ANDRE LANGE Head of Markets

1
ANDRE LANGEHead of Markets Financing
information Department

• ANALYSING FINANCIAL PERFORMANCES OF EUROPEAN
  AUDIOVISUAL COMPANIES
• Conference The Challenge of Transparency in the
  Audiovisual Sector (Strasbourg, 17 January 2003)

2
EUROPEAN AUDIOVISUAL MARKET SIZE (1996-2000)EUR
Million2000 72,4 Billion EUR
3
GROWTH OF THE VARIOUS BRANCHES OF THE FILM TV
INDUSTRY IN THE EUROPEAN UNION (1997-2000)
Operating revenue in EUR millionSoure OBS
4
PROFIT MARGIN OF VARIOUS BRANCHES OF THE FILM
TV INDUSTRY IN EUROPEAN UNION (1997-2000) in
Profit before Taxation / Operating
RevenuesSource OBS
5
PROFIT MARGIN OF THE TRANSMISSION COMPANIES IN
EUROPE (1997-2001) in
6
POPULATION OF TV COMPANIES IN THE EUROPEAN
UNIONNumber of companies for which data is
available (1997-2000)
7
GROWTH OF PUBLIC BROADCASTERS (Radio TV)
1996-2000 EUR ThousandAverage Annual Growth
4,9
8
AVERAGE ANNUAL RATE OF GROWTH OF PUBLIC
BROADCASTERS INCOME (1997-2000)
9
GROWTH OF REVENUES OF PRIVATE BROADCASTERS
(1996-2000)EUR Thousand
10
AVERAGE ANNUAL RATE OF GROWTH OF PRIVATE
BROADCASTER INCOME(1997/2000)
11
RESULTS OF THE TELEVISION BRANCH IN EUROPEAN
UNION (1997-2000) EUR MillionSource OBS /
AMADEUS
12
FINANCIAL PERFORMANCE RATIOS OF THE TELEVISION
BRANCH IN THEEUROPEAN UNION (1997-2000) (in ))
13
PROFIT MARGIN OF TELEVISION COMPANIES IN
EUROPEAN UNION (1997-2000) (in )Source
European Audiovisual Observatory
14
PROFIT MARGIN OF NATIONAL TV SYSTEM (1996-2000)
(in )Source OBS / AMADEUS
15
IS BROADCASTING STILL A LICENCE TO PRINT MONNEY ?

• European consolidation still uncertain (withdraw
  of Canal, national solution to the KirchGruppe
  failure)
• Few companies remains with offensive European
  strategies (RTLGroup, News Int., CME, SBS)
• Public sector still fighting but financial
  situation is deteriorating
• Crisis of TV advertising market in 2001 (-6,3 )
  may continue (0,5 in 2002 3 in 2003 ?)
• Transition to digital has dramaticaly increase
  competition and costs, at the detriment of the
  financial stability of the branch
• Premium pay-TV (Canal) have lost their high
  level profitability and are looking for new
  programming formula
• Mergers of digital satellite plateforms
  progressively accepted by EC and national
  authorities but with very restrictive requisites
• Digital terrestrial television at high risks
  Has accelerated concentration process in UK
  Slow development in Sweden and Finland
• Home Shopping will probably be more and more
  challenged by Internet e-commerce
• Interactive television still a marginal business
  (except BSkyB)

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TOWARDS A CRASH OF THE AUDIOVISUAL EUROPEAN
INDUSTRY ?

• US INDUSTRY STILL DOMINATING THE EUROPEAN MARKET
• THE COST OF THE TRANSITION TO DIGITAL IS VERY
  HIGH
• DIGITAL WILL MAKE CAPTATION OF THE VALUE MORE
  DIFFICULT (PIRACY, PRIVATE COPY)
• MATERIAL RETAIL (DVD) MORE PROFITABLE THAN
  SERVICES DISTRIBUTION (BROADCASTING, EXHIBITION)
• THE PERIOD OF FINANCIAL PROFITS SEEMS OVER (TV
  PRODUCTION, EXHIBITION,)
• WILLINGNESS TO INVEST DECLINING (POOR RESULTS,
  SPECTACULAR GROUPS CRASH, BANKS CAREFULNESS)
• BACK TO A CREATIVE / INDUSTRIAL APPROACH ?
• PRODUCTION ACTIVITIES GROWING FASTER THAN OTHER
  BRANCHES BUT FINANCIAL SITUATION REMAINS WEAK
• NECESSITY TO REVIEW THE REALLOCATION POLICIES
  BETWEEN THE BRANCHES (INVESTMENT QUOTAS IN TV,
  IMPLEMENTATION OF DIGITAL CINEMA, TAXING VIDEO
  PUBLISHERS/DISTRIBUTORS,)
• TRANSMISSION SECTOR TO BE INVOLVED IN THE
  FINANCING ?

17
ANALYSING THE THE TV PROGRAMMES
MARKETMETHODOLOGICAL DIFFICULTIES

• Limited number of national studies
• Great heterogeneity of TV landscapes, business
  models, industrial structures and accounting
  practices
• Vertical integration / Horizontal integration
• Lack of transparency
• Fragmention, high level of micro-entreprises or
  one-production enterprise
• No breakdown of revenues by genres
• No accessible database on TV programmes
• Opacity of the rights market

18
TRADE BALANCE IN AUDIOVISUAL PROGRAMMES BETWEEN
EUROPEAN UNION AND NORTH AMERICA (film, TV,
video)(1998-2000)Millions USD
19
ORIGIN OF IMPORTED FICTION (feature films TV
Fiction) BROADCAST BY 101 LEADING TV CHANNELS IN
EUROPEin hoursSource ETS / OBS
20
ORIGIN OF IMPORTED EUROPEAN FICTION (feature
films TV Fiction) BROADCAST BY 101 LEADING TV
CHANNELS IN EUROPE(1994-2001) in hoursSource
ETS / OBS
21
VOLUME OF TV FICTION PRODUCTION (1996-2001)(in
hours)Source Eurofiction
22
THE 10 LEADING TV PRODUCTION GROUPS IN THE
EUROPEAN UNION (2000-2001)Operating revenues in
EUR millionSource OBS

• 2000 2001
• ENDEMOL ENTERTAINTMENT (NL) 519
  914
• RTL Group (Content) (DE) 883 897
• - Thames Television (GB) 114
  n.a.- Grundy France
  81 n.a.
• - Grundy UFA
  75 n.a.
• MEDIATRADE (IT) 654 746
• BAVARIA FILM (cons.) DE 284 n.a.
• EXPAND (FR) (est.) 304 270
• TELE-MÜNCHEN (est.) 200 200
• ITN (GB) 153
  n.a.
• THE TELEVISION CORPORATION 70
  127
• GRUPO ARBOL PRODUCCIONES 64
  120
• LAGARDERE ACTIVE (est.) 100
  n.a.

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GROWTH OF THE TV PRODUCTION COMPANIES IN EUROPE
(1997-2000)EUR million
24
PROFIT AND LOSS OF TV PRODUCTION COMPANIES IN
EUROPEAN UNION (1997-2000) EUR millionSource
OBS
25
PROFIT MARGIN OF EUROPEAN TV PRODUCTION COMPANIES
(1997-2000)in Source OBS
26
TOWARDS A CRASH OF THE AUDIOVISUAL EUROPEAN
INDUSTRY ?

• US INDUSTRY STILL DOMINATING THE EUROPEAN MARKET
• THE COST OF THE TRANSITION TO DIGITAL IS VERY
  HIGH
• DIGITAL WILL MAKE CAPTATION OF THE VALUE MORE
  DIFFICULT (PIRACY, PRIVATE COPY)
• MATERIAL RETAIL (DVD) MORE PROFITABLE THAN
  SERVICES DISTRIBUTION (BROADCASTING, EXHIBITION)
• THE PERIOD OF FINANCIAