Opinion no. 2014-18 of December 2, 2014 on the draft decree amending the system of contributions to the production of audiovisual works by television services.

Seized for an opinion by the Government, pursuant to articles 9, 27 and 33 of law no. 86-1067 of September 30, 1986 on freedom of communication, of a draft decree modifying the system of contributions to the production of audiovisual works. by television services, the French Superior Audiovisual Council, after deliberating in plenary session on December 2, 2014, issues the following opinion.

The draft addressed to the Council amends decrees no. 2010-747 of July 2, 2010 and no. 2010-416 of April 27, 2010; its main purpose is to implement article 71-1 of law no. 86-1067 of September 30, 1986 in the wording resulting from law no. 2013-1028 of November 15, 2013 on the independence of public audiovisual, which opened up the possibility of taking into account, under independent production, expenditure by publishers on producer shares. The draft decree includes another series of schemes, based on articles 27, 28, 33 and 33-1 of the September 30, 1986 law, unamended by the aforementioned 2013 law. In her letter of submission of a case before the court, the Minister poses a number of questions to the Council concerning these second provisions.

This opinion therefore examines, after a few general observations, successively:

• the procedures for enforcing article 71-1 of the law of November 15, 2013 ;
• the questions raised by the Minister of Culture and Communication;
• the other provisions of the draft decree.

It then makes a number of proposals to supplement the draft decree, as well as a few editorial clarifications.

I. GENERAL OBSERVATIONS

The main objectives underpinning today's public policies to support audiovisual production and the regulatory managerial framework for relations between television service editors and audiovisual program producers were expressed during 2013 and 2014 in the work of Parliament, the Government and the National audit office. The Conseil, which also made contributions, sums them up as follows:

- to promote, in the public interest, the quality of the cinematic works exhibited to the public, which results in particular from a high level of investment by publishers in production and from good circulation of works;

- promote a dynamic balance between strengthening audiovisual groups, which must face up to profound developments in usage and diversify their resources, and the solidity of an independent production sector, capable of playing an active role in the renewal of creation;

- support the international influence of French and European creation and, particularly at a time when revenues from linear audiovisual media are not growing in France, enable publishers and producers to build partnerships to find new sources of growth through co-production, pre-sales and program sales.

