The growing recognition at European level of the danger digitisation poses to independent cinemas was clear at the Europa Cinemas annual conference in Paris. And that begged the question - could there be a case for European-level funding to support the switchover'

The answer appears to be yes but with big provisos and it is clear the industry will have to take the initiative and rethink its approach in some areas.

In Paris, a number of possible avenues were highlighted, including two of the European Structural Funds, plus the European Social Fund (ESF) and the European Regional Fund.

The former focuses on reducing differences in prosperity across EU countries while the latter supports innovation, the environment and infrastructure. In both cases the impact of an unbalanced digital switchover, which could create economic discrepancies between European countries or hamper innovation, could trigger support.

However, in a period of economic crisis and with the euro zone now officially in recession, European Commission representatives were quick to point out that the industry would be competing with other sectors for the same pool of money.

And given the rules of funding, any support would necessarily be on a territory-by-territory or regional basis.

Another potentially more pan-European and perhaps financially more significant source emerged at the conference in the form of the European Investment Bank (EIB).

A main criterion for support from the EIB is market failure and in Paris, EIB economist Patrick Vanhoudt argued strongly that the current European transition to digital shows clear signs of this. Exhibitors are bearing the brunt of costs while distributors benefit the most, the financing of costs is uneven across the market, and in a financial crisis digital roll-out across Europe could be delayed.

Timing is an important factor. Previously, the EIB believed it was too early to intervene; until recently, the industry itself did not know which models would emerge or what the costs would be.

Now, for Vanhoudt, it is time to talk. But while the EIB estimates the total costs of digital switchover for Europe to be around $2.8bn (EUR2.2bn), it questions which business model will prevail.

It has questions over third-party virtual print fees (VPF), seeing them as expensive for exhibitors and questioning the transparency between exhibitors and distributors. And it also questions how they can address the question of financing next generation roll-out.

For the EIB, these problems can be solved with a third-party policy-driven VPF. That model would see any profit reinvested to finance a next generation roll-out, a transparent VPF with costs fairly distributed, and the EIB argues, it would have the advantage of being cheaper.

With any type of national or sector support, the spectre of breaching state aid rules raises its head. However, exceptions to state aid rules do exist and the cultural exception is one of them.

With digitisation, a relevant precedent already seems to exist. The UK Film Council's Digital Screen Network subsidised the digitisation of 240 screens and was accepted as not violating state aid on the grounds of cultural exception.

Anti-competitive practice is another area that could fall foul of EU legislation and the EIB's suggestions that current VPF models are not transparent enough have been informally echoed by the EC.

Concerns over state aid and competitiveness legislation seem premature, however, when the industry has yet to make any serious approaches for EU level funding.

ESF funding has to be applied for and the EIB cannot intervene of its own accord. It has to be approached, for example, by a government, a public body, an industry or representative organisation.

There are suggestions that such an approach could be made on behalf of the industry by the European Commission's Media programme. If that were to happen, the model of a policy-driven VPF would more than likely be the one followed.

However the industry is free to seize the initiative and promote its own models, within the bounds of competition legislation.

Vanhoudt was clear - the EIB is only a bank and while it can propose solutions, it is the industry that needs to act. His message to last week's delegates' The funding is there, get yourself organised.


Europa Cinemas was set up in 1992 with funding from the European Media programme and the French CNC. Members of the network, comprising 687 cinemas in 41 countries, receive financial support to show non-domestic European Film. Last year, members devoted 63% of their screenings to European films and 39% to non-national European films.

Europa Distribution, created two years ago, is a network of 60 independent distributors from 19 countries. Its commitment to European film includes a commitment to support Europe-Latin American links.