Opinion no. 2016-17 of October 19, 2016 on the draft decree amending the system of contributions to the production of audiovisual works by television services.
The French Superior Audiovisual Council (Conseil supérieur de l'audiovisuel) has been asked by the French government, in application of articles 9, 27 and 33 of law no. 86-1067 of September 30, 1986 on freedom of communication, to give its opinion on a draft decree amending the system of contributions to the production of audiovisual works applicable to television service editors broadcast by terrestrial hertzian means. After deliberating in plenary session on October 19, 2016, the Conseil supérieur de l'audiovisuel has issued the following opinion.
The draft addressed to the Council amends decrees no. 2010-747 of July 2, 2010 and no. 2010-1379 of November 12, 2010, thereby also revising the system of contributions to the production of audiovisual works applicable to on-demand audiovisual media service editors.
In its letter of submission of a case before the court, the French government also raised the question of whether or not it was necessary to specify that the broadcaster's rights "purchasing center" also sells rights, so that the expenses incurred by this company can be taken into account as part of the service editor's contribution to the production of audiovisual works.
The main purpose of the draft decree is to enable full implementation of the agreement signed on May 24, 2016 by the TF1 group with professional organizations from the audiovisuel industry. Certain stipulations of this agreement summon a development in the regulatory manager necessary for full application in fiscal 2017.
By way of introduction, the Conseil recalls that the regulations established in 2010 gave a central place to professional consultation. Decree no. 2010-747 of July 2, 2010 on terrestrial service editors and decree no. 2010-416 of April 27, 2010 on non-terrestrial service editors transposed in great detail the professional agreements signed between 2008 and 2010 by service editors and professional organizations in the audiovisuel industry.
These decrees also make it possible to take into account the negotiation of specific contribution terms for channels through professional agreements. In the case of free-to-air terrestrial channels, article 14 of decree no. 2010-747 of July 2, 2010 enables agreements and specifications to take account of these specificities by taking these agreements into account [1]. The draft decree submitted to the Conseil for its opinion mainly amends this article in order to incorporate the schemes negotiated by the TF1 group.
The Conseil notes that the regulatory power has chosen to transcribe precisely in the decrees the specificities negotiated by the TF1 group rather than envisage a manager authorizing derogations, negotiated in agreements, and included in the service editors' conventions.
With the aim of authorizing the conclusion of agreements with other editors (editors of free-to-air terrestrial services, pay terrestrial services or non-terrestrial pay services) that could take different forms from that of the May 24, 2016 agreement, the decree could instead indicate the points on which derogations from the general manager could be envisaged (in particular, rate of the sub-quota reserved for "independent production", share of the financing provided by the broadcaster to the estimate of the work allowing the valuation of producer shares for independent production) and possibly the quid pro quos that would have to be conceded by service editors.
The Council also notes that the agreement signed by the private group was concluded for a given period (until December 31, 2020, with the possibility of renewal for two-year periods). It wonders whether fixed-term commitments can be transposed into regulations on a survival basis. The Conseil points out that the effect of making time-limited commitments permanent has already been to subject the OCS service grouping definitively to stricter rules in terms of contributions to audiovisuel production, notably compared to terrestrial film service editors.
The Council therefore gives a favorable opinion on the draft decree submitted to it, subject to the following comments and proposals.
I. AMENDMENTS TO DECREE NO. 2010-747 OF JULY 2, 2010 PROPOSED BY THE GOVERNMENT
The proposed amendments put forward by the French government allow publishers of free-to-air television services, in consultation with professional organizations from the audiovisual industry, to modify the rules governing the use of independent production and the definition of the basis of obligations, to modify the mechanism for carrying forward from one year to the next any deficit or additional expenditure in relation to the amount of obligations, and to adjust their obligations to broadcast new works during prime time (the so-called "120-hour" obligation).
They also introduce the ability for service editors to declare as part of their contribution expenses incurred by GIE(s) and/or commercial companies for the joint purchase of rights, thus taking into account the existence of audiovisuel groups with several diffusion outlets.
