a crucial role in the deployment of the information society, 
fuelling investments in broadband infrastructures and services, in digital technologies, as well 
as  in  new  consumer  electronics  and  telecommunication  devices.  Beyond  their  direct 
contribution to GDP, creative and cultural industries are also important drivers of economic 
and social innovation in many other sectors. 

In  light  of  the  policy  issues  at  stake,  the  UNESCO  Convention  on  the  Protection  and 
Promotion of the Diversity of Cultural Expressions4, ratified by the European Union in 2006, 
also  has  a  role  to  play  in  determining  the  need  for  European  Union  action  in  respect  of  the 
digitisation of cinemas. 

The  policy  issues  raised  by  the  impact  of  the  digital  revolution  on  European  cinema  are  of 
concern  at  all  levels:  regional,  national  and  European.  Two  aspects  are  of  particular 
importance:  

–  Competitiveness and circulation of European works; 

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4 

See http://ec.europa.eu/eu2020/index_en.htm  
See  Communication  COM(2010)  245,  19.5.2010,  at  http://ec.europa.eu/information_society/digital-
agenda/index_en.htm, in particular p. 31-32. 
See Communication COM(2010) 183, 27.4.2010, at   
http://ec.europa.eu/culture/our-policy-development/doc2577_en.htm  
See http://ec.europa.eu/culture/portal/action/diversity/unesco_en.htm 

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–  Pluralism and linguistic and cultural diversity. 

Member States' support measures focus in general on the creation and production phases of 
filmmaking.  These  films  will  from  now  on  also  need  digital  masters  and  digital  screens  in 
order to be shown and to reach their potential audience. Access to digital equipment and to 
digital masters will become crucial to remain competitive in a rapidly evolving market. 

Ensuring  that  there  is  circulation  of  European  works  and  diversity  of  European  cinema 
available to viewers will require a wide range of operators (distributors and exhibitors). One 
of the challenges will be to maintain cinemas in spite of the entry barrier represented by the 
high costs of digital equipment that threatens the existence of a number of European cinemas.  

This  Communication  builds  on  the  work  that  has  already  been  carried  out  by  the  European 
Commission  and  the  Member  States  in  this  area.  The  European  Commission  established  a 
Group  of  Experts  on  Digital  Cinema  as  early  as  spring  2008.  This  group,  made  up  of 
distributors,  exhibitors  and  representatives  from  the  film  agencies  working  on  digitisation 
schemes,  explored  the  different  means  to  maintain  the  diversity  of  films  and  of  cinemas  in 
tomorrow's digital Europe. The discussions showed the need for an alternative to the existing 
VPF  (Virtual  Print  Fee)  model  as  well  as  the  importance  of  European  Union  and  national 
public support for the digitisation of certain cinemas.  

These  issues  were  further  explored  in  the  Public  Consultation  on  Opportunities  and 
Challenges for European Cinema in the Digital Era5 launched by the European Commission 
on  16  October  2009.  Over  300  replies  from  exhibitors,  distributors,  producers,  sales  agents 
and  other  stakeholders  such  as  film  agencies,  professional  agencies  and  digital  service 
companies  were  received.  These  responses  provided  a  valuable  input  for  the  present 
document.  

During this period a number of Member States have also started reflecting on how to ensure 
that cinemas can make the transition to digital projection and reap its benefits. These schemes 
have also been examined in the preparation of this Communication. 

It is clear that the European Commission has an important role to play in the digital transition 
of  cinemas,  in  particular  by  contributing  to  the  establishment  of  a  framework  for  this 
transition, covering elements such as: 

–  standardisation; 

–  collection and preservation of film in digital format; 

–  regional support to digitisation (including EU Cohesion Policy); 

–  compatibility with Treaty rules; 

–  support to exhibitors of European films (MEDIA Programme); 

–  access to finance (European Investment Bank and MEDIA). 

5 

See the background document to the Public consultation: 
http://ec.europa.eu/culture/media/programme/overview/consultations/docs/background_digital_cinema_
en.pdf 

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2. 

