Europe's creative industries contribute greatly to the European Economy on a social and political as well as cultural basis, but find themselves, for the most part, on the fringes of the European project. The voices of Europe's independent cultural creators are increasingly being ignored by the EU, and Europe's economy, creativity, cultural diversity, and reputation as a world leader are being endangered as a result. Despite the EU's professed ambition of preserving cultural diversity and promoting SMEs, the waving through of the Sony BMG merger, which has resulted in 4 companies having an 80% share of the world market, suggests that they are not ready to back up their words with actions.
One of the EU’s stated aims is the preservation of cultural diversity, and in order to achieve this, a wide variety of competitors within the cultural sector are necessary. However, the measures needed to achieve this, such as the allowance of state aids to the cultural sector, need to be reconciled with the EU’s commitment to a liberal internal market.
KEA has argued that there is a need for a European assembly of the cultural industries to discuss how to contribute to the creation of a vibrant knowledge-based European economy, whilst at the same time preserving cultural diversity; to marry the principles of the free market with the measures necessary to keep a varied and creative competitive environment. It is essential, if the Lisbon objectives are to be acheived, for the cultural industries to be more involved in the European project.To read more about KEA’s stance on this issue click on the link below.
On 28 November 2004 in Berlin, the President of the European Commission recognized the urgency of answering the following question: what can Europe
do for culture and what can culture do for Europe?
During the Symposium for a Europe of Culture, held in Paris, on 2-3 May 2005, the French President Jacques Chirac invited the audience to recognise that the European project was essentially a cultural project… and that “as we build Europe politically, our common goals must more than ever, take inspiration from culture”.
The role of culture in the European integration process is quite limited in practice. Is this one of the reasons why Europe lacks spirit and motivation in this area?
Europe aims to promote the principle of diversity. Its policy is to encourage small and medium enterprises, which are rightly considered as the backbone of the economy. It is part of an effort to support innovation and creativity through the creation of a knowledge society.
Creative industries (music, cinema, softwares, fashion, and video games) should naturally be placed at the heart of this policy. Apart from cinema, these industries remain on the fringes of the European project and are sometimes left out in the cold when it comes to financial support.
Considering their importance both from economic and social perspectives, it is imperative to assess the role of these industries within the European building process and to consider the measures to adopt in order to make them competitive in a globalisation process. This involves Europe’s identity and the role it intends to fill.
This document aims to highlight the inconsistencies of European policy in terms of the promotion of « content » industries and to emphasize the limitations of an approach which fails to take into account the unique nature of an isolated SME sector on a fragmented market composed of a medley of languages and cultures.
We aim to highlight these inconsistencies in order to justify the convening – following the President of the European Commission’s initiative – of the Creative Industries Conference - following the example of the European Audiovisual Assises - with the objective of involving creative industries in the European project.
The application of the internal market and competition rules which underpin the European project does not always sit well with the realization of cultural ambition. They are often the source of great misunderstanding between the European Commission, guardian of orthodoxy, and the creative entrepreneurs in Europe.
The constitutional treaty refers, for the first time, to the promotion of cultural diversity as a political objective of the union.
Due to its national character, culture restricts the powers of the European Commission in its key areas of responsibility - international trade, competition, and the internal market. Diversity is currently perceived as a brake on the process of integration, an obstacle to the internal market.
• The system of state aid in the domain of cinema is at odds with the principles of European competition law.
• Intellectual property law remains national with disregard for the creation of a European free market.
• The “cultural exception” in international commerce clashes with the principle of free trade, a founding principle of the communities. This is the cause of an inordinate amount of disagreement between the EU and the US, with the latter making the liberalization of the audiovisual sector a political and commercial priority.
The cultural products market is perceived as contrary to the European project, as it is essentially nationally and linguistically based. Diversity is sometimes seen as slowing down the process of integration which was planned out through essentially economically inspired treaties.
That doesn’t stop the European Commission from applying to represent the community’s interests at UNESCO as part of the negotiation of an international instrument to protect cultural diversity. Should we be pleased or worried?
While the European executive legitimately aspires to be the advocate of this diversity, the incoherence of its policies in the cultural arena damages its credibility.
In terms of competition, European cinema is marginalized by Hollywood with a market share of less than 25% in the whole of Europe. This does not prevent the questioning, by EU anti trust authorities, of national state aids to cinema – without which the latter could not survive – to remedy “distortion of competition”.
In order to justify state aids, competition rules experts are now arguing that the market defining the competition area for European films is made up solely of those European films, excluding American cinema! This means that European cinema does not compete with American cinema but only with itself.
The European Commission, taking into account the terms of the treaty establishing competition rules, takes the following position:
· Aid is only justified for “cultural” films, and commercial films should be subject to the rules of the market, a market dominated by Hollywood. However, the notion of a “cultural” film still remains to be defined.
· Aid for films should not exceed 50% of the production budget – if this rule was applied, no “small” country of the European Union would be able to produce any films (except if they classified them all as cultural productions).
· A commercial film would be a successful film – are we trying to avoid European cinema becoming competitive? Does our cultural policy intend to ensure that our cinema remains confined to the niche genres? How should we separate the activity from its cultural dimension? Support to a cultural activity is essentially a support to culture.
Inconsistency ? In the scope of the negotiations about the liberalisation of international trade, the Commission has received a mandate from the Member States in order to maintain their capacity to support cultural industries. But, through its position of competition authority, the Commission places limits on such interventions to the great advantage of the competitors in Hollywood.
This inconsistency can be seen again in the recent decision of Mr Monti on the merger of Sony and BMG – two of the 5 music majors. Recognising the link between an oligopolistic situation and the marginalisation of the independent sector, the Commission has, however, given its approval to a merger that has resulted in four companies controlling more than 80% of the global record market. Without any compensation, the Commission has approved a change to the music market that also makes it look more like the “soft drink” market with its Pepsi/Coca Cola domination through the big two’s 60% market share. How can this decision be reconciled with the political objectives of cultural diversity and consumer choice?
While the Commission could have taken the opportunity to address the industry’s structural problems and re-establish healthy competition by exacting imposing commitments on the merging parties, it threw in the towel and consequently, in the medium term, made the dependence of European music companies (of which 95% are SMEs) on state support, inevitable. However, at the same time, the Commission would criticize the very model of state support.
The Commission shows less reluctance when tackling the risk of abuse of a dominant position at national level. In the case of the purchase of the publishing assets of the Vivendi group by the Lagardère group in France, the Commission refused to allow the merger of the distribution activities of the entities Editis and Hachette. In this case, it stood up for market diversity.
However, this position with regard to the national monopolistic situation is insufficient in a globalised cultural market. National market leaders are condemned whilst international giants are left unchallenged. This strengthens situations established for 50 years to the benefit of the “Entertainment” giants. Entry barriers have become insurmountable, so why reinforce them?
In this case, the competition policy does not aim to preserve the diversity of markets and goods on offer in Europe, which are also essential for real competition and to serve consumer interests. Creative industries seem condemned to a secondary role. The European project must have another ambition for this industrial sector.
These decisions are in fact evidence of the little political weight carried by the cultural industries within the European Commission.
Today, the music and book industries do not have an effective interlocutor in the Commission to defend their interests when these are being investigated by competition authorities. No commissioner has the “cultural industries” (or creative industries) portfolio, while the “industry” portfolio does not show a great interest in this sector – its organization chart only considers traditional industrial activities.
Inconsistency? While the audiovisual is heard in the general sense within the scope of the trade negotiations (GATS classification), it is heard in a restrictive way in the definition of the competencies of Ms Reding within the framework of mandate as Commissioner in charge of the audiovisual and information society sectors.
Despite a five year head-start in terms of electronic trade, online distribution and mobile communication, music remains confined in a solely cultural competition field. Consequently, music is at risk of being removed from the scope of research and development programs that would aim at improving the circulation of “content” on the “information superhighway” or at establishing Digital Rights Management (DRM) policy.
Creative industries share the objectives of the European Union. They merit more from Europe because only the European Union is able to promote diversity, consumer choice, market access, development and access to new technologies.
These industries believe in the future because new distribution technologies can establish a new order. Creative industries are the spearhead of the economy of the future – a sector in which Europe excels due to its innovation and creative know-how. Europe does not lack added value when compared to international competition, except at distribution level.
Like many industries, creative industries in Europe suffer from fragmented structures that are under-capitalized because of a limited geographical exploitation of the works and the variety of languages used. It should be pointed out that “copyright” industries bring in more to the USeconomy than the automobile and pharmaceutical industries together.
In 2000, within the scope of theLisbon process, the Council authorised the European Investment Bank (EIB) to invest in the audiovisual sector. This, finally, was a political acknowledgement of the strategic importance of the sector, in the same way as the financing of infrastructure works! Unfortunately, at the moment, nobody seems to care about the results of this mandate.
The sector is becoming disillusioned: out of €17 billion of investment capacity €450 million were going to be allocated to the audiovisual sector, according to the EIB, essentially to finance investment operations in TV equipment (BBC World and Denmark Radio). As a matter of fact, only €40 million of credit has been raised for cinema and only in support of French cinema, as it enjoys a risks warranty structure enabling the EIB to operate. This is totally insufficient.
The objective of the conference would be to gather the actors of the cultural industries - following the example of the European Audiovisual Conference, held in Paris in 1989 – in order to evaluate the position of these industries in the European integration process, the advantages and challenges in the building process of a knowledge-based society but also within the scope of a Europe synonymous with diversity, tolerance and healthy competition.
Some thematic suggestions :
- The contribution of the creative industries to the European project.
- The purpose of competition rules with regard to culture in a fragmented market where under-capitalized industries operate.
- The role of the European Investment Bank in the field of creative industries according to the Lisbon mandate.
- Cultural cooperation at international level.
- The Commission’s structure and the recognition of the sector across different competences in transversal intervention fields of the European Commission, in particular competition, the internal market and international trade.
KEA European Affairs
May 2005
Why a European Creative Industries Conference?
The Cultural Industries and the European Project
Cultural industries within the organization chart of the European Commission
Competition policy and cultural diversity
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