While the Conseil considers it positive that the general managerial framework laid down by the decree can be modulated, it nevertheless considers that certain general schemes should be applied equally to all service editors, whether free or pay.
A. Changes to be applied to all service editors
1. Definition of the basis for the obligation to invest in the production of audiovisual works.
The draft decree makes it possible for service editors, in consultation with audiovisual industry professional organizations, to deduct from the basis of their obligations revenues from the exploitation or transfer of rights to broadcast works between television services or on-demand audiovisual media services and/or between the commercial rights purchasing company or the economic interest grouping.
Insofar as these amounts do not actually correspond to the publisher's revenues, but to internal re-invoicing within the group, the Council can easily understand that they may not be taken into account in the contribution base. However, it believes that this general principle of calculating the basis of obligations should apply to all publishers. He therefore proposes that this modification be introduced in article 8 of the decree, and not in article 14.
2. The inclusion within the service editor's contribution of expenditure incurred by commercial companies for the joint purchase of rights and/or economic interest groups formed exclusively between the service editor and companies under its control.
The draft decree makes provision for expenses incurred by rights-purchasing companies controlled by the service editor and/or economic interest groupings (EIG(s)) formed exclusively between the service editor and companies under its control to be taken into account as part of the contribution to the production of audiovisual works.
In the case covered by this proposal in III of article 12, the inclusion of such expenses would enable an intermediary to sign a single global contract with a producer or distributor for several works and several channels, which would then buy from this intermediary.
The Council notes that the draft decree does not require that the exclusive purpose of the trading company be the purchase of rights. As a result, it considers that the company may engage in other activities, including the sale of rights.
Furthermore, just as group-internal re-invoicing will not be taken into account in the net sales for the financial year used as a basis for calculating the contribution, it will not be included in the expenses that can be declared as part of this contribution, once the publisher has declared the expenses incurred by a rights-purchasing trading company controlled by the publisher, or by an economic interest group.
3. Introduction of a mechanism for carrying forward deficits or additional expenditure from one year to the next
The draft decree modifies the mechanism enabling service editors, in consultation with audiovisual industry professional organizations, to declare expenses incurred in previous years in the current financial year and carry forward a portion of their obligations.
In its notice 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, the Conseil had already recommended the introduction of such a carryover mechanism in order to meet the objective of adapting obligations to economic conditions.
The Conseil recalls that the option of offsetting any shortfalls against the following financial year is not new to the decrees in force, which provide for it for the audiovisual production contribution obligations of non-hertzian film service editors, who had negotiated it in their agreement (5° of article 30 of decree no. 2010-416 of April 27, 2010). It has also long been applied to the contribution to cinematic production obligations of cinema service editors, due to the professional agreements they have signed to this effect.
The May 24, 2016 agreement makes provision for the TF1 group to carry forward a deficit or additional expenditure incurred during the year, in relation to the level of obligations, up to a limit of 2% of the amount of the obligation and per rolling three-year period (the TF1 group must have fulfilled its investment obligations at the end of these three years).
The draft decree sets out this mechanism in two different schemes: in article 14, 5°, an option for the publisher to declare expenses incurred in previous years that have not been taken into account in the current financial year, and in article 14, 7°, the possibility of deferring part of its obligations.
The Conseil recommends a general provision allowing the deferral of deficits and surpluses, under which both the agreement signed by the TF1 group and future agreements signed by other service editors could be included. The Council therefore suggests the following wording, which could be included in a new, single provision: " The agreements or specifications make provision for the carryover of excess expenditure to the following year, or for the compensation of shortfalls in relation to the level of obligations, up to a maximum of 10% of obligations ".
B. Amendments designed to enable greater consultation between groups of publishers and professional organizations
1. Rules governing the use of independent production
The Conseil notes that, in the agreement of May 24, 2016, the TF1 group and producer representatives agreed to lower the share of independent production to a minimum of 8% of the previous year's net annual sales, and to regulate part of the expenditure of the so-called "dependent" corridor. The draft decree transcribes this scheme in article 14 of decree no. 2010-747 of July 2, 2010.