The legislative and regulatory framework must foster the creativity on which the audiovisuel business is based. Creativity is obviously present in television service editor groups and in their own production. But preserving a strong independent production sector, a breeding ground for creative talent, is in part a guarantee of creative renewal. It is for this reason that this industrial sector, which represents an important economic activity in terms of employment and value creation, must be supported, under the provisions of the European Audiovisual Media Services Directive of March 10, 2010.
The audiovisual production sector has proven its ability to meet the growing needs of television broadcasters, and is showing signs of vitality through the diversity of its productions and its successes in terms of audience and awareness, which French regulations must continue to encourage.
In its report published in April 2014, however, the National audit office noted the failure of the scheme to support audiovisual production to bring about the emergence of a sufficiently structured fabric of audiovisual production companies. The Conseil shares the view that many production companies suffer from undercapitalization, which hampers their ability to significantly develop research work and submit new projects to broadcasters. The fragmentation of the production fabric needs to be put into perspective, given the existence of a few production clusters that are in the process of developing, but which remain smaller than the biggest European groups.
The Conseil believes that the scheme whereby broadcasters are required to invest in audiovisual production should encourage this consolidation of the production industry. Such a development would not prevent the maintenance of a wide variety of companies, nor the arrival of new entrants.
Secondly, the Council believes that the regulatory manager must create the conditions for optimal circulation and exposure of French and European programs, in order to guarantee their influence both nationally and internationally.
All operators are currently going through a period of stagnation or even decline in their resources (subscription income, advertising revenues, budget subsidies with the exception of the contribution to public audiovisual): after a slight upturn in activity in 2011 and 2012, the base of obligations for the 2013 financial year began to fall by 2.3% compared to the previous year, from 6.49 billion euros in 2012 to 6.34 billion euros in 2013.Broadcasters and producers are therefore forced to find new sources of growth. One of them lies in adding value to works through international co-productions, pre-sales and foreign sales.
In this context, the reform of the decrees should lead to the maximization of revenues from secondary exploitation in France and abroad, on the one hand to enable producers to remunerate their structure and support their project development efforts, and on the other hand to encourage broadcasters to pre-finance exportable programs and enhance the international value of works they heavily finance.
This will also strengthen the position of French creation on new distribution networks and in the globalized digital sphere. In this respect, the Conseil specifies that within French creation, no programme type should be excluded, in particular flow programs, which contribute to the economy of the sector as a whole and are a factor in the diversity of the program supply. They can provide evidence of great creativity and enable the emergence of innovative formats. The regulatory framework must help to encourage original concepts for flow programs, some of which are highly exportable.
On a broader level, the Conseil considers that support for creation implies guaranteeing the effective exploitation of works, which is virtuous for the vitality of the production sector and for payments to rights holders, and which is not necessarily contradictory with the strategies of audiovisual groups to enhance and protect their brands.
Finally, the Conseil is keen to preserve a fair balance between strengthening all audiovisual groups, which are subject to increasing competition, and guaranteeing the development of the independent production sector.
This is why the Council welcomed the introduction, by the law of November 15, 2013, of the possibility for service editors to directly or indirectly hold producer shares in works for which they have financed a substantial part, while valuing this expenditure within their contribution to independent production.
This legislative reform is the culmination of work by Senator Jean-Pierre Plancade (Rapport d'information sur les relations entre les producteurs audiovisuels et les éditeurs de services de télévision, May 30, 2013) and Mr. Laurent Vallet (Rapport à la Ministre de la Culture et de la Communication, Adapter les obligations de financement de la production audiovisuelle pour garantir leur avenir, December 17, 2013).
