our manifesto

Piracy

The EPC believes that piracy is an absolutely vital question, not only for the film industry but for the European economy as a whole. If the public were no longer to accept the concept of intellectual property, we would soon be unable either to protect or to find a viable economic model for the production of information. This is not only an extremely significant part of the economy, but also the sector showing the highest rate of growth.

No comprehensive licensing system, i.e. fixed compensation in return for allowing unlimited downloading and copying, is likely to compensate, whether in the short or long term, for the heavy losses resulting from the illegal copying of films and piracy in general. However, for effective counter-measures to be put in place, they must be accepted by the general public, effectively combining education, prevention, repression and just punishment.

The EPC is convinced that internet service providers as well as those working within the telecommunications industry, who up until now have more or less turned a blind eye to the meteoric rise in illegal downloading, can be persuaded to engage in effective action, provided that such measures are supported by both governments and the Commission. The French film industry and internet service providers managed to reach this kind of agreement, and the EPC expects the French government and parliament to pass the necessary law and implement it before the end of 2008.

The EPC thinks that the graduate response should be implemented at a European level outside of criminal law, ie. that ISPs should have to disclose data on illegal downloaders, and that for repeat offenders, their Internet access should be cut. However, we are naturally supportive of the development of legal video-on-demand services, provided that the revenue generated from this new market is greater than the overall loss of income from other areas.

The recent fall in revenue from video and DVD sales witnessed in several countries is of course directly linked to the rise in piracy, far more than to the recent appearance of legal downloading opportunities.

On the responsibility of ISPs in the fight against piracy

Generally speaking, the EPC believes that it is absolutely necessary to give a certain degree of responsibility to ISPs with regards to the fight against piracy.

In response to the proceedings launched by the Sabam (a Belgian Writer, Composer & Editor private company), a first judgment, delivered on June 28th 2007 by the Brussels Court of First Appeal, ordered the company Scarlett (ex-Tiscali) to implement a filtering system in order to avoid the exchange of illegal files on peer-to-peer networks using the infrastructures of the said company.

The judge considered that the consequences of the possible blocking of legal file exchange were negligible in comparison to the damages created by the exchange of illegal files. The judge also considered that filtering systems are sufficiently efficient as to be able to be imposed upon ISPs as an effective solution in the fight against piracy.

The members of the support this decision, which clearly identifies the capacity of public authorities to impose anti-piracy solutions on ISPs. The EPC supports the tribunal’s request that ISPs use all existing means to fight efficiently against the scourge of piracy.

(Excerpt from the position paper on Tiscali Sabam published on 15/11/07)

A second judgement of utmost importance was pronounced by the Court of Justice in Luxembourg on January 29th. The Court’s verdict was that EU privacy law does not compel ISPs to disclose the personal data of users who file-swap pirated material on peer-to-peer websites. It also calls attention to the fact that certain national legislations can oblige ISPs to disclose data if they are able to strike a balance between the protection of privacy and the protection of intellectual property rights.

The EPC is in favour of such a judgment, which correctly places the protection of intellectual property rights on the same level as the protection of privacy - a way in itself of condemning file-swapping on peer-to-peer networks. The EPC is also in favour of the implementation, on a national level, of legislations dealing with piracy problems linked to ISPs. Lastly, the EPC is in favour of the implementation of a European directive that would encourage member States to legislate nationally on this subject.

Internet rights

The members of the would like to state their opposition to broadcasters’ requests that producers grant VOD rights and Free-TV rights together, as well as to grant VOD rights without territorial limitations and without any additional financial return for the producer. If this practice were to be generalised, it would lead to the simultaneous release of films on microwave or cable networks as well as globally (though only in the national version) on the TV stations’ websites.

The EPC considers that all rights assignments are unique and cannot include two licences, and that all assignments are to be made within certain territorial boundaries. Each release must be priced separately and exploited by the producer. VOD rights should always remain the property of the producer and should be granted only at their decision, and at market price. If and when VOD rights are licensed, the Licencees should apply appropriate, industry-accepted geo-filtering measure in order to prevent “overspill” into other territories.

The EPC fully supports all producers who refuse to sign contracts with TV broadcasters in order to protest the fusioning of two separate rights.

On Interoperability

The desire for interoperability is heralded by some consumer organizations and supporters of freeware as a so-called ‘right to interoperability’. This is sadly nothing more than cover for their excessive leniency towards those who choose to ignore copyright.

