Culture emerges from the wings to take leading role

Date: 25/07/1996

By Tim Jones

THE last days of the eight-year-long Uruguay Round of world trade liberalisation negotiations provided a graphic illustration of how important the media industry has become in the developed world.

The hard bargaining of the first six years were all about scrapping tariffs on industrial and farm products but, when it came down to the wire in December 1993, it was the media sector which held up a deal that promised to unleash global economic activity worth up to 400 billion ecu.

With the arrival of Bill Clinton at the White House and the appointment of former Hollywood lawyer Mickey Kantor as his trade representative, both the EU and the US said goodbye to the arguments of the past.

They were still happy to squabble over steel or soda ash, but both sides recognised that the audio-visual sector was the growth area of the future. They may no longer be able to compete with Korean shipbuilders or Indian textile manufacturers on cost or even (sometimes) on quality, but they can outsmart them in the production of cultural goods. As a result, safeguarding the interests of their media is now paramount.

In a global audio-visual market worth 250 billion ecu, the European share is the fastest growing segment.

But this growth has been of most benefit to the US, whose revenue from selling programming into the EU has grown from 250 million ecu in 1984 to more than 4 billion ecu today. Two-thirds of all American audio-visual programming exports - the US' second largest export sector - are sold to the Union. In stark contrast, the EU's media products deficit with the US stands at around 3 billion ecu.

When Orson Welles made the innovative Citizen Kane, coal, steel, shipbuilding and textiles still dominated industry in the EU and the US. Last year, Disney made the first 'virtual' film - Toy Story - using computer-graphic techniques that would have blown Welles' mind and which alone grossed 280 million ecu.

This is no peripheral industry.

And as new transmission technologies multiply with the arrival of digital television and distribution channels - pay-per-view, satellite and video-on-demand - the prospects are even greater.

The number of television channels is expected to rise from 117 to 500 by the end of the century - and this should not be jobless growth. The media is highly labour-intensive, with staff costs swallowing up half of a film's budget and an eighth of the operating costs in television production. The jobs are intelligent and cannot be emulated at lower cost in Asia.

Looking at these figures makes many European politicians' mouths water. If only the EU could take on the Americans more aggressively by encouraging the creation of European 'majors' to compare with Time Warner-Turner, Disney-ABC or Westinghouse-CBS, they say.

At the same time, quotas are needed to prevent distributors from shunning programme and film production and choosing the cheap option of buying in American imports.

Competition Commissioner Karel Van Miert does not accept the first argument and has infuriated supporters of the 'European champions' theory with his veto of three television mergers.

“We do have a specific problem in Europe that we still have many separate markets roughly along the lines of languages and cultures, but it can go even further than that,” he said recently.

“Would it be right to conclude from this that since we do have this fragmented market, you should allow players to be dominant and foreclose the markets in which they have to be strong in order to take on the Americans? I think that is really the wrong direction.”

But the Commissioner will have to run to keep up. Market developments are encouraging mergers and the proliferation of joint ventures at a dizzying speed.

In 1989, agreements between firms reached a value of 36 billion ecu, then dipped with the onset of recession. In 1994-95, they rose again to reach close to 100 billion ecu and this year the Europeans have been making deals at a frantic speed.

The latest development in the saga saw Rupert Murdoch pull out of a deal with Canal+, CLT and Bertelsmann to develop pay-television in Europe. He was not alone for long. Within a week, he had swapped sides to do a deal with Bavarian publisher Leo Kirch.

Behind the mergers and joint ventures is the need for firms to position themselves for the new world of interactive multimedia - a jargon term meaning combinations of moving pictures, sounds, graphics and text all on one screen which the user can influence or control. The investments that need to be made in this sector are heavy and speculative, just the kind of money firms hate to spend on their own. Getting at least one foot into bed with a rival helps persuade media companies to take the risk. As a result, the market is developing apace in Europe, although it remains well behind the US in terms of commercialisation.

The biggest and potentially most lucrative market is Germany, but it remains largely untapped. Pay-TV pioneer Premiere has taken five years to attract just over a million viewers and make a profit. Launching digital-TV into this market is not without risk.

While private production and distribution companies face risks with their cash, those for the public broadcasters are arguably more serious. Already, cable and satellite distribution has brought up to 30 channels into people's homes and they can now choose not to watch the old reliables. There is much more on offer than one state television station and a handful of newspapers.

The public broadcasters are already seeing their lucrative sports coverage seeping away. Murdoch had exclusive rights to show the 2000-2008 Olympic Games within his grasp, but just failed to outbid the European Broadcasting Union club of state companies, while Kirch succeeded with a 1.8-billion-ecu bid to purchase the rights to the 2002 and 2006 football World Cup finals.

State broadcasters are losing their tag as a protected species. This has not come too soon for many of the commercial stations who feel that while some of the public broadcasters deserve their reputations, others do little to fulfil their public service requirements.

The higher quality state companies argue that they are the last bastion of programme- and film-making in Europe.

Throw them into the lion's den of market forces and Europe will be swamped with cheap American sitcoms and humourless comedies, they warn.

Their arguments carry some weight. Pride and Prejudice and Heimat came from their stables, but commercial terrestrial stations also have cultural medals to display.

Even the BBC, which many hold up as an example of the highest quality television in the world, said as much about consumer demand in its 1995 top ten list as it did about its reputation.

Top of the league table was its interview with the Princess of Wales, followed by the Christmas editions of London-based soap opera Eastenders. The BBC itself recently announced its intention to invest heavily in digital technology and multimedia.

Ten years from now - if the technology soothsayers are to be believed - the world will be a more sedentary place. People will come home to a clever television set, capable of choosing the programmes they like and sorting through the jungle of stations on offer.

This is, most definitely, the future. The best the public broadcasters can hope for is a modicum of protection from the tastes of their viewers.