SESSION FOUR : Global perspectives on funding models and commercialization of local content production

The ‘cultural exception’ stance in the DTT context : the French policy and regulatory framework that supports the development of local content

By Séverine LAURENT, Media Consultant

DTT Roll-Out and Local Content Development Workshop

28 May 2014CSIR Conference Center, Pretoria

In France, DTT is totally operational since the 30th of November 2011.

Today, France has 32 national TV channels which are terrestrially distributed, on 8 multiplex :

7 public TVs, 17 private plus 8 paid TVs. France has also 48 local TV channels on DTT.On Satellite and ADSL, we count up to 205 national TV channels and 106 local TV Channels.

According to the Public Accounting Court (Cour des Comptes) ,

audiovisual production has mobilized nearly 800 million €uros in 2012 invested by television channels and

332 million €uros of public subsidy

This investment in culture is unique in Europe in terms of the extent of public support, the diversity of indirect support

and the scope of the regulatory framework. Sources : csa.fr, senat.fr, ccompes.fr

French production in the DTT context

The cultural exception

Cultural exception (in French l’exception culturelle) is a political concept introduced by André Malraux in France since the early sixties. It has been introduced in General Agreement on Tariffs and Trade (GATT) negotiations in 1993. Concretely, it can be seen through protectionist measures limiting the diffusion of foreign artistic work (quotas) or through subventions distributed according to the country cultural policy.

Objectives: • To treat culture differently from other commercial products ;• To consider cultural goods and services as exceptions in international treaties and

agreements especially with the World Trade Organization (WTO).

Examples : • The law of audiovisual implies for instance that "radio have to broadcast 40% of

French songs and, within this quota, 20% of new talents." • Between 2005 and 2011, from 45% to 55% of film products were American imports,

compared to 60 to 90% American imports in other European film markets.

Production of French local content is based upon an industrial politic serving cultural exception

Regulatory framework : FRENCH LAW

French Audiovisual Law deals with DTT new TV channels in the same way as analogs but adapts their obligations to their fragile economy

Priority for public service» Publics channels are supposed to reach all homes. French legislation

enforces this, by specifying that all publics channels must be received via DTT, including for the operators of commercial packages, along with the right of priority or pre-emption for future services. Same obligations on DTT than on the analog versions

Must-carry rights for analog channels» The transition to “all digital” and the arrival of new competitors can be

compensated by must-carry rights for commercial analog channels. Should they so wish, these channels have the right to continue broadcasting in digital without encountering state opposition, and without it being an obligation either (unlike for public channels). Same obligations on DTT than on the analog versions

Regulatory framework : FRENCH LAW

Obligations regarding the promotion of local production» Since it is authorized on the universal network and accessible to all homes

nationwide, the DTT service must fulfill obligations relative to the promotion of local production from Europe or from France.

» Two types of obligations are imposed: broadcasting quotas or obligatory investments in production. Investment are made in proportion to turnover. Smaller quotas with increasing % per year and derogatory mode as far as peak hours are concerned

» In this case it is necessary to define what the legislative body means by audiovisual and cinematographic works. These promotional obligations for local production can distinguish between two levels: strictly national works and those from the sub-region. (eg France and Europe or South Africa and African continent)

» To foster the emergence and development of a local market for content production, these obligations regarding local or sub-regional promotion can also be agreed at sub-regional level. (idem)

Created in 1982 then with a new name in 1986 & 1989, the High Audiovisual Council (CSA) role is

“to ensure the freedom of audiovisual communication in France”

In addition to all traditional tasks, the CSA is responsible to ensure

"the defense and representation of the French language & culture" on the airwaves .

The CSA is in charge of controlling quotas for film and audiovisual :

» Television stations to invest 3.2% of their annual turnover in the production of French and European cinematographic or audiovisual works.

» Amongst those 3,2%, 2.5 % should be allocated to works in French (EOF) . Exception : 9% for Canal +.

» Broadcast quotas require TVs to devote 60% of their transmission time for European works , 40% for works EOF).

Quotas are decided by decreesCSA has the power to give and to take back broadcasting authorization

TV Regulatory framework and control

INTERNAL FUNDING» Contribution of the production company in film financing :

• Cash • Support Fund producer • Participations • Crowdfunding

Challenge of funding local contents SOURCES

Evolution of funds invested in french cinema 2002-2012 (in M€)

Publics

Private

Private from producers

TV Channels contributions

MAJOR EXTERNAL FUNDING• Regional grants & subventions • CNC• The advance on receipts from CNC• Other institutional supports • Eurimages • The pre-sales of television • The co-producer funding • International coproduction • SOFICA • Minimum Guarantee ( commonly called " MG" ) :

Rooms MG : advance on the revenues of cinemas in France MG Video : advance on receipts from operation DVD , Blu -ray and VOD in France MG International ( or abroad) : advance sales to foreign territories.

CNC

TSTTax on Television Services

Applied since 2008, the TST has become the main source of funding for the CNC. It is planned to raise up to € 537 millions in 2014

TSATax on Cinema Tickets

VOD / DVDTax on VOD services

OTHERS REVENUESSpecial Tax

One of the major funding source for local contents

Total net

€700 millions

TSA €134 M

TST (editors) €266 M

TST (distrib.) €270 M

VOD/DVD €28 M

OTHERS €28 M

Estimation 2014

Challenge of funding local contents

How does COSIP work ?

To benefit of the COSIP, programs must meet several requirements:

» Fall into 5 categories only : fiction, animation, creativ documentaries, live shows and cultural magazines;

» Most artistic & technical staff either French or European;

» Financing : Cosip funds cannot exceed 40% of the full cost of the program and TV channel fundings has to reach a minimal amount ;

» Screening jury is meeting up once a month.

Focus on CNC

Challenge of funding local contents

The TST – Taxe on Television Services -, a special tax created in 2008 to support the funding of local

contents in the context of DTT and convergence of the media supports.

WHO PAYS IT ?

• All TV editors

• Telecom operators distributing mobile television services

• Internet Service Providers distributing television services

Source : cnc-tst.fr/

Focus on TST

WHO MANAGES IT ?• The CNC – Centre National de la Cinématographie

Challenge of funding local contents

HOW IS THE TST CALCULATED ?• TV editors : the tax is based on the amount of advertising and sponsorship revenues, on

paying SMS and phone calls linked to the programs transmitted and on connections linked to telematics services. All amount excluding VAT and the total sum benefits of a 4% tax abatement.

Source : cnc-tst.fr/

Focus on TST

• TV distributors : the tax is based upon the total amount of subscriptions dues to provide television services. This amount benefits of a 10% reduction. It is also based upon subscription of all communication services given access to telephone or Internet. This amount benefits of a 66% reduction.

HOW MUCH DOES THE TST COST ?• TV editors : 5,5% of the total amount declared for all traditionnal TV editors. France

Télévision benefits of a 50% discount on this amount. Television services broadcasted terrestrially in HD and those wich provides mobile TV are subject to a respective increase of 0.2 and 0.1%.

• TV distributors : the applicable rate is progressive in terms of sales Business: the threshold of taxable sales is set at € 10 million per year, the rate of evolving 0.5% to 4.5% tax bracket of 65 million euros.

Results of the DTT launching – Market share

In the second half of 2011, about 26.6 million households, or 99% of households with televisions have access to digital television (DTT, cable, satellite, ADSL ...).

There are 32,7 millions digital access including 50% in DTT.

Source : Mediametrie rapport 2013

Results of the DTT launching - Audience

Since 1995, two major trends are emerging:

• Decreasing of the audience of ‘historical’ terrestrial channels ;

• The growth of cable and satellite TV audience (+8 points);

• The strong growth in new free DTT channels (excluding local channels) reaching 22% audience in 7 years.

» Most of the television editors on DTT have already developed media services on demand.

» Channels such as France 4 or Euronews are negotiating partnerships with video sharing sites like YouTube or Dailymotion.

» According to a study made by the European Interactive Advertising Association (EIAA) young Europeans spend now more time online than watching television. For television, quality is one of the key to success!

» Fight against piracy and illegal downloading has borne fruits (HADOPI)

» French cartoons and documentaries are best-sellers on the international market

» Quality and cost of French fiction production is still a challenge in the context of globalization

Source : Assemblée Nationale / Rapport Christian Kert

In France, to resist to the new modes of communication, television takes its inspiration from them

Results of the DTT launching

Results of the DTT launching – Economic battle

Some DTT Tv channels are struggling for life

• Failure of pay DTT : eg. LCI and Paris Première are willing to switch from a paid system to a free to air model. But their competitors are fighting against it.

• DTT newcomers sold their channels to larger and historic media groups => market concentration

Plus overall European and French economic crisis

Results of the DTT launching on local content production

These difficulties have consequences on content production :

» Between 2011 and 2012, the rights allocated by TV channels has decreased of 7%;

» In 2014, producers are complaining from an decreasing of investments in production : minus 20% on some similar programs;

» Quotas are globaly respected but the production market is becoming more and more competitive;

» DTT Channels , with their limited budget, have lower costs of production;

» The end of an « Golden Age » of the production market is profiling with a low cost market emerging;

» All those difficulties link to a major challenge : quality of the programs.

Focus on French-speaking countries in Africa

• From 2007 to 2011, all local TV operators transformed their platform from analog to Digital signal BUT still in the MMDS frequency;

• One big challenge for 2015 is to allocate them UHF frequencies wish implies loss of channels as the bandwith allocated cannot welcome as many channels as they could transmit on the MMDS frequencies;

• Trends on the market is to develop local languages contents;

• Local production in mainly financed either by TVs, either by private sponsorship (bartering).

Significants figures

Regulatory Framework• Under the pulse of the French CSA and the Organisation Internationale de la Francophonie,

all comitees of audiovisual regulation has been created from late 90’s to early 2000’s;

• Today, all French Speaking countries in Africa have their CSA/ ICASA equivalent. Those institutions are mainly in charge of monitoring channels during elections times;

• So far, neither private televisions nor telecom operators pay taxes dedicated to local production;

• To face the challenges of “All Digital”, Authorities in Western Africa (UEMOA + Guinea) has setted up common platform. Tasks identified by this platform are, amongst others :

• To combine intelligence to meet the technological, cultural, sociological, political and economic challenges of the audiovisual sector in West Africa;

• To strengthen cooperation and collaboration in controlling the Audiovisual Communication in West Africa, by establishing a formal structure;

• To impulse studies on the audiovisual sector.

The platform is headed by Béatrice DAMIBA, President of the CSC in Burkina Faso and the Technical Secretariat is headed by Ibrahim Sy Savanné, President of HACA in Ivory Coast.

Focus on French-speaking countries in Africa

DTT Switch over : a wonderful opportunity for content creation

A very tight timing

A main cultural issue Local content is a key success factor

Sub-regional cooperation strongly advised

DTT content: New usages and new contents Strong potential of development of interactive services

Media and Telecom are emerging in Africa

French authorities and DTT specialists willing to help and support

Thank You for your kind attention

Séverine LAURENT Tel : +33 6 63 82 99 57 – Mail : severine@afrikakom.com

Medias consultant specialized in French Speaking countries in AfricaGeneral Manager of Afrikakom - France & Mali

Former General Secretary of the MEDIAF – Network of French speaking Medias