Of all the problems of fragmentation, it is the legal, rights and licensing issues that are perhaps most pressing. This chapter looks at some of the macro issues for aEurope that issplit at a deep level on issues such as the moral rights of authors and copyright.
We look particularly at the European Commission's approach.
What is absolutely certain is that the US has been able to press ahead more quickly in digital technologies - from downloads to digital cinema - because it has a more (though far from perfectly) homogenous market where technical and legal differences are much less than Europe if far from negligible.
By contrast Europe is a complex jumble of states, each with their own laws and traditions. That presents serious problems for the global digital business.
Would-be new media contender suchas Apple (click here for more)and Hulu.com (click here for more)have announced grand designs for European expansion but each will be required to negotiate an extraordinarily complicated variety of individual state licences and regulations.
Europe's marketaspirations as a single marketarelargely illusory in the digital field.
Rights holders have so far been reluctant to make digital rights available in more than a couple of countries at a time.
'It's brutally complex,' warns Gregor Pryor, senior associate in digital media at law company Reed Smith Richards Butler. 'Licensing on a pan-European basis means dealing with a range of different regimes and regulations. It's an absolute minefield.'
Dealing with countries on an individual basis is both time-consuming and expensive.
It is extremely difficult to exploit the economies of scale that the US - and indeed India and China.
THE FEAR FACTOR
If words were able to conjure up a digital future, Europe would have no problems. Digital transformation has become a mantra for the European Commission (EC) which has made no secret of its frustration at what it sees as slow progress by the industry.
Digital change is essential if Europe is to remain competetive on the global stage, says the Commission. And it has said it will step in unless the business picks up pace.
With Commission figures suggesting that VOD in Europe will be responsible for 7% of all movie revenue, the EC thinks the prize in the game is big enough to justify intervention.
That places Viviane Reding, EU commissioner (pictured)in a pivotal role.
As Commissioner for the information society and the media, Reding's DirectorateGeneral controls the lion'sshare of relevant policyimpacting on digital distribution.
The latest directive means that, for the first time, there is a regulatory framework encompassing all media, including VOD.
The AVMSDaims to ensure providers can create cross-border services. And, in line with the Commission's priority to support cultural diversity, it also obliges non-linear, ie on demand, providers to promote European content where possible.
In other words, it wants the digital age to have the same cultural priorities demanded of more established media.
The influence of Commission activity does not stop there, however. The impact of newly-converging technologies has prompted a number of other significant regulatory developments.
The introduction of the new European Telecoms package, for example, boasts specific areas that relate directly to online distribution. Indeed, this package sets out an obligation for operators to respect content copyright for the first time.
The related Communications on Spectrum Frequency and Mobile TV also touches on this developing market and in a shift from the Commission's traditional policy of technology neutrality, Commissioner Reding has made clear that, if necessary, she will mandate a single, open broadcasting standard for mobile TV - DVB-H.
'I know that competition among different standards can for some time be a good way to let the market identify the best solution,' says Reding.
'But we have been waiting for too long. The opportunities are slipping away. It is time to break the deadlock.'
But if there is clarity, backed by tough words, among Europe's leaders, it has not filtered down to all.
Not everyone is in favour of this interventionist approach. MEP Ruth Hiernoymi, of the European Parliament's Culture and Education Committee, for example, supports Reding's view of a 'window of opportunity' that needs to be seized. But she also feels that industry involvement is essential.
'The dimension of our success depends on the dimension and speed of action,' Hiernoymi explained. 'However there needs to be stronger cooperation between industry and the EU. We need a two-step approach of cooperation and harmonisation. The European Commission seems to prefer harmonisation on all levels.'
For the moment, Reding seems satisfied with restricting the Commission's role to encouraging Member States to use DVB-H now that it is listed as an official EU standard and each country is obliged to promote its use. But that could change.
From Reding's point of view, the main thrust of the EC's strategy has to be aimed at unlocking the potential of content in the digital age by 'creating a stable and EU-wide basis for the provision of content services'.
That means supporting the industry, and directing it where necessary, while protecting consumers' rights along the way.
The industry may be wary, but it certainly cannot complain that it has not had ample opportunity to participate in shaping new legislation.
For example, the Film Online Charter that was agreed in Cannes in May 2006 saw the three main stakeholder groups - the film industry, the Internet Service Providers and the telecoms operators - agree in principle on several key elements that would be needed for a new online film model to succeed.
The charter was intended to serve as a reference point for developing new business practices across the three groups; identifying recommended systems for bringing film online via legitimate services and in a consumer-friendly way.
This approach represents a 'soft law' instrument of the type Commissioner Reding is keen to support. However, she has also made clear over the past year that while industry agreements and self-regulation have a significant contribution to make in improving the provision of online content, she feels they may not be enough.
LACK OF AMBITION
That was underlined in the latest Communication from Reding's Directorate, where the Commission specifically expressed its disappointment in what it called the industry's 'lack of ambition' and 'fragmented response' to the Film Online Charter.
The Communication on Creative Content Online presented to the European Parliament late last year specifically addresses the issue of online content and its distribution.
The Communication was widely flagged ahead of publication so its contents came as little surprise to the main players. The document set out four areas where action could be taken at European level to ensure progress:
» Interoperability and transparency of Digital Rights Management Systems
» Multi-territory licensing
» Piracy and legal offers
» Access to content.
Commissioner Reding has consistently stressed her support for DRMs as a means of ensuring effective rights management for content providers and as the foundation for building the new business models she feels are essential if the market is to progress.
With little movement from industry on this issue though, the Commission has now taken the initiative and will move to establish a framework for DRM transparency.
Multi-territory licensing will also be addressed so that licensing mechanisms evolve to reflect the reality of the online environment - ie ensuring that content is available seamlessly across a single European market.
While acknowledging that rights holders need to come to their own decisions on the benefits of multi-territory licensing, the Commission is keen to secure the potential benefits for European consumers - the recent decision on Apple's i-Tunes pricing being a case in point.
The Commission has regularly highlighted its concerns over the availability of content due to the ongoing reluctance of owners to make it available online.
TERMS OF TRADE
While acknowledging that illegal downloading and piracy remain valid concerns, the Commission is also concerned about the lack of progress between owners and distributors in agreeing to updated terms of trade.
By introducing 'codes of conduct' and 'cooperation procedures' between access/service providers, rights holders and consumers, the Commission hopes to increase the availability of online content and provide protection against piracy.
But a lack of progress from industry to date has resulted in ever more strongly worded calls for active collaboration.
President Manuel Barroso has also added his voice to the debate. At a conference on Creative Rights in December he said, 'Because these problems are global in scale, it is more vital than ever that solutions be found at European level, and that all stakeholders show more transparency and goodwill towards one another.'
That is why the next stage of the process will be so crucial to the film industry.
Following the publication of the on Creative Content Online Communication, the Commission started another public consultation at the beginning of January.
This is a vital opportunity for the industry to put forward its position before the Commission produces a Recommendation by mid-2008, which will then have to be approved by the European Parliament and the Council.
As this stage, it is unclear exactly how far the Commission's proposals will go. But it is clear that if the film industry wants to come out on the winning side, there is much to do to make sure that it has a voice in setting out the rules of the game.
Although the big strategy issues are getting the headlines now, the Commission is also putting money into developing specific, tailored programmes for the sector that it hopes will help deliver practical solutions for the future.
MEDIA 2007 is the key EU support programmes for the European audiovisual industry.
The programme has an overall budget of Euro 755 million over seven years and to help ensure that the latest technologies and trends are promoted within the industry, it provides specific funding for projects that promote Video on Demand (VOD) and Digital Cinema Distribution (DCD).
The first round of funding on VOD and DCD in 2007 was scheduled to cover around six projects from a budget of Euros 4 million. In the end, 12 projects were approved with funding of Euro 5 million.
Of the 12 projects, 11 were VOD focused, while only one dealt with DCD. According to the Commission, this split reflects not only the quality of projects submitted in each category, but also the ratio of projects under each category.
The Commission has indicated an increased budget for VOD funding in 2008 with the intention of funding more projects in this area. The proposed budget is expected to be announced in early 2008.