EUROPEAN CINEMAS 

Compared to the United States (where  most of the film industry  is vertically integrated and 
the market share of domestic films is 95%), the European cinema market is characterised by 
fragmentation,  different  language  zones  and  a  wide  variety  of  operators  that  make  it  more 
difficult for global deals or national roll-outs to be implemented.  

Roughly 10% of European cinemas are multiplexes, compared to 35% in the USA6. Moreover 
31% of European screens are in single-screen cinemas. This will slow down the digital roll-
out as limited levels of activity undermine any profitability of costly digital equipment. 

The problem is even more acute in the newer Member States, where the percentage of screens 
in single-screen cinemas is 60%, and indeed over 80% for some countries. There is a similar 
discrepancy in terms of inhabitants per screen: whereas in 2007 there were 15,977 inhabitants 
per  screen  in  Western  Europe,  there  is  one  screen  for  an  average  50,926  inhabitants  in  the 
Central and Eastern European Member States7.  

The  majority  of  European  cinemas  have  between  2  and  7  screens.  This  is  where  the  great 
diversity  of  European  exhibition  lies:  from  local  two-screen  cinemas  mainly  exhibiting 
national and US content to urban multi-screen theatres with majority European programming, 
there is a wide range of exhibition categories/companies for which there is no one-size-fits-all 
solution. 

Some European exhibitors are still hesitant about investing in digital equipment since over the 
last 15 years they have made substantial investments in the upgrading of their facilities and in 
the  creation  of  mini/multiplexes.  In  2008  37%  of  the  screens  in  MEDIA  countries  were  in 
multiplexes  compared  to  9.4%  in  1994  and  this  has  more  than  doubled  between  2000  and 
2008.  

The digital cinema distribution revolution therefore raises two major issues:  

–  The  important  investment  in  digital  equipment  has  to  be  borne  by  exhibitors,  but  the 

savings will be made by distributors (thanks to the lower cost of digital copies); 

–  Digital equipment represents a cost that can be borne by cinema chains and multiplexes but 
that is often out of reach for certain smaller independent (frequently arthouse) cinemas.  

This  could  lead  to  a  dual  exhibition/distribution  market,  where  only  multiplexes  and  high 
value  commercial  films  would  benefit  from the digital cinema revolution. Cultural diversity 
and renewal of talent however depend on maintaining Europe's unique network of cinemas. 

An important corollary issue is that the digital transition will also have a social cost (in terms 
of staff redundancy for projectionists and in labs) and training needs will have to be met. The 
transition  period  should  therefore  be  carefully  managed  and  all  its  implications  on  the 
different stakeholders at each step of the audiovisual chain be taken into account. 

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In 2007 (source: Media Salles). 
European Audiovisual Observatory, Yearbook 2008, volume 3, p. 18. 

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3. 

STANDARDISATION 

The Digital Cinema Initiative (DCI) was launched in 2002 by the six US majors to define the 
technical specifications of digital cinema distribution. These specifications were published in 
July  2005  and  then  turned  into  standards  by  the  Society  of  Motion  Picture  and  Television 
Engineers (SMPTE). They included a resolution of 2048x1080, known as 2k (4096x2160 or 
4k for screens over 15m) and JPEG 2000 as the compression format intended to allow digital 
cinema  to  offer  an  improved  cinema  experience  to  audiences  over  soon-to-be-available 
technologies  (HDTV  Broadcast,  Blu-Ray  and  video-on-demand).  These  specifications  also 
include  security  parameters  (a  significant  part  of  the  cost  of  the  equipment).  They  are  now 
being  considered  for  adoption  as  voluntary  international  standards  by  the  International 
Standard Organisation (ISO) in Geneva.  

Nevertheless these specifications have cost implications: 2k/4k represents a major investment8 
for cinemas, many of which are currently experiencing financial difficulties. Not all European 
cinemas  consider  that  they  will  reap  short-term  benefits  from  it  (except  perhaps  those  that 
screen 3D films) or indeed long-term benefits (since digital projectors have a shorter lifespan 
than 35 mm projectors and will therefore need to be replaced more often at a higher cost). 

