'Digital convergence is coming of age.'

That's the view of EU Commissioner for the Information Society and Media, Viviane Reding (pictured below), who claims 'it is now possible to distribute online content on a mass market scale'.

And in a great many areas of new media development, it is fair to say that the digital age has already arrived.

Historically, the film industry has been driven in part by technological change, evolving to embrace challenges and opportunities in equal measure.

But the latest wave of change is moving at such unprecedented speed that the industry's has struggled to keep up.

For Commissioner Reding, the time has come when business must now catch up with a changing world: 'The key challenge is to adapt our intellectual property rights regime to the reality of convergence, allowing the development of innovative and attractive business models for online exploitation of content.'

Evidence of such adaptability has been thin on the ground though with the industry understandablyreluctant to let go of old models for unproven alternatives and revenue sources.

Solid examples of bold steps forward are thin on the ground.

Missed opportunity'

In an era of rapid digital advances, that may prove to be a missed opportunity for European cinema.

The region may not be able to redress the historical Europe/US imbalance, but at least it presents an opportunity to exploit the potential efficiencies of digital distribution its own terms.

To do so though, it needs to seize the initiative, according to Commissioner Reding's Directorate earlier this year when it noted the industry's 'lack of ambition and implementation' in this area.

Some industry commentators complain the Commission was itself too slow to see the potential for content provision or the direction that Europe would need to take in response.

The Commission's historical preference for a non-interventionist approach and the grinding pace of European level policy-making has done little to alleviate that perception.

However, even a cursory review of European Commission policy over the past three years shows that a consistent strategy has been in place - whether or not you agree with the approach on individual issues.

The i2010 strategy has provided the umbrella for Commission policy development since 2005.

The Commission describes the main thrust of its approach as 'creating a stable and EU wide basis for the provision of content services'.

Commissioner Reding is in a pivotal position having driven through a number of significant policy and regulatory developments that directly impact the European film industry.

While the Communication on Creative Content Online is perhaps the most high-profile recent development, there have been significant changes elsewhere:

Audiovisual Media Services Directive

The Audiovisual Media Services Directive, for example, replaced the Television Without Frontiers Directive at the end 2007.

It means that for the first time there is now a regulatory framework encompassing all categories of audiovisual media services, including non-linear services such as VoD (Video-on-Demand).

The Commission hopes that it will provide the necessary legal and economic certainty to prepare Europe's audiovisual sector for the challenges ahead.

Critically, it preserves the 'country of origin principle' ensuring that service providers can provide cross-border services. And in line with the Commission's goal of promoting cultural diversity, it obliges non-linear providers to promote European content where possible.

Over the course of the next two years, the Directive will become law in all 27 European Member States.

Telecoms Package

The Telecoms Package in November last year is relevant to the film industry.

For example, it is here that policy proposals related to ensuring Europe-wide access to high speed broadband are set out - a factor widely acknowledged to be crucial to the development and uptake of online distribution of film.

Other potential platforms such as Mobile TV, which Commissioner Reding describes as 'a concrete example of convergence offering the possibility of viewing any content, anytime, anywhere' are also directly impacted by these proposals, with the Commission pushing hard for a single standard in this area.

The Telecoms package is currently being debated across the European institutions, with the Commission hoping that it will come into force in 2010.

Creative Content Online

The forthcoming Recommendation on Creative Content Online may have less legal force than either the AVMS or the Telecoms package, but its impact on the film industry will be significant.

To address these issues, the current Communication highlights the four areas that Commissioner Reding regards as presenting 'the most pressing current challenges' meriting action at EU level:

  • availability of creative content
  • multi-territory licensing for creative content
  • interoperability and transparency of Digital Rights Management systems (DRMs)
  • legal offers and piracy.

European flag

Digital Rights Management

It has been the discussions on digital rights management (DRM) and multi-territory licensing in particular that have generated the most heat in the ensuing months.

At the public consultation stage, many companies and bodies hit out at proposals to impose interoperability on DRMs.

The Motion Picture Association Europe (MPA Europe), for example, argued that 'the achievement of DRM interoperability will be the fruit of a market-driven process and that it will not result from the choice of a single technology'.

At a time when music companies are making moves to remove DRMs from online content, other commentators question whether the public will accept the idea.

That's a view shared by MEP, Ignasi Guardans, member of the European Parliament's Culture and Education Committee.

'I understand the concerns, but I am not in favour of such strong protection for every piece of content. It is not what consumers will accept,' said Guardans recently.

Commissioner Reding is far from ready to dismiss the approach however.

As she points out, 'My view is that technologies that support the management of rights and the fair remuneration of creators in an online environment are the key to developing a creative content online industry.'

As a result, the Commission is seeking to establish basic rules for transparent Digital Rights Management systems. However, it is keen to appear mindful of the concerns raised on all sides.

'We intend to closely monitor the evolution of DRMs and ensure that they do not hamper competition in the online content market,' Commissioner Reding explains. 'In the meantime, we will keep monitoring the progress of the industry towards the development of transparent, interoperable standards and continue to assess the acceptance of business DRM solutions by consumers.'

Commissioner Reding is also keenly following the difficulties surrounding copyright licensing. She regards it as 'one of the most acute problems in the short term [that] calls for an adaptation of existing and new copyright licensing agreements'.

Multi-territory licences

Multi-territory licenses, as proposed in the Communication, are high on her agenda.

Europe now has the technology to ensure cross-border distribution of film online, but anyone that wants to do so at present is required to secure individual copyright licences for each of the 27 EU Member States.

The logistics and the costs involved are hardly incentives and far from the ideal of a single European digital market.

The process is further complicated as rights holders have so far proven reluctant to make rights available in more than a couple of countries at a time.

Meanwhile, some responses to the Commission's proposal have been less than favourable. The UK Film Council, for example, regarded the Commission's proposal as 'founded on a weak evidence base'.

The Commission remains concerned that a lack of multi-territory licences makes it difficult for online services to be deployed across Europe, but it does appear to have softened its approach in recent months.

'I keep an open mind on this issue and I have asked my unit to commission an independent study concerning the possible effects of multi-territory licensing of audiovisual works in the European Union, both from an economic and a cultural point of view,' says Commissioner Reding.

As prior notice of that study has just been published, it is unlikely that a firm direction on the issue will emerge anytime soon.

Following on from the Communication, the Recommendation on Creative Content Online was expected to be published before the end of this summer. However, Commissioner Reding has indicated that it will now be published 'by the end of the year'.

Digital Cinema

There is one important area of digital distribution that will not be covered in the forthcoming Recommendation - that of digital distribution in theatres.

While current figures show that only 5.5% of screens worldwide are digital, that figure is expected to reach 48% by 2012 even if the vast majority of those screens are expected to be in the United States.

The joint support of the US studios for the Virtual Print Fee (VPF) as a viable model is widely regarded as driving that process. And while the VPF model has enjoyed some success in Europe in recent months, it is not a model that translates easily to Europe's tradition of independent cinema theatres.

As Commissioner Reding acknowledges, 'There is still a critical mass of small theatres that can't afford digital switchover, which is a problem that needs to be addressed. However, the small cinemas are the ones that promote European cinematographic works and therefore have great impact on cultural diversity in Europe.'

For many in Europe, consideration of the cultural element is integral to any solution.

As Ignasi Guardans has argued, 'There must be help based on both public policy and cultural diversity without replacing private initiative, or I don't see how cinema will continue in small cities. Independent cinemas could find themselves out of the distribution chain.'

The Commission has ruled out the possibility of direct capital funding at EU level, but some commentators have highlighted the need for action at EU level.

'There is not a specific policy to go to cinemas to say you need to prepare for this change,' said Guardans. 'But some of us are calling for this, otherwise Europe will be in a position where there is distortion to competition in the market.'

However, Commissioner Reding argues that the industry has to take the lead.

'It cannot be decided if a general European approach is appropriate in a stage where the stakeholders haven't yet agreed on the conditions and business models for digitisation,' she says. 'So far no single business model for digitisation has been established that meets all needs of distributors, producers and exhibitors. However, the EU will continue to support pilot projects in this area under the MEDIA programme, which will certainly help to tease out the most promising business models.'

That support also includes MEDIA funding under 'New Technologies' which has provided support to projects that promote VoD and Digital Cinema Distribution (DCD) from 2007.

In its first year, 12 projects were approved, but only one of those focused on DCD. At the time, Commissioner Reding acknowledged that fact reflected the number of submissions in this area as much as their quality, but commented that it was 'also a reflection of the state of play on digital equipment in cinema theatres'.

Building on industry's response to the new initiative, the framework for funding under new technologies is being revisited and was widely expected to be published before Cannes 2008.

When it is published, it will be interesting to see how DCD is addressed.

MEDIA programme changes

There are other significant changes currently underway in the MEDIA programme, not related to digitisation, but reflecting the ongoing globalisation of the industry.

Last month, the MEDIA programme published a call for proposals for cooperation projects with so-called 'third' countries outside of the European Union (EU).

The Commission has stated that it sees this 'preparatory action' as the first step towards a possible legal basis to create a programme of audiovisual cooperation between the EU and other countries such as the United States and Asia.

The new initiative, 'Media International', will be the subject of discussion at Cannes this year.

'I am confident that a new programme will emerge to boost our international cooperation in the audiovisual sector,' says Commissioner Reding.

A public consultation on the potential new programme - 'Media Mundus' - has just been launched.

So as European Commission policy reaches outwards and digital technology presents increasing opportunities to reach greater numbers on new platforms, where does that leave the European film industry'

While European policy may be consistent in its approach to supporting a competitive framework for European industry in a digital age, neither its specific film initiatives, nor the funding it provides, will be sufficient to ensure the European film industry takes its place at the top table as Commissioner Reding envisages.

Indeed, it can be argued that it should not be expected to. The speed of action and scope of ambition that the Commission urged on industry at the beginning of this year is still necessary.

Diversity may be the strength of European cinema, but paradoxically fragmentation is its main weakness.

The digital era needs to be seen not as a threat to the former, but an opportunity to address the latter. And that window of opportunity may be closing.