We are of course open to and supportive of a move towards the greatest level of interoperability possible, but only if stringent copyright protection is ensured. The only form of ‘public protection’ that we feel would be necessary is the obligation to inform users of the possibilities left open to them by the DRM in question. With this in place, the most flexible and interoperable services should succeed merely on the basis of supply and demand, provided that customers are sufficiently informed.

This does not have a particularly significant effect on cinema on demand, the question of interoperability being only partially relevant for two main reasons: - Film ‘hire’, ie. the right to watch a film within a given time frame is, for the time being, more common than outright sales. Indeed, most films are only watched once. Consequently, the question of copying the film onto another medium does not necessarily arise – the same film is often available simultaneously and on a non-exclusive basis via various services, thereby covering most reception and storage methods.

Clearly, a lack of interoperability could contribute to the emergence of dominant operators, but it would not be the most significant factor in this regard. We believe that at present this risk is less significant for cinema on demand than it is for the rest of the cinema economy. To say the least, it would be somewhat paradoxical to see the governments take action to try and avert the threat to a market which today is only just starting to grow, considering it refused to intervene despite producers facing monopolies and oligopolies within their main national markets on a daily basis, not only in relation to cinemas networks but also pay TV operators and free national TV channels.

On multi-territory licensing for Internet rights

European films are very rarely available in several countries at the same time. Only the biggest films, vigorously promoted and combining factors which make them easily recognisable by the general public in several countries, can allow themselves this privilege. Other films require either success on a national level, or to be shown in one or more festivals before they can succeed abroad: this imposes different release dates.

Even if release dates can be coordinated, the release of major films must be organized on a country-by-country basis: films require some form of co-production or international sales before showing a profit. The distributors in each country like to keep a close eye on the domestic release of the films so as to lessen the risk presented by the high level of investment they must make for the film’s promotion, release and guarantees. Only the few European films distributed by the majors can be managed on a pan-European basis.

The rights for most medium-budget films must also be managed on a country-by-country basis, since the only way to optimize their release is to stagger the release dates. The only European films whose rights could be managed on a multi-national basis for cinema on demand would be those that saw minimal rights sales abroad: clearly this offers little potential for success without considerable advertising or the targeting of expat communities.

Multinational services are equipped with the necessary technology to offer certain films only in the countries in which they own the rights: this presents no significant problems. Issuing pan-European licenses would have two immediate and catastrophic consequences for European filmmaking: it would hand a serious competitive advantage to the few organizations operating on a Europe-wide basis, i.e. the majors, as well as to the biggest European films, while seriously reducing both the number of other European films released outside of their home country, of which there are already very few.

On DRM

DRM systems are absolutely imperative for the development of cinema on demand : they are now sufficiently flexible and secure to be considered satisfactory in the whole. We are strongly in favour of the development of DRM systems, the modern day equivalent of the cinema walls of the past.

On private copy

The supports maintaining the private copy exception for rights holders. However, the EPC still upholds the DRM system, which is the only reliable technical means for fighting piracy. The absence of DRMs signifies the right to integrally copy all films broadcast on internet. The EPC affirms that there is nothing contradictory in supporting both DRMs and private copy exception.

Release Windows

On Release Windows

The management of release windows is the only method that cinema has found as of yet to offer a fair range of prices. Whereas two films can have production costs in a ratio of 1 to 100 or even 200, the price at which they are sold, both in the cinema and on video and DVD, is the same. Release windows thereby allow the different types of release to be staggered, depending on the price that is paid for each single viewing. A family pays more to see a film at the cinema than they do to hire it (or even buy it) on video or DVD. They also pay more to buy the video/DVD than they would to subscribe to a “premium” channel, etc…

Release window management can either be considered on a film-by-film basis and the dates for a specific film agreed contractually or a more general, industry-wide view can be taken, thereby making a more organized approach attractive, either through legal measures or interprofessional agreements. On a film by film basis, it is in the producer’s best interests to significantly reduce the length of time between releases so as to make the most of the impact of the launch advertising. This is however made difficult as each successive interested party (firstly at the box office, then on video and DVD, Pay Per View etc…) is unhappy that their rivals pay less per view, thereby allowing them to remain competitive.

In addition to managing releases on a film by film basis, public expectation must also be taken into consideration. Why should a customer go to the cinema when premium channels generally show the films six months later? Why should they subscribe to a premium channel when free-to-view channels show the same films just a few weeks after the premium channels?