It  is  worth  noting  that  there  is  no  standard  for  3D  digital  projection.  However,  audience 
interest in 3D films enables cinemas to charge premium ticket prices for 3D showings, at least 
in  the  short  term.  This  has  encouraged  commercial  cinemas  to  install  3D-capable  digital 
projection  equipment.  As  far  as  alternative  content  (live  screenings  of  concert,  opera  and 
sports  events)  is  concerned,  distributors  of  such  content  have  so  far  imposed  fairly  limited 
minimum requirements. 

Technology  is  changing  rapidly.  It  is  important  that  standards  meet  the  needs  of  European 
cinemas.  There  are  now  digital  projectors  suitable  for  large  venues  which  are  significantly 
cheaper than 2k DCI-compliant projectors but which have an image resolution of 1920x1080. 
Some  have  a  profile  similar  to  those  required  by  the  DCI  specifications  and  have  versions 
which could show 3D films. These projectors are also compact and can be integrated easily 
into  existing  projection  booths  and  run,  at  least  in  the  short  term,  in  parallel  with  a  35mm 
projector to allow for a smooth transition from 35mm to digital projection. 

Over  80%  of  European  screens  are  less  than  10  m  wide.  The  quality  of  projection  at  a 
resolution of 1920x1080  on screens  of this size is more than satisfactory and  the difference 
with  2k  is  fully  acceptable  to  audiences  and  cinema  owners.  This  would  clearly  represent  a 
viable  alternative  for  the  overwhelming  majority  of  European  screens.  This  would 
furthermore  represent  a  significant  economy  in  terms  of  the  private  and  public  investment 
needed  for  the  transition  to  digital  projection.  However  issues  remain  as  to  whether  all 
distributors would accept the screening of their films in these conditions. 

The  European  Union  will  further  examine  how  to  seize  the  opportunities  offered  by  the 
standardisation  process.  The  aim  is  to  ensure  that  the  necessary  flexibility  is  guaranteed  to 
enable all viable cinemas in Europe to use digital projection. 

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Around  € 60,000  (projector  and  server)  per  screen   +  installation  costs  +  associated  costs  (cabin 
adaptation, cable extraction, air conditioning, lamps…) + maintenance costs (higher than for 35 mm).  

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4. 

CHALLENGES OF DIGITAL CINEMA FOR FILM HERITAGE 

As  underlined  in  the  Second  report  on  the  implementation  of  the  Film  Heritage 
Recommendation,  transition  to  digital  cinema  puts  the  ability  of  future  generations  to  have 
access to digital films at risk. As regards the collection of digitally-produced or digitised films 
in film heritage institutions or specialised heritage cinemas, there is a need to update the legal 
instruments  establishing  legal  or  compulsory  deposit  of  films,  in  order  to  cover  films 
produced  in  all  media.  The  establishment  of  standards  at  European  level  specifying  the 
conditions for the submission of films to archives and for their preservation is also important.  

However, since many questions are still open about the storage and long-term preservation of 
digital  material,  all  options  for  preserving  digital  films  should  be  considered,  as  well  as 
benchmarking between Member States and other sectors. Investments in research, equipment 
and professional training in this field are very important. Finally, film heritage institutions or 
specialised heritage cinemas also need to be equipped to project in digital format and are to be 
included in the Member States' strategies for equipping cinemas. Definition of standards for 
digital projection of heritage films is also necessary. 

5. 

FINANCING THE DIGITAL CINEMA TRANSITION 

5.1. 

Commercial models 

Under  a  VPF  financing  model,  distributors  (initially,  the  six  US  Majors)  sign  long-term 
agreements  with  intermediaries  (known  as  integrators).  These  integrators9  finance  the 
acquisition  of  digital  cinema  equipment  and  collect  the  distributors’  contribution  to  repay 
(part of) the equipment they have financed on behalf of the exhibitors.  

The idea behind the model is that the first time a distributor shows a digital film in a cinema 
equipped through a VPF agreement, the distributor pays a fee (the VPF) to the integrator in 
order to reimburse its initial investment. 

The  current  commercial  financing  models  rely  primarily  on  VPF  payments.  Distribution 
agreements  have  been  signed  by  all  the  US  Majors;  others  are  now  beginning  to  sign 
agreements.  The  VPF  model  may  not  provide  a  sufficient  revenue  stream  for  smaller  and 
arthouse cinemas  offering  European programming. This may  have  an impact on the type of 
films that are programmed. 

5.2. 

Public intervention at national, regional or local level 

Since the VPF  financing model is based on the traditional distribution model, the profile of 
cinemas which have traditionally been second-, third- or fourth-run cinemas could therefore 
be inappropriate for the VPF model, which is based on the average turn rate of first-run films. 

Cinemas play an important social and cultural role in municipalities and rural areas since they 
are  often  the  only  venues  providing  access  to  culture  for  the  community.  Many  European 
cinemas (in particular single-screen cinemas) are owned by municipalities.  

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Only four are active in more than one European country: Arts Alliance Media, XDC, Ymagis and Sony 
for 4k equipment. 

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European  Union  Structural  Funds  could  be  called  upon  by  Member  States/regions  to  co-
finance  digitisation  projects  and  training  initiatives  as  factors  of  innovation  as  well  as  of 
cultural diversity and of regional development, provided these projects and initiatives are in 
line with the State aid rules. In this context, funding could be provided under several types of 
projects  including  a  cultural  dimension  and  linked  with  local  attractiveness:  urban 
regeneration, rural diversification, cultural tourism, innovative activities, information society 
and human capital10. As these Structural Funds are managed by Member States/regions, it is 
for  them  to  identify  digitisation  as  a  possible  funding  area  in  their  National  Strategic 
Reference Frameworks and operational programmes11. To be successful, digitisation projects 
must  be  mainstreamed  into  integrated  development  strategies,  at  regional  or  city  level,  in 
partnership  with  authorities  representing  different  policy  areas  and  relevant  representatives 
from the civil society.  

In Poland the region of Malopolska has already used European Structural Funds to digitise a 
small  network  of  municipally-owned  arthouse  cinemas  in  order  to  increase  the  "tourist 
attractiveness" of  the  region.  In  Portugal an interregional  scheme  for  digitisation of  (mainly 
municipal) cinemas in the North, Centre and Alentejo regions is close to completion, having 
obtained  funding  from  the  ERDF12  under  the  general  heading  of  ‘Cultural  Facilities’.  The 
German Land of Niedersachsen and some French regions also intend to use ERDF resources 
for the digitisation of cinemas.  

In  EEA  States  a  variety  of  political,  social  and  economic  conditions  prevail.  Therefore 
different  approaches  to  digitisation  have  been  considered  in  different  countries,  including 
collective  conversion  schemes  for  example  in  France  and  Germany  that  have  not  been 
followed through: 

–  Pilot  projects:  The  first  country  to  launch  a  pilot  scheme  was  the  UK  with  the  Digital 
Screen Network (240 screens for "specialised" films). Similar pilot schemes have been run 
in Ireland (Cultural Cinema Consortium) and Sweden (through the Swedish Film Institute); 

–  Targeted  national  schemes:  Finland;  Poland,  the  Czech  Republic  and  Slovakia  focus 

mainly on municipal cinemas; 

–  Tax and credit facilities: Spain (soft loans) and Italy (tax credit)13; 

–  Other schemes: Norway (ongoing) and the Netherlands (in works). 

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13 

Out of  the  € 347 billion  that  the  Cohesion Policy  will  invest  in  regions over 2007-2013, € 5.9 billion 
will be dedicated to culture, € 10 billion to urban and rural regeneration projects and € 15.2 billion to 
the  development  of  digital  infrastructures.  For  cultural  projects  supported  by  Structural  Funds,  see: 
http://ec.europa.eu/regional_policy/themes/culture/index_en.htm 
The  detailed  management  of  programmes  which  receive  support  from  the  Structural  Funds  is  the 
responsibility  of  the  Member  States.  For  every  programme,  they  designate  a  managing  authority  (at 
national,  regional  or  another  level)  which  will  inform  potential  beneficiaries,  select  the  projects  and 
generally monitor implementation. To find the responsible authority see: 
http://ec.europa.eu/regional_policy/manage/authority/authority_en.cfm  
European Regional Development Fund. 
State aid investigation opened by the Commission in July 2009. 

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Complementarity 

In the territories where market solutions/VPF deals are available, they can be accessed by a 
number of cinemas (multiplexes, cinema chains, multi-screen cinemas with a high turn rate of 
first-run  films).  Subject  to  compliance  with  EU  competition  rules,  smaller  cinemas  with  a 
lower turn rate who want to acquire digital equipment could in some cases group together and 
"mutualise" their costs to access VPF deals (or European regional funds). National solidarity 
funds are also an option.  

Complementarity  is  all  the  more  necessary  as,  according  to  some  interpretations,  public 
support  could  actually  affect  the  value  of  the  VPF  paid  to  reimburse  the  exhibitor's 
equipment. 

Although some countries favour nationwide digital roll-outs, so that equal access to cinema is 
guaranteed  and  the  transition  is  quicker,  some  consider  that  public  support  should  actually 
prioritise  cinemas  that  have  no  access  to  market  solutions  or  solidarity  funds  and  cannot 
therefore  afford  the  equipment  without  public  intervention:  one-screen  cinemas,  part-time 
cinemas,  travelling  cinemas…  Another  possible  approach  is  to  support  the  digitisation  of 
cinemas in exchange for European programming commitments.  

Compatibility with European Union State aid and competition law 

Under the current European Commission policy on State aid for the digitisation of cinemas, 
subsidies  to  cinemas  showing  a  certain  share  of  European  or  arthouse  films  have  been 
approved  under  Article  107(3)(d)14  TFEU  and  State  aid  to  small  cinemas  and  cinemas  in 
remote areas has been approved under Article 107(3)(c)15 TFEU. Smaller amounts of public 
funding  meeting  the  conditions  of  the  de  minimis  regulation16  are  not  considered  to  have  a 

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16 

State  aid  N  477/04  –  United  Kingdom,  UK  Film  Council  Distribution  and  Exhibition  Initiatives  - 
Digital Screen Network: Article 107(3)(d) refers to "aid to promote culture and heritage conservation, 
where such aid does not affect competition and trading conditions to an extent contrary to the common 
interest".  In  the  case  of  the  UK  Digital  Screen  Network,  aid  under  this  exemption  was  approved  for 
cinemas showing a high proportion of "specialised" films using the digital projection equipment being 
(fully) financed. 
State aid NN 70/2006 - Aid scheme to cinema in Finland: Article 107(3)(c) refers to "aid to facilitate 
the  development  of  certain  economic  activities  or  certain  economic  areas,  where  such  aid  does  not 
adversely affect trading conditions contrary to the common interest". The Commission has approved the 
support to cinemas under the aid scheme to cinema in Finland on this basis. The support was intended 
as  partial  funding  for  the  procurement  of  equipment  and  modernisation  in  (arthouse  and  1-3  screen) 
cinemas operating primarily in small or medium-sized localities. Multiplexes and cinemas which were 
part  of  a  larger  chain  in  the  capital  area  were  excluded  from  the  aid  (idem  in  medium-sized 
municipalities, except in limited economic circumstances). 
To benefit from the de minimis rule, aid has to satisfy the following criteria: 
- The ceiling for the aid covered by the de minimis rule is in general € 200,000 (cash grant equivalent) 
over any rolling three fiscal year period to any single recipient undertaking. The relevant period of three 
years has a mobile character, so that for each new grant of de minimis, the total amount of de minimis 
aid  granted  during  three  consecutive  fiscal  years  (including  the  then  current  fiscal  year)  needs  to  be 
determined; 
-  The  ceiling  applies  to  the  total  of  all public  assistance  to  any  single recipient undertaking,  which  is 
considered to be de minimis aid. It will not affect the possibility of the recipient obtaining other State 
aid under schemes approved by the Commission; 
- The ceiling applies to aid of all kinds, irrespective of the form it takes or the objective pursued. The 
only type of aid which is excluded from the benefit of the de minimis rule is export aid;   
- The regulation only applies to “transparent" forms of aid which means aid for which it is possible to 

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potential  effect  on  competition  and  trade  between  Member  States,  so  that  the  measure  does 
not need to be notified to the Commission in advance. 

The  current  exemptions  do  not  cover  aid  to  bigger  cinemas/multiplexes  that  do  not  show  a 
minimum level of European/arthouse films and which exceeds the de minimis threshold.  

The Commission would need to assess the compatibility of State aid for digital cinema under 
either Article 107.3(c) TFEU or under the cultural derogation of Article 107.3(d) TFEU. Both 
require the Commission to consider the necessity, proportionality and adequacy of the aid.  

The  Commission  notes  that  3D  digital  screenings  make  investment  in  digital  projectors 
commercially  viable.  So  it  would  appear  that  State  aid  for  such  costs  is  not  necessary.  
In addition, public support schemes for digital projection equipment: 

–  should  not  accelerate  the  closure  of  cinemas  with  a  high  proportion  of  arthouse 

programming; 

–  should follow the principle of technological neutrality, i.e.:  

–  any  aid  should  be  available  to  finance  digital  projection  equipment  which  the 

exhibitor considers to be suitable for its auditorium and for its audience; and 

–  the supported equipment should be capable of showing content from a variety of 

digital sources. 

The Commission will always acknowledge the dual (cultural and economic) nature of the film 
sector, in line with the guiding principles of the UNESCO Convention on the Protection and 
Promotion of the Diversity of Cultural Expressions. 

When  developing  support  schemes  for  digital  projection  equipment,  Member  States  should 
avoid  models  which  could  raise  competition  issues,  for  example  those  which  involve 
collective agreements between a majority of distributors. The Commission will ensure that the 
transition  from  analogue  to  digital  cinema  complies  with  European  Union  competition  law 
rules, in particular regarding a prohibition of restrictive agreements contained in Article 101 
of the TFEU. 

6. 

PUBLIC INTERVENTION AT EUROPEAN LEVEL 

If  the  transition  to  digital  projection  causes  cinemas  to  close  down,  this  could  clearly 
jeopardise cultural diversity. The European Union is committed to preserving and promoting 
cultural diversity in accordance with the following provisions: 

–  Article 167(4) of the TFEU stipulates that the Union is to take cultural aspects into account 
in  its  action  under  other  provisions  of  the  Treaty,  in  particular  in  order  to  respect  and  to 
promote the diversity of its cultures; 

determine the gross grant equivalent in advance without needing to undertake a risk assessment. This 
implies a certain number of restrictions on certain forms of aid like, for example, guarantees; 
- In view of the current economic situation, the Commission will, for a temporary period, consider State 
aid of up to € 500,000 per undertaking to be compa tible, provided that certain conditions are fulfilled. 
The possibility of a loan guarantee of up to € 1.5 million can also be regarded as de minimis. 

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–  The  UNESCO  Convention  on  the  Protection  and  Promotion  of  the  Diversity  of  Cultural 
Expressions  emphasises  the  distinctive  dual  (cultural  and  economic)  nature  of  cultural 
goods and services17 (which include notably audiovisual works). 

The objective of the European Commission action plan is to create a favourable environment 
for  the  digital  exhibition  of  European  films.  Different  initiatives  have  been  and  will  be 
launched to support the take-up of and the investment in new digital technologies. With the 
help of the European Structural Funds and the new MEDIA scheme, the ultimate objective of 
the Commission is also to promote European citizens' access to digital cinema. 