In its "Conclusions de la concertation sur la production audiovisuel" published in January 2016, the Conseil declared itself in favor of a scheme that would make it possible to move away from the traditional distinction between, on the one hand, obligations to support the development of independent production (which are subject to a highly regulated sub-quota) and, on the other hand, the remaining part of the obligations usually summoned the "dependent corridor" (in which service editors are not subject to any regulatory constraints). The Council therefore welcomes the May 24, 2016 agreement.
However, the Conseil does not rule out the possibility that agreements currently being negotiated could make provision for a simple adjustment to the rate of recourse to independent production, and considers it desirable that the regulatory manager authorize this.
The Conseil notes that the draft decree, which is intended to govern the contribution to the development of audiovisual production by all terrestrial broadcasters, incorporates the particularities negotiated by a single audiovisual group, and could consequently raise difficulties for its future application to other broadcasters currently renegotiating their obligations.
The Council therefore suggests the following wording: " Set the share of independent production stipulated in article 15 at a lower level, without being able to fall below 8% of net annual sales for the previous financial year. This reduction is offset by commitments to promote the development of independent production. These commitments relate in particular to the proportion of the production company's share capital or voting rights held by the service editor, and to the scope of the rights assigned .
2. Waiver, for certain genres, of the publisher's minimum contribution to the work's production budget set out in the second paragraph of 1° of article 15, for the inclusion of producer's shares in independent production.
Pursuant to article 71-1 of the French law of September 30, 1986, as amended by law no. 2013-1028 of November 15, 2013, decrees no. 2010-747 of July 2, 2010 and no. 2010-416 of April 27, 2010 set the minimum proportion of the service editor's financing of the work to be taken into account for independent production. The publisher's minimum contribution must therefore be at least 70% of the work's production budget. The decrees set the same threshold for all works.
The agreement signed by the TF1 group introduces a distinction for works of drama, lowering the rate for the latter to 60% of the production estimate for the work.
In its opinion no. 2014-18 of December 2, 2014, the Conseil had noted, with regret, " that due to this high threshold in relation to the contributions observed in financing plans, the option to hold producer shares will essentially only concern drama works, series and single-title works, financed by the historical audiovisual groups (they finance around 70% of the cost of dramas, 60% of the cost of documentaries and 20% of the cost of animation works) ".
It also pointed out that the fact that this rate is calculated on the production cost of the work, and not, in the case of international co-productions, on the French share of financing, does not allow European or international co-productions to benefit from this measure, and does not encourage service editors to invest in these projects.
The Conseil also notes that in 2015, the TF1 group financed three drama series to the tune of 67.9%, 68.7% and 69.5% of the production cost of these works. In the case of one of these dramas, the TF1 group took on a producer's share and was unable to value this expenditure as independent production, as its share of financing for the work was less than 70% of the estimate.
The lowering of the minimum financing threshold for drama programmes under the agreement signed on May 24, which the draft decree authorizes, contributes to a better profit-sharing for the TF1 group in this programme type.
The Conseil notes that the draft decree, by allowing this measure to be extended to other genres and to all service editors broadcasting free-to-air over the air, could, where appropriate, benefit certain documentaries, since animation and live-action productions are generally financed by the broadcaster at less than 60% of the cost estimate.
3. The "120-hour rule" for diffusing previously unseen cinematic works in the first half of the evening slot
Free-to-air service editors with sales in excess of 350 million euros must show at least 120 hours of previously unbroadcast European or EOF cinematic works in the first half of the evening. The annual volume of these diffusions may, however, include up to 25% reruns.
Under article 13 of the decree of July 2, 2010, this obligation applies to TF1, M6, France 2 and France 3. Article 9, III of decree no. 2009-796 of June 23, 2009, setting out the specifications for France Télévisions, extended this obligation to France 5.
The draft decree allows agreements and specifications, taking into account agreements reached between service editors and professional organizations, to modify the time segment for the diffusion of these works by setting it between 8 p.m. and 9:30 p.m. (instead of "8 p.m. and 9 p.m." imposed by article 13 of decree no. 2010-747 of July 2, 2010), as well as the rate of possible reruns by reducing it to a level below 25%.
The Conseil has always considered that this obligation to broadcast, by guaranteeing exposure in the first half of the evening for new works, implicitly imposes a minimum volume of investment in the production of audiovisual works, and is favorable to the development of the production sector.
In its opinion no. 2009-8 of July 15, 2009 on the draft decree on the contribution of "analog" terrestrial service editors, the Conseil expressed reservations about the option offered by the decree for editors to take into account up to 25% of this annual hourly volume for reruns.
The Council notes that between 2010 and 2015, only TF1 made use of this option offered by the decree.
Pushing back to 9:30 pm the maximum start time for unseen works of original EOF in light of developments in television consumption practices, and limiting the proportion of reruns taken into account within this obligation, therefore appear to be two useful developments to the current rule. The question might even be raised as to whether they should be made general in scope.
II. AMENDMENTS TO DECREE NO. 2010-1379 OF NOVEMBER 12, 2010
The contribution of on-demand audiovisual media service editors to the development of production of audiovisual works is governed by Decree no. 2010-1379 of November 12, 2010.
With regard to decrees concerning linear services, articles 14, 29 and 43 of decree no. 2010-747 of July 2, 2010 concerning terrestrial service editors, and articles 14 and 30 of decree no. 2010-416 of April 27, 2010 concerning non-hertzian service editors, make provision for service editors to pool their contribution to the development of the production of audiovisual works with other television or on-demand audiovisual media services that the editor publishes, or that are published by its subsidiaries or subsidiaries of the company that controls it. This option is only available to publishers who have signed an agreement to this effect with the industry.
The pooling of obligations has been negotiated by some of the existing audiovisuel groups, such as the Canal+ group, the Lagardère group, the Disney group, the AB group and the NRJ group, and for these groups concerns exclusively television services. France Télévisions' contribution to the development of audiovisual production covers sales of the Group's terrestrial television services, as well as on-demand audiovisual media services produced by France Télévisions or one of its subsidiaries (cf. 6th paragraph of IV of article 9 of decree no. 2009-796 of June 23, 2009, setting out the specifications for the national program company France Télévisions). In its agreement of May 24, the TF1 group negotiated the pooling of the obligations of its TV services and MyTF1, which offers catch-up TV, previews and free-to-air channels linked to the group's supply.
The current wording of decree no. 2010-1379 of November 12, 2010 on on-demand audiovisual media services does not envisage the possibility of pooling obligations to contribute to the development of audiovisual production between on-demand audiovisual media services published by the same company. Nor does it envisage this between on-demand audiovisual media services and linear services belonging to the same group.
The draft decree makes provision for the contribution to the development of the production of audiovisual works, as defined in the decree of November 12, 2010, not to apply to on-demand audiovisual media services "whose contribution is aggregated with that of television services [...]". This means that an on-demand audiovisual media service subject to contribution obligations for the production of audiovisual works included in the overall obligations of the audiovisual group (by virtue of the decrees applicable to linear services) is not subject to the specific contribution for SMADs provided for by decree no. 2010-1379 of November 12, 2010.
The Conseil is in favor of this option, which gives audiovisuel groups full flexibility in fulfilling their obligations, taking into account the development of new exhibition channels for the works they finance, which they must imperatively develop.
However, in order to avoid any difficulties of interpretation, the Council proposes not to exclude these services from the scope of application of the contribution to the production of audiovisual works, as made provision for in the Government's draft, but to include, within article 1 of decree no. 2010-1379 of November 12, 2010, wording similar to that found in decrees no. 2010-416 of April 27, 2010 relating to non-hertzian publishers and no. 2010-747 of July 2, 2010 relating to hertzian publishers.
In addition, as part of the pooling of obligations for the France Télévisions and TF1 groups' services, the agreement specific to each of these groups makes provision for all services, including SMAD, to be subject to a single rate applied to the group's overall sales. In the case of the Canal+ group, the Canal+ channel retains its special status as a cinema service, while the group's other channels are subject to a single rate distinct from that of Canal+. The Lagardère group, for its part, has chosen to apply a specific rate to each of its channels, with the group's overall contribution made up of the sum of these specific obligations.
In the case of a pooling of obligations to contribute to the development of audiovisual production, including on-demand audiovisual media services, the question arises of the rate applicable to the latter. If these services do not sign an agreement with the Conseil to determine the rate of their contribution, the regulatory rate set out in the decree on SMADs will apply, with no possibility of derogation.
Consequently, the Council suggests that an IV be added to Article1, III of this decree, which could read as follows: " IV. - The contribution of on-demand audiovisual media services to the development of audiovisual production may be aggregated with that of television services under the conditions set out in articles 14, 29 and 43 of the aforementioned decree of July 2, 2010 and articles 14 and 30 of decree no. 2010-476 of April 27, 2010 on the cinematographic and audiovisual contribution of television service editors and radio service editors distributed by networks not using frequencies summonsed by the French Superior Audiovisual Council. The rate applicable to these services is specified in the agreements and specifications of the television services ".
Lastly, in its November 2013 report to the Government on the application of Decree no. 2010-1379 of November 12, 2010 on on-demand audiovisual media services (SMAD), the Conseil proposed making provision for a SMAD editor's contribution to the development of the production of audiovisual and cinematic works to cover all SMADs it publishes, or those published by its subsidiaries or the subsidiaries of the company that controls it.
Such a development would introduce greater flexibility not only for companies that publish both television services and SMADs, by allowing them to choose the services to which they wish to apply such globalization, but also for SMAD publishing companies that do not publish television services. This would also simplify monitoring of compliance by the Conseil.
III. THE COUNCIL'S PROPOSALS CONCERNING PAY-TV CHANNELS
A. Extend the proposed reform to terrestrial and non-terrestrial pay-TV channels
The Conseil recommends that Title II of decree no. 2010-747 of July 2, 2010, applicable to TV service editors whose financing summons remuneration from users, and decree no. 2010-416 of April 27, 2010, applicable to non-hertzian pay-TV channels, also be amended to incorporate the measures of general scope, and to authorize any amendments resulting from agreements currently under discussion or to be reached in the future.
Thus, just as the amendment concerning the calculation of the contribution base should be included not only in article 8 of decree no. 2010-747 of July 2, 2010, but also in articles 24 and 39 of the same decree, and in articles 10 and 20 of decree no. 2010-416 of April 27, 2010, the amendment envisaged in article 12 of the decree of July 2, 2010 (expenditure by a central purchasing body or economic interest group) should be included in articles 27 and 41 of the same decree, and in articles 12 and 28 of the decree of April 27, 2010.
Similarly, the changes proposed for article 14 of the decree on contributions from terrestrial service editors should apply to articles 29 and 43 of the same decree, and to articles 14 and 30 of the decree applicable to non-terrestrial service editors (possibility, taking into account agreements between the service editor and one or more audiovisual industry professional organizations, to carry over surpluses and deficits in relation to the level of the obligation, to reduce the proportion of the obligations devoted to "independent production" in return for specific commitments, and to reduce the minimum proportion of the estimate represented by the broadcaster's contribution enabling investment in producer shares to be taken into account for independent production).
With regard to the reduction in the rate for independent production, the wording will have to be adapted to the specific nature of terrestrial film services, which have specific levels of obligation in audiovisual production: " Set the share of independent production provided for in article 42 at a lower level, without being able to fall below [...] % of net annual sales for the previous financial year. This reduction shall be offset by commitments to promote the development of independent production ".
B. Adjusting the regime for non-hertzian pay-TV channels
The Conseil has repeatedly stressed its concern about the difficult economic situation of non-hertzian channels.
The Conseil notes that between 2014 and 2015 the number of services subject to obligations to contribute to the development of audiovisual production fell. In 2014, 88 channels were subject to such obligations, which could conditionally be pooled by group, resulting in the examination by the Council of 46 declarations. In 2015, these obligations concerned 78 publishers, giving rise to the examination of 35 declarations.