The Council endorses the intention to give broadcasters a greater stake in the life of the works they finance in a substantial way, beyond mere revenue-sharing. It shares the objective pursued by this measure, which enables publishers to hold not only diffusion rights on their airwaves but also assets (a share of the "negative") that are producer shares. The Conseil also considers that the broadcaster's interest in the life of the work, from the first euro of exploitation revenue, could have beneficial effects on the international influence of French creation, since broadcasters could be more encouraged to finance works that can be marketed in France and abroad, and therefore sources of revenue for them and not only for producers.
This objective must not, however, ignore the interests of independent producers, who bear the initial risk and need the resources to invest in the development of new projects.
The dynamism of the audiovisual industry as a whole requires quality relationships between service editors, authors and producers. The Council considers the approach taken in the reform of the 2010 decrees to be very positive. This is a real step forward, which has enabled the creation of a constructive dialogue between all industry stakeholders. However, the Council has expressed regret at the method used to transcribe these agreements into regulations, which were negotiated bilaterally, without the support of the authorities, the guarantors of the major balances, and at the complexity of the regulatory texts resulting from these negotiations.
The Conseil therefore welcomes the initiative of the draft decree, which refers more systematically to agreements the task of setting the terms and conditions of publishers' contributions to audiovisual production "taking into account" professional agreements and "objective and transparent criteria such as the publisher's sales figures or the nature of its programming". The Conseil sees this development as a means of making production obligations more adaptable to the economic uncertainties of broadcasters, and to developments in discussions between producers, authors and service editors. The Conseil is obviously prepared to play a greater mediation role in relations between the latter, in order to guarantee a neutral and independent balance of power.

II. TAKING PRODUCER SHARES INTO ACCOUNT FOR INDEPENDENT PRODUCTION (ARTICLE 15 OF DECREES N° 2010-416 AND 2010-747)

Pursuant to article 71-1 of the law of September 30, 1986, as amended by law no. 2013-1028 of November 15, 2013, the draft decree transcribes the possibility for the service editor, if it has financed a substantial part of the work, to directly or indirectly hold producer shares, while valuing its expenditure within its contribution to independent production.

A. The substantial share of financing

1. The draft decree sets the threshold of 70% of the production estimate as the "substantial share" of financing for the work, enabling the broadcaster to hold producer shares that can be valued as independent production.
The Board takes note of this rate, mentioned during the Senate debates, then recommended by the Minister of Culture and Communication, and proposed by Mr. Laurent Vallet in his report to the Minister.
The Conseil notes that, given this high threshold in relation to contributions to financing plans, the right to hold producer's shares will essentially concern only drama, series and single programs financed by historical audiovisuel groups (they finance around 70% of the cost of drama, 60% of the cost of documentaries and 20% of the cost of animation). Non-hertzian service editors and more recent independent groups or channels will very rarely be able to benefit from this scheme, as it is virtually impossible for them to contribute to the financing of works to such an extent.
The Conseil also points out that this minimum rate of 70% will not allow European or international co-productions to benefit from the introduction of producer shares in independent production obligations, unless it is assessed on the French share of financing, as some service editors recommend. In this way, the objective of developing international pre-financing for drama is unlikely to be achieved within the framework of such a rate. The regulatory authority should reserve the right to adjust the rate in the light of observed practices.
The Council recommends that the decree specify that the estimate taken into account is appended to the co-production contract.

2. During the Council's hearings on the draft decree referred to it for an opinion, it was informed of certain difficulties linked to a lack of transparency in the presentation of estimates, resulting in sometimes significant variations between the initial estimate and the final cost of the work. In view of the possible consequences on the possibility of holding producer's shares that can be valued as independent production, he suggests that an inter-professional study be carried out, with a view to establishing a standard estimate, along the lines of what exists in the film industry.

3. The draft decree makes provision for the publisher to hold no more than half of the pre-financing provided. Part of the pre-financing of a work produced by an independent producer must obviously consist of the acquisition of first-run diffusion rights. The scheme is largely inspired by cinema practice, where service editors contribute far less than 70% of pre-financing. The Conseil takes note of the Government's choice, even if another approach might be to assess the proportion of the investment in producer's shares in relation to the budget for the work, rather than the contribution from the publisher.

B. Conditions governing the scope of secondary rights and marketing mandates

Article 71-1 of the 1986 law makes provision for the decree to specify "the extent of secondary rights and marketing mandates held directly or indirectly by the publisher".
Most service editors believe that real control over the life of a work does not depend solely on the financial ownership of producer shares, but also on the right to control how the work is exploited, in particular through the exercise of marketing mandates.
The business model of an independent producer, on the other hand, is based on the long-term development of its catalog. The Conseil considers that it is therefore essential for producers to control the distribution of their works as much as possible, and to ensure their optimal circulation on both the French and international markets, in order to generate the resources needed to finance research and development work on new works. Holding marketing mandates appears to be an indispensable source of income for reinvesting in new projects.

1. The Conseil wishes to emphasize the central role of the "delegated" producer.
Although the 1986 law is autonomous in relation to the French intellectual property code and to the scheme for financial support for audiovisual production by the Centre national du cinéma et de l'image animée, it is desirable that the legislative and regulatory provisions in the three areas be consistent.
Article 3, II of Decree no. 95-110 of February 2, 1995 on financial support for the production, preparation and distribution of audiovisual works defines a "delegated production company" as "the production company that personally or jointly takes the initiative and financial, technical and financial, technical and artistic responsibility for the production of the work, and guarantees its successful completion". Under the provisions of article L. 132-23 of the French intellectual property code, "the producer of the audiovisual work is the natural or legal person who takes the initiative and responsibility for the production of the work", and under the provisions of article L. 132-24 of the French intellectual property code, "unless otherwise agreed", the authors make him the assignee of the exclusive exploitation rights to the audiovisual work.
In principle, therefore, it is up to the line producer to decide whether and under what conditions to grant exploitation rights.
However, in order to ensure the best possible exploitation of the works, and as made provision for in the new wording of article 71-1 of the law of September 30, 1986, the broadcaster must not be prohibited from holding any marketing mandate.
The Conseil points out that the current provisions of article 15 of decrees no. 2010-416 and no. 2010-747, which are currently being amended, make provision for the fact that when service editors invest in independent production, they do not "personally or jointly take the initiative and assume financial, technical and artistic responsibility for the work, or guarantee its successful completion". These provisions should be understood as meaning that the publisher is not the "delegated producer" and does not automatically hold the rights to exploit the work. The Government's draft does not modify these schemes in the event of the acquisition of producer shares, which is possible under the last paragraph of article 71-1 of the law of September 30, 1986, which makes provision for the decree to "take into account the extent and responsibility of the service editor in the production of the work". As a result, even if the service editor holds producer shares, it cannot act as delegated producer or delegated co-producer if it intends to use this investment to meet its independent production obligations. The service publisher may therefore only hold marketing mandates for the work if the delegated producer expressly entrusts them to it.
The Council is proposing an editorial amendment to articles 15(1) and (2) of the decrees currently being amended, to make this rule more explicit.

2. The draft decree performs the notion, set out in article 71-1, of limiting the "scope of secondary rights and marketing mandates" that publishers may hold, as implying not so much defining in the regulatory text the consistency of all or part of the mandates and secondary rights that the publisher may hold, as framing the contractual negotiations between the delegated producer and the publisher.
In the Conseil's view, the legislator's approach to the notion of scope of rights is flexible, in that it seeks to designate any means of ensuring that the rights likely to be acquired by service editors are not excessive.
The Government's plan makes the effective introduction of a framework for mandates and secondary rights conditional on amendments to publishers' agreements and specifications, taking into account inter-professional agreements whose drafting, signature and application could be encouraged by the Council, in order to ensure fair, transparent and non-discriminatory conditions for the allocation of mandates, which are generally unverifiable today. These commitments could then be transcribed into the agreements signed with the Board.
With regard to the wording of b) of 2) of articles 15, the Council suggests not retaining the references to separate contracts and written exchanges subsequent to the co-production agreement. This is because, on the one hand, the requirement for separate contracts is already set out in articles 18, 28 and 44 of decree no. 2010-747, as far as terrestrial channels are concerned; and, on the other hand, the expenses provided for in articles 12, 27 and 41 of decree no. 2010-747 and in articles 12 and 28 of decree no. 2010-416 cannot, in any event, include a marketing mandate.
On the other hand, in the light of the consultations it has held with all the parties involved, including the French Ministry of culture and communication, the Conseil suggests a wording which ensures that producers' own distribution capacities are effectively taken into account, and that the best possible marketing conditions are applied, whoever is responsible for them. A similar suggestion was made when the French Ministry of culture and communication put a preliminary draft of the decree out to public consultation. Thus, in the absence of any specific mention in the publisher's agreement or specifications taking into account professional agreements, the publisher could only be entrusted with marketing mandates when the producer has no distribution capacity for the work in question, either in-house or through a subsidiary, or an agreement with a distribution company ensuring equivalent marketing conditions. Such a provision would enable the law to be implemented immediately, even before the conclusion of professional agreements.
Under the provisions of article 19 of the law of September 30, 1986, the Conseil will then be entitled to demand, when checking the obligations of service editors to contribute to audiovisual production, any evidence that the holding of marketing mandates and secondary rights complies with this principle, including, in the case of mandates awarded to the editor, any documents showing that, for a given work, the producer considers that he does not have adequate marketing capacity. In its annual reports on the fulfillment of its obligations to finance independent production, the Conseil will report on the practices it observes.

C. Conditions governing the exploitation of diffusion rights and marketing mandates

In addition to freezing diffusion rights, the draft decree includes two schemes designed to prevent the freezing of marketing mandates for a work in France for exploitation on a television service, as a further condition for taking producer shares into account as independent production.
Obligations to exploit rights in the event of repurchase of the work and to exploit marketing mandates at the end of the initial period of diffusion rights are measures designed to ensure the proper circulation and optimal exploitation of works.
In the Council's view, support for creation, and the supply of programs to television groups or services that do not have the means to finance major new production, presuppose that the effective exploitation of works is guaranteed. This is why, if the legal basis of article 71-1 is considered sufficient to include an obligation of exploitation as a condition of independent production, it approves the introduction of these two provisions in the draft decree.
However, to ensure that these conditions are effective and verifiable, the Council proposes a drafting amendment to include the publisher's commitment to respect these conditions as part of an option to buy back the diffusion rights, which must be included in the initial contract.

D. Full payment before the end of the shooting period

The Conseil welcomes the requirement that the investment in producer shares must be paid in full before the end of the shooting period. In its opinion no. 2010-10 on the draft decree "relative to the contribution to the development of the production of cinematographic and audiovisual works by terrestrial television services", the Conseil noted that the audiovisual production sector was suffering from sometimes excessive payment deadlines on the part of service editors, which hampered the reinvestment capacity of production companies forced to go into debt in order to finance the development of new projects, due to a lack of cash.
The Council suggests, however, that a clause be inserted to allow for unforeseen situations, such as an upward revision of the estimate after the work has gone into production.

E. Maintaining revenue entitlement

In view of the substantial proportion of the total cost of certain works financed by service editors, the Council approves the retention of a revenue right for works in whose production the service editor does not take a producer's share.

III. QUESTIONS PUT BY THE MINISTER FOR CULTURE AND COMMUNICATION

A. Modification of the reference year for determining the basis of obligations
The draft decree proposes a change in the basis for calculating obligations, which would be determined on the basis of net sales or net resources for the current financial year, rather than the previous year. In the letter transmitting the text, the Government "wishes to ensure that this new measure would not pose any difficulties for the Conseil in its application, particularly in terms of the timetable for communication of company financial data".
The Conseil underscores its commitment to the objective pursued by such a measure, which is to ensure that the level of obligations imposed on broadcasters is more in line with their economic situation, and is not opposed to taking into account the current year's revenues or sales when determining the basis of obligations.
However, most professionals agree on a number of difficulties that could arise from listing the financial year "in progress".
For broadcasters, this measure could give rise to uncertainties about the level of obligations, given the highly seasonal nature of advertising revenues for some publishers, making investment management much more uncertain. Producers fear that such a measure would reduce their visibility of broadcasters' capacity to invest. Secondly, it would complicate the control of obligations, which would have to be established in two stages, first on the basis of provisional sales and revenue figures, then on the basis of consolidated figures after final approval of the accounts.
For these reasons, the Council ultimately recommends maintaining the reference to the previous financial year, and, in order to meet the objective of adapting obligations to economic conditions, it recommends that the decree introduce adjustment measures with the possibility of carrying forward excess expenditure and offsetting any shortfalls in relation to the level of obligation, from one year to the next.
To avoid the risk of indefinitely deferring part of the obligations, the deferral of surpluses and deficits must be limited to a certain percentage of the obligations, which the Council proposes to set at 10% for terrestrial service editors and 20% for non-terrestrial service editors.
Such a mechanism is in line with existing schemes, and could even replace them: the limited inclusion of previous year's expenditure, initially provided for in the professional agreements signed in 2008 and transcribed into current decrees, is already a method of carrying forward surplus expenditure, which should however be amended.
Similarly, the option of offsetting any shortfalls against the following financial year is not new to the current decrees, which provide for it for the audiovisual production contribution obligations of non-hertzian film service editors, who had negotiated it in their agreement. It has also long been applied to the contribution to cinematic production obligations of cinema service editors, as a result of the professional agreements they have signed to this effect, and has proved its worth both from the point of view of the flexibility given to editors and the amounts invested in production.
Thanks to these deferral mechanisms, and in contrast to the current scheme, if a publisher fails to meet its production obligations, the shortfall must be made up in the following year. The deferral option, in the event of overspending, provides an incentive for publishers to commit to heavy investments that can be booked against their obligations over two financial years, thereby encouraging the financing of international co-productions or long series with potentially high budgets.
Lastly, for reasons of consistency, the schemes for deferring part of the obligation in the event of a reduction in sales may need to be modified.
B. Inclusion of on-set broadcasts (article 14-6° of decree no. 2010-747 and article 14-5° and 6° of decree no. 2010-416)
The Minister of Culture and Communication has asked the Council whether it considers it "appropriate, in the interests of regulatory simplification, to simplify the wording of the rules governing the inclusion of on-set broadcasts (in particular, article 14, 6° of decree no. 2010-747 of July 2, 2010)" or whether it recommends, on the contrary, "that certain details be retained in the decrees".
In the Council's view, this system is a derogation from the general rules governing investment in cinematic works, and should therefore be governed by decree.
However, in the interests of regulatory simplification, and in view of the fact that publishers of free-to-air terrestrial services with annual net sales of less than 100 million euros have to date never fully exercised the option offered by this provision, the Conseil considers it advisable to modify the current scheme, to propose a single regime applicable to publishers of terrestrial services other than cinema.
Accordingly, the Conseil is proposing to abolish the double sales threshold under the provisions of this derogation, and to retain only the sales threshold of 200 million euros, below which publishers would be authorized to deduct expenditure on non-drama programs produced mainly on set. In the Council's view, it is not necessary for the text of the decree to set a precise percentage, but it should make provision for this option to be limited to a reduced proportion of publishers' net annual sales, with the allowance of these expenses at 50% of their actual amount remaining unchanged.
For non-hertzian service editors, in view of pre-existing professional agreements, the Council proposes no change to the system of inclusion of on-set programs set out in 4° and 5° of article 14 of decree no. 2010-416, even though, to make the regulations clearer, it would be desirable for the inclusion of expenses for on-set programs to be set, identically for all editors, at half their actual amount.
The Conseil welcomes the latitude given to it by the draft decree to introduce in agreements, taking into account professional agreements and "objective and transparent criteria such as the service editor's turnover or the nature of its programming", and within the limit set by the decree, the option of taking into account expenses for on-set programs. However, the Conseil considers it essential to link the benefit of this provision to commitments made by the publisher for this type of programming.
C. Capping expenditure on training authors and promoting works
In her letter of submission of a case before the court, the French Minister of Culture and Communication asked whether the Conseil considered it appropriate for "training and promotion expenses to be subject to a common regulatory ceiling". The draft decree proposes to leave it up to the agreements to set the conditions and limits under which these expenses will be taken into account.
As a preliminary point, the Conseil notes that festival financing expenses are no longer explicitly mentioned in the text submitted for its opinion. It considers that festival financing expenses are naturally part of promotional expenses. Consequently, publishers will be able to continue valuing these expenses even without explicit mention in the decree.
The Conseil considers that the decree must take into account expenses for training authors and promoting works, which do not concern the acquisition of diffusion rights or the financing of a work. It will ensure that such expenses represent only a small proportion of the obligation.
D. Taking into account expenses for works exploited on "online public communication services".
The Minister of Culture and Communication would like to know whether the Council considers it appropriate that "the inclusion of expenditure on web-works should also be subject to a limitation".
The Council welcomes the introduction of these new expenses, which reflect the need for service editors to adapt to developments in content consumption practices, in the face of the proliferation of non-linear supplies.
The Council regrets, however, that the draft decree refers only to the category of "online public communication services", which covers websites only, to the exclusion of on-demand audiovisual media services (ADMS), which come under the heading of audiovisual communication services, regardless of how they are made available to the public.
It seems desirable that the text should also make provision for the possibility of exploiting rights intended for SMADs, and proposes an editorial addition to this effect to articles 12, 27 and 41 of decree no. 2010-747, and articles 12 and 28 of decree no. 2010-416, currently being amended.
In both cases, whether the service falls into one or other of these categories, the Council considers that the inclusion of these expenses must be offset by the inclusion of the revenues linked to these services within the production development contribution base. It therefore suggests that the text specify that the expenses taken into account for the contribution may be valued by service editors "for the services they edit, the sales of which are taken into account within the contribution base".
The French Minister of Culture and Communication has raised the question of whether there should be a limit on spending on web works. Provided that revenues from on-demand audiovisual media services or web activities are included in the contribution base, the Conseil considers that the related expenditure need not be limited by the regulatory text.

IV. COMMENTS ON THE OTHER PROVISIONS OF THE DRAFT DECREE

A. Reference to agreements (articles 11, 12, 14, 15, 27, 29, 41 and 43 of decree no. 2010-747 and articles 12, 14, 15, 27, 28 and 30 of decree no. 2010-416)
The Council reiterates its commitment to the conclusion of professional agreements between service editors and organizations representing authors and producers, which has enabled a constructive dialogue to be established between them.
In its opinion no. 2010-10 on the aforementioned draft decree, the Council expressed its reservations about a scheme that would transcribe to the regulatory level stipulations negotiated individually by some publishers in their agreements, thereby ratifying situations existing at the time of the reform.
The expression "taking into account the agreements concluded between service editors and audiovisual industry professional organizations", found in articles 14, 29 and 43 of decree no. 2010-747 and articles 14 and 30 of decree no. 2010-416, was interpreted as leaving the Conseil no room for maneuver to include in the agreements terms and conditions other than those resulting from the signing of an agreement.
The Council welcomes the new wording "taking into account agreements..." instead of "taking into account agreements...". It takes note of this terminological development, which gives it greater latitude in drafting agreements without requiring the existence of a prior agreement, and enables it, in the interests of equal treatment between service editors, to depart from the strict position previously adopted with regard to agreements, and to apply in particular to editors who are not signatories to agreements certain arrangements hitherto reserved for its signatories alone.
Similarly, the Conseil approves of the possibility given to agreements to make provision for the conditions under which certain expenses are taken into account, or to set the minimum obligation in favor of works of original French expression, subject to the minimum threshold set out in the draft decree, and the discretion thus given to the Conseil to increase the maximum share of European works that are not of original French expression, taking into account the publisher's sales figures.
Decrees are not intended to be amended frequently. The advantage of referring to agreements is that they are more adaptable to the economic ups and downs of publishers, and to developments in discussions between publishers and professional creative organizations. Moreover, the conventional scheme can be limited to specific individual cases, without the risk of calling into question the general managerial framework made provision for by the decree.
The economic power of certain service editors sometimes places producers in a position of inferiority that destabilizes their relations. Publishers, for their part, have already reported difficulties in approaching professional organizations to renegotiate certain aspects of their commitments. The Council will strive to promote balanced inter-professional exchanges.
The Conseil welcomes the introduction, in articles 14, 29 and 43 of decree no. 2010-747 and articles 14 and 30 of decree no. 2010-416, of "objective and transparent criteria such as the publisher's sales or the nature of its programming" to provide a framework for any adjustments to publishers' contributions. In addition to these criteria, it proposes to add "commitments made by the publisher", by adding an incision to this effect to articles 14, 29 and 43 of decree no. 2010-747 and articles 14 and 30 of decree no. 2010-416, which are currently being amended.
This scheme will enable the Conseil to specify and adapt the contribution terms to the specific characteristics and economic strategies of each group, taking into account any agreements signed with professionals, while ensuring that French program production is protected and revitalized.
The Conseil welcomes the leeway it has been given to set the specific terms and conditions of its contribution to audiovisual production, within the framework of agreements signed with service editors; it will be firmly opposed to any interpretation that consists in gutting the commitments made by editors as part of the professional agreements they have signed.
B. The possibility of assigning a multiplier coefficient to all expenses (articles 14, 29 and 43 of decree no. 2010-747 and articles 14 and 30 of decree no. 2010-416)
The draft decree introduces the possibility of valuing all expenses taken into account for the contribution, up to a limit of dubbed their amount.
The Council welcomes the leeway offered by the draft decree to set the terms and conditions of service editors' audiovisual production contributions.
It will be particularly vigilant to ensure that essential expenses such as pre-financing and acquisition of diffusion rights are maintained.
C. Expenses taken into account (articles 12, 27 and 41 of decree no. 2010-747 and articles 12 and 28 of decree no. 2010-416)
The Conseil welcomes the harmonization, between the different types of service editors, of the expenses taken into account for their contribution, whereas the decrees that came into force in 2010 had only transcribed on this point the provisions of agreements negotiated by some of them.
The Conseil recalls that, in its report to the Government on the application of Decree no. 2010-1379 of November 12, 2010 on on-demand audiovisual media services, it had suggested broadening the scope of expenses taken into account as part of the contribution to the development of production, by including expenses relating to the digitization of works and those linked to the fight against piracy, the nature of which has yet to be specified.
D. Minimum obligation for original French-language works (articles 11, 25 and 40 of Decree no. 2010-747 and articles 11 and 27 of Decree no. 2010-416)
The draft decree sets out a minimum investment requirement for original French-language works (EOF). The Conseil is strongly committed to supporting original French-language audiovisual creation. It is nevertheless pleased to note the possibility of increasing the proportion of non-EOF European works in the audiovisual production contribution of free-to-air terrestrial service editors with sales in excess of 100 million euros, and of editors of non-theatrical services other than cinema. We welcome the fact that this point has been referred to the relevant agreements, and that this gives us the leeway we need to ramp up this obligation, taking into account professional agreements and publishers' sales figures.
The Conseil considers that such a scheme will make it easier to assess the situation of each service editor, and will increase the capacity of editors to participate in the financing of European co-productions.
The Conseil regrets that the minimum rate applicable to DTT pay TV service editors remains higher than that for free-to-air terrestrial service editors, and proposes that the minimum rate applicable to all terrestrial service editors be harmonized at 80%.
Similarly, in view of the specific characteristics of non-hertzian TV service editors, in particular children's channels whose main genre, animation, is particularly dependent on European funding, the Council considers it advisable to lower the minimum rate of investment in EOF production to 75%. It regrets that this measure only concerns non-theatrical service editors. To encourage them to take part in European co-productions, it therefore proposes that the minimum rate of 75% be extended to non-cinema service editors, while maintaining for the latter the condition of eligibility for financial aid from the CNC.
Editorial clarifications
The Council notes that the draft decree has not amended article 10 of decree no. 2010-747, which makes provision for an increase in the heritage obligation for editors of free-to-air terrestrial services with annual net sales of less than 300 million euros. It proposes to update the wording of this article, notably by deleting the reference to past years. An equivalent update should be considered for article 26 of the same decree.
The Council also notes that the draft decree makes provision for a minimum proportion of EOF works to be taken into account "as part of their obligations" for publishers of free-to-air terrestrial services with sales of less than 200 million euros, in article 11 of decree no. 2010-747. In the Council's view, the text should specify that these are the obligations mentioned in articles 9 and 10 of the decree.
The Council also proposes that, in the first sentence of articles 14 and 30 of decree no. 2010-416, the reference to the service editor's sales be replaced by a reference to the service editor's total net resources, in line with the method used to determine the contribution base for non-hertzian service editors.

V. THE BOARD'S PROPOSALS

A. Regime for non-hertzian service editors
1. Non-film service editors
Faced with the proliferation of non-linear supplies and the rise of free-to-air DTT, the economic situation of non-movie service editors continues to deteriorate. Recent decisions to cease broadcasting a number of loss-making theme channels bear this out.
The Council stresses the need to take into account the difficulties faced by non-hertzian service editors, who are suffering from increased competition from foreign operators exempt from the regulatory framework, as well as those of on-demand audiovisual media service editors (SMAD), for whom decree no. 2010-1379 of November 12, 2010 sets a threshold for triggering production obligations from sales in excess of ten million euros. To this end, the Council recommends that the draft decree relax the rules governing audiovisual production contributions by non-hertzian service editors.
The Conseil notes that article 14, 6° of decree no. 2010-416, currently being amended, makes provision for the agreement to set the level of the heritage obligation, with the exception of music channels, below the rates defined in article 11 of the same decree, but not below 4.5% of total net resources.
The Conseil considers that the new wording, "taking into account professional agreements [...] and objective and transparent criteria such as the service editor's sales or the nature of its programming", now authorizes it to set a higher level for the heritage obligation, based in particular on the service editor's level of sales.
He proposes that the wording of this article be completed to also make it possible to increase the "global" obligation. In this way, the Conseil would be in a position to redress the imbalance that currently exists between the high obligations incumbent on non-hertzian service editors and the absence of a regulatory manager from which some of their direct competitors benefit.
For non-hertzian service editors with the least resources, the Conseil proposes an exemption from the audiovisuel production contribution. A threshold of one million euros in net annual resources should be set to trigger obligations.
The Conseil considers that this measure would represent a genuine regulatory simplification for service editors whose economic health is fragile, as well as a means of lightening the control operations it carries out. It notes that its financial impact would be relatively limited for the production sector, with only a small number of services concerned (eleven editors in 2013).This proposal seems compatible with the principles set out in the "Audiovisual Media Services" directive of March 10, 2010, which authorizes a scheme of progressive obligations when justified by economic realities.
2. Cinema service editors
To date, the only non-hertzian cinema service editor to devote more than 20% of its annual broadcasting time to cinematic works, and therefore subject to obligations to contribute to audiovisual production, is the OCS service group.
The Conseil recalls that decree no. 2010-416 ratified, at regulatory level, the commitments made by this publisher for a three-year period (2010-2013) under the managerial agreement, the term of which has now expired. This regulatory endorsement of time-limited commitments has resulted in a highly unbalanced situation for OCS, particularly in relation to terrestrial cinema service editors, who are subject to less stringent rules on contributions to audiovisual production.
As soon as a service editor is no longer bound by a professional agreement, the Conseil considers that the decree should allow for conditional adjustments to its obligations in favor of audiovisual production, all the more so in the case of cinema services whose main purpose is not the diffusion of cinematic works. In this case, at the end of 2013, OCS made significant commitments in favor of cinematic production, which could justify a certain relaxation of its audiovisual production obligations.
Consequently, the Conseil proposes to introduce two developments within the audiovisual production contribution obligations of non-hertzian film service editors.
Considering that the 70% financing rate authorizing the holding of producer shares that can be valued as independent production is too high to benefit non-hertzian film service editors, the Conseil recommends the creation of a "dependent" production corridor, which article 31 of the decree currently being amended does not currently authorize. It proposes setting the independent production obligation at at least 75% of the overall obligation, by analogy with the rates in force for other non-hertzian service editors.
In addition, the Conseil would be in favor of broadening the proportion of non-EOF European works taken into account for the contribution of these publishers, while retaining the condition of eligibility for financial aid from the CNC. It notes that the text makes provision for conventions to set the minimum rate of investment in EOF works, but that this has remained unchanged. For the reasons set out above, the Council proposes that the minimum rate of 75% proposed by the draft decree be aligned with that for non-movie service editors.
B. Explicit valuation of rights
In view of the proliferation of broadcasting methods and the development in ways of consuming audiovisual content, the Conseil is not opposed to the idea of service editors acquiring extended rights on more media, but considers it essential that each of the rights acquired by the editor be clearly identified and valued. In particular, when linear and non-linear rights are assigned together, the latter must be explicitly valued.
With regard to catch-up TV rights, the Conseil does not question their indissoluble link with television diffusion rights, but it considers that the inclusion of catch-up TV revenues in the audiovisual production contribution base does not prevent publishers from valuing this form of exploitation of works in their rights acquisition contracts. Sensitive to producers' concerns about the monetization of catch-up TV rights, the Conseil considers that it would be appropriate to at least give them a value, without necessarily increasing the financial participation of service editors.
The Conseil is therefore proposing the addition of an obligation to explicitly value each of the rights acquired by the publisher in contracts, in order to recognize the potential value of non-linear rights. This proposal could be incorporated in articles 18, 28 and 44 of Decree no. 2010-747, and in articles 13 and 29 of Decree no. 2010-416, currently being amended.
In the interests of regulatory simplification, the Conseil also considers it advisable to harmonize, for all service editors, the exercise for taking into account expenditure contributing to the development of audiovisual production set out in these same articles. It proposes to use the financial year in which the service editor began to execute the financial commitment.

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The draft decree under review represents the first useful modernisation since 2010 of the rules governing television service editors' obligations to contribute to the production of audiovisual works. It pragmatically enforces the provisions of the law of November 15, 2013.
In order to abide by the notion of independent production, both the law and the decree can only introduce conditions and limitations on the participation of publishers in the production and exploitation of the cinematic works concerned. Consequently, the draft legislation, based solely on the new article 71-1 of the law of September 30, 1986, can only imperfectly respond to the need to support our audiovisual production industry in all its components, and to the need for consolidation of publishing groups in the audiovisual production field.
The Conseil wishes to point out that the draft legislation submitted to it does not, on a constant legislative basis, exhaust the various elements of modernised and simplified legislation that the audiovisual industry is summoning up for the near future. In particular, it notices that the prospects and conditions for the development of two settings which currently fall exclusively within the regulatory power should be studied: a lowering of the rate of recourse to independent production within the obligations to contribute to the financing of audiovisual works and heritage audiovisual works, and an increase in the rate of capital ownership of the production company by the service editor. A further amendment to the 2010 decrees is therefore likely in the near future.
In any case, the major simplification work carried out by the draft decree under review is limited by the legislative foundations that have been built up over the years to govern audiovisuel production and relations between service editors and producers. It highlights the usefulness of studying a partial rewriting of the law, to enable us to continue the work of adapting publishers' obligations to the current economic, technological and cultural context.

The present notice will be published in the Journal officiel de la République française.

Paris, December 2, 2014.
For the French Superior Audiovisual Council :

Le président,

O. SCHRAMECK