MEDIA 2007 Programme 

The  digital  revolution  is  a  challenge  to  MEDIA's  global  objectives  of  cultural  diversity, 
increased circulation of European works and strengthened competitiveness of the audiovisual 
sector18.  

The  MEDIA  2007  Programme  has  committed  itself  to  supporting  European  cinemas  in  the 
digital age. One of its main objectives is: "to preserve and enhance the European cultural and 
linguistic diversity and (…), guarantee its accessibility to the public…". 

Firstly,  digital  transition  needs  to  be  accompanied  by  training  for  professionals.  In  this 
context  Article  3  (1)(c)  of  the  MEDIA  2007  decision  foresees  training  on  the  inclusion 
upstream of digital technologies for production, post-production, distribution, marketing and 
archiving  of  European  audiovisual  programmes.  Training  initiatives  have  therefore  been 
supported,  including  on  3D  production  and  for  exhibitors19.  Secondly,  Article  5  of  the 
MEDIA  2007  Decision  foresees  the  following  objectives  in  the  field  of  distribution  and 
dissemination:  

"(d)  to  encourage  the  digitisation  of  European  audiovisual  works  and  the  development  of  a 
competitive digital market place; 

(e) to encourage cinemas to exploit the possibilities offered by digital distribution." 

Under  (d)  The  MEDIA  programme  has  contributed  to  the  digitisation  of  European  content 
through  pilot  projects  such  as  Europe's  Finest20  (digitisation  of  European  classics)  and  D-
Platform21 (common tool facilitating the digital mastering and distribution of European films). 
Through  the  VOD  scheme,  MEDIA  also  indirectly  supports  the  digitisation  of  European 
programmes. 

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18 

19 

20 
21 

See in particular the 18th recital in the Preamble and Article 1(g). 
Article 1(2) of the MEDIA 2007 Decision sets the global objectives of the programme:   
(a)  preserve  and  enhance  European  cultural  and  linguistic  diversity  and  its  cinematographic  and 
audiovisual heritage, guarantee its accessibility to the public and promote intercultural dialogue;   
(b)  increase  the  circulation  and  viewership  of  European  audiovisual  works  inside  and  outside  the 
European Union, including through greater cooperation between players; 
(c) strengthen the competitiveness of the European audiovisual sector in the framework of an open and 
competitive  European  market  favourable  to  employment,  including  by  promoting  links  between 
audiovisual professionals. 
See 
in  Europe" 
http://ec.europa.eu/culture/media/programme/training/guide/docs/guide2010v2_en.pdf  
http://www.finest-film.com/en/index.html  
Now called European Digital Cinema Library (EDCL). See http://www.cnfilms.fr/soutien.html  

in  particular  pages  59-71): 

(2010  Edition, 

"Where 

to  be 

trained 

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Under (e) The Commission has already supported a number of initiatives through the various 
MEDIA schemes: pilot projects on new technologies (such as CinemaNet Europe, a network 
of  digitally  equipped  cinemas  dedicated  to  screening  documentaries),  co-funding  of  digital 
costs  for  the  distribution  of  European  films  and  a  specific  support  scheme  for  digital 
screenings of European films managed by Europa Cinemas.  

The  next  step  is  now  to  design  a  new  MEDIA  scheme  to  support  the  digital  transition  of 
European cinemas. In line with the principle of subsidiarity and the Programme's objectives 
the  support  will  focus  on  cinemas  screening  a  majority  of  recent  European  films.  This  will 
comprise the basic award criterion for the applicant cinemas.  

The  same  criterion  has  already  been  used  to  establish  the  Europa  Cinemas  network,  which 
plays  a  crucial  role  in  screening  European  films22  and  which  the  MEDIA  Programme  has 
supported for 15 years. The network has now grown to 770 cinemas totalling 1,945 screens in 
443 cities of MEDIA participating countries. 