The Conseil repeats the proposals for adjusting the system of contributions to the production of audiovisual works. applicable to non-hertzian service editors that it was able to formulate in particular in its opinion no. 2014-18 of December 2, 2014 relating to the draft decree amending the system of contributions to the production of audiovisual works. by television services and in its "Conclusions of the consultation on audiovisual production" of January 2016.
1. Establish a threshold of net annual resources to trigger obligations
The Conseil proposes to establish a threshold for triggering obligations to contribute to the production of audiovisual works by non-hertzian channels as of a level of net resources set at one million euros.
In its opinion no. 2014-18 of December 2, 2014, the Conseil emphasized that this measure would be a real regulatory simplification for publishers with low resources, as well as a means of lightening the control operations it conducts.
It notes that the decree on SMAD exempts on-demand audiovisual media services with annual net sales of less than ten million euros from production contribution obligations.
2. Progressive obligations linked to the publisher's net annual revenues
Decree no. 2010-747 of July 2, 2010, applicable to terrestrial service editors, transposed the professional agreements in force at the time of the reform, and introduced a scheme for progressive contribution rates for free-to-air terrestrial service editors, based on their sales levels, and for pay terrestrial editors, based on their subscriber numbers.
For all free-to-air broadcasters, the aforementioned decree makes provision for a gradual increase in the rate of investment in the production of audiovisual heritage works [2], and in the rate of investment in independent production of all works [3].
For terrestrial pay-TV broadcasters, the decree of July 2, 2010 establishes an increase in the rate of the obligation covering all works, as well as the obligation covering so-called "heritage" works [4].
Decree no. 2010-416 of April 27, 2010, applicable to non-hertzian service editors, does not provide for this increase in obligations.
As it has already indicated on a number of occasions, the Conseil would be in favor of implementing a gradual increase in the obligations, in particular heritage obligations, applicable to these publishers, taking into account the level of their net annual resources.
In its view, such a measure is compatible with the principles set out in the Audiovisual Media Services Directive of March 10, 2010, which authorizes a scheme for increasing obligations when justified by economic realities [5].
3. Adjust the corridor devoted to works of original French expression
Decree no. 2010-416 of April 27, 2010 sets, for non-hertzian publishers, the share to be devoted to works of original French expression at a minimum of 85% of obligations covering all works as well as so-called "heritage" works.
Given that many non-hertzian publishers are unable to finance original creations on their own, and must take part in European or international funding schemes, the Council proposes that the minimum percentage reserved for these works be reinstated at 75%, the rate that appeared in decrees prior to 2010.
4. Introduce a "dependent" production corridor for film service editors
In its opinion no. 2014-18 of December 2, 2014, the Council proposed, for film service editors, " the introduction of a dependent production corridor that Article 31 of Decree no. 2010-416 of April 27, 2010 does not currently authorize ".The Council repeats this proposal.
This notice will be published in the Journal officiel de la République française.
Paris, October 19, 2016
For the French Superior Audiovisual Council :
Le Président,
Olivier SCHRAMECK
[1] As a reminder, this option, which is open to all service editors, appears in articles 14, 29 and 43 of decree no. 2010-747 of July 2, 2010 for terrestrial editors, and in articles 14 and 30 of decree no. 2010-416 of April 27, 2010 for non-terrestrial editors.
[2] As a reminder, according to article 10 of decree no. 2010-747 of July 2, 2010, "By way of derogation from the third paragraph of article 9, the compound share of expenditure contributing to the development of the production of heritage works is set, taking into account the service editor's net annual sales for the previous financial year, at least at the following percentages:
8.5% for service editors with sales of less than 100 million euros;
9.25% for service editors with sales between 100 and 200 million euros;
9.5% for service editors with sales between 200 and 350 million euros".
[3] As a reminder, article 15, 2° of decree no. 2010-747 makes provision for an increase in the rate for channels with sales of 350 million euros or less.
[4] This increase is provided for in article 26 of decree no. 2010-747.
[5] This principle is set out in Recital 67 of the Audiovisual Media Services Directive of March 10, 2010: " The proportions of European works must be achieved taking into account economic realities. A scheme of increases is therefore necessary to achieve this objective ".