The situation has been resolved through the signing of interprofessional agreements: such deals are now widespread as the majors, the only integrated companies in the industry and highly influential throughout Europe, are more interested in long term, multi-platform success than they are in making an immediate profit on their most recent film(s). In relation to cinema on demand, the recently negotiated release windows now see films appearing a few weeks after their release on video and DVD : this makes sound financial sense as the prices are generally lower than for videos and DVDs. It is worth considering whether this is wise or not: on a trial basis, films could be released at the same time as on video and DVD, at the same price. Once more, the problem here is of course that the same films are offered for free by pirates outside of the negotiated release windows: films are often available before their cinema release.

Generally speaking, the EPC supports the preservation of release windows so that each exploitation generates revenue proportional to the type of exploitation.

Cultural tests

On cultural tests

The European Commission has a tendency to multiply cultural tests, a condition that must meet the approval of the various national grant systems. The EPC maintains that this issue was brought up and resolved during the establishment of the European Convention on Co-production. A test exists, which has been approved by all the European countries: the European Convention cultural test. We believe in a systematic referral to it. The EPC is opposed to the multiplication of different European tests.

Grant Territorialisation

On Grant Territorialisation

The EPC is clearly in favour of the territorialisation of public support for film production. The EPC believes that without any territorialisation criteria, there would not be any support, for without any support there would not be any cinema. Territorialisation is essential to the existence of support systems, which are essential to the production or co-production of a film. No films can be made in Europe without a support system. Even the more market-driven films are produced with public support.

Territorialisation criteria are different from one country to another. Some are very helpful for production and co-production, others are not.

The EPC is in favour of territorialisation criteria that

are proportional ;

have a minimum level acceptable to get into the system (as for instance the 25% UK minimum spend)

The EPC is against “all or nothing” systems - where there is no proportionality, ie. that if the conditions to get support are not fulfilled, there is no support at all.

Digitalization of theatres

The EPC is strongly in favour of the digitalization of the theatres as an unavoidable evolution of our sector. We truly believe that it constitutes progress for the film industry because it will open the range of films presented to the public, and should decrease the release price of films. However, while the EPC does support this new age of theatres, issues remain as to the financing, rights protection and guarantee of equal access to screens.

In particular, we must be careful that digitalisation does not accentuate the inequalities of access to distribution and does not polarise even more releases (ie. massive releases as oppose to small releases that become more and more difficult).

VAT

On VAT

In December of 2011, the European Commission published a communication on the future of VAT for a single market. Accelerating globalisation, intensified competition from new regions, rapidly changing business models and technical progress have created challenges for the European tax system. Moreover, the financial crisis has created a need to foster sustainable economic growth and to consolidate public finances. Current tax systems are complex and costly, and have a negative impact on commercial behaviour. The EC’s communication proposes solutions to make the VAT system more effective, efficient and fair.

Broadly speaking, the Communication addresses the rejection of the country of origin principle in favour of taxation in the country of destination, and determines criteria that should govern the new TVA system: simplicity, efficiency and neutrality (ie. a broadening of the tax base at the standard rate, with a reduction of this rate). A one-stop shop approach will be progessively established, as well as standardized VAT declarations in all languages, and a review of the VAT rates structure, with a reduction in the differences between the Member States’ structures.

The European Producers Club (EPC) is an association of Europe’s most influential producers, committed to supporting a strong European film industry. EPC supports the lowest possible VAT rate for cultural goods. Although they are representatives of European diversity and contributors in their own right to the European economy, cultural goods remain fragile by nature and must be supported by all means, including favorable economic conditions.

For the same reason, EPC supports a simplication of the payment and taxations systems as recommended by the Commission. Tax systems in the EU are currently so complex, and sometimes costly, that businesses often refrain from engaging in cross-border activity, indeed preferring at times to work with non-EU partners. EPC believes that the Eruopean film industry is consolidated by coproduction between Member States. The impact of a strong European film industry is signficant on several levels, as it leads not only to the protection of smaller cultures and languages – one of the EU’s founding principles – but to a unified force that can hope to provide an alternative to the tidal wave of Hollywood.

For EPC, the lowest possible VAT rate for cultural goods, and a simplification of the payment and taxation systems as recommended by the Commission are sure, dependable ways to improve the taxation system as it exists in Europe today.