The new digitisation  scheme  will grant support directly to cinemas and co-finance a clearly 
identified set of digital equipment costs in the form of flat-rate financing. MEDIA support can 
be cumulated with national support; however, priority will go to cinemas/countries that cannot 
benefit from VPF deals or from national support schemes for digitisation. The cinemas based 
in those countries will be given particular attention, in line with the priorities of the MEDIA 
2007 Programme23. 

To  be  able  to  grant  support  in  the  form  of  flat-rate  financing  a  study  on  digital  equipment 
costs has been commissioned to determine a sliding scale of unit costs. The scheme will be 
finalised and launched at the end of 2010, on the basis of the findings from this study. 

Another option to be explored is to facilitate the access of exhibitors to credit or to support 
their  financing  costs.  In  a  period  of  credit  crunch,  such  a  measure  could  be  the  adequate 
response  for  some  cinemas  as  it  is  not  very  costly,  it  has  a  high  multiplying  factor,  lessens 
dependence  on  distributors/studios  and  is  much  less  likely  to  distort  the  market.  The 
possibility of opening the MEDIA Production Guarantee Fund to exhibitors and/or of creating 
a new i2i scheme for them is therefore being considered. 

The  European  Investment  Bank  (EIB)  could  also  play  a  role  in  the  digital  transition  by 
helping  national  funds/digitisation  plans  access  commercial  loans.  In  the  meantime  the  EIB 
participated in the € 100 million  credit facility awarded to the integrator XDC for the roll-out 
of digital cinema in Europe. 

7. 

CONCLUSIONS 

The European Commission is aware that the transition to digital projection has a number of 
inherent  risks  that  have  to  be  tackled  to  enable  European  cinemas  to  benefit  from  its 
opportunities. To reach that objective it is necessary to ensure: 

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23 

36% of screenings and 34% of admissions were for European non-national films in 2009, compared to 
less than 10% on average within the European Union. 
In its Article 1.4.c), the MEDIA 2007 Decision sets out as one of its priorities "reducing the imbalances 
in  the  European  audiovisual  market  between  high  audiovisual  production  capacity  countries  and 
countries  or  regions  with  low  audiovisual  production  capacity  and/or  a  restricted  geographic  and 
linguistic area". 

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•  flexibility and transparency in the standardisation process, so that digital cinema projection 

standards can meet the diverse needs of European cinemas;  

•  legal security in the field of State aid for the digitisation of cinemas, in the form of clear 

assessment criteria enabling Member States to design their schemes accordingly; 

•  EU  financial  support  for  the  digital  transition  of  cinemas  showing  European  films  or 

having an impact on regional development. 

The Commission therefore intends to put into place the following elements of an action plan 
for the transition to digital cinema projection for European cinemas: 

ACTION 

The Commission will prepare a progress report on the 
adoption  of  digital  cinema  projection  standards  to 
ensure that this reflects the needs of European cinemas 
and 
that  alternatives  are  explored  for  European 
cinemas  that  do  not  need  or  cannot  access  2k 
equipment. 

TIMETABLE 

2010 

The  Commission  will  launch  a  study  on  the  costs  of 
digital  equipment  to  provide  important  data  from 
across the EU. 

2010 

The  Commission  will  launch  a  new  MEDIA  support 
scheme  for  the  digitisation  of  cinemas  screening  a 
significant  percentage  of  European  (non-national) 
films. 

The  Commission  will  examine  the  possibility  of 
extending  the  MEDIA  Production  Guarantee  Fund  to 
exhibitors or find a similar way to facilitate their access 
to credit. 

2010 

2011 

The  Commission  will  adopt  a  Recommendation  on 
promoting digitisation of European cinema. 

2011 

The Commission will monitor the digital transition and 
review all its different aspects in the whole audiovisual 
chain (training, digital masters, programming…). 

2012 

The  Commission  will  develop  appropriate  criteria  to 
assess  State  aid  support  for  digital  projection  in  the 
Cinema Communication. 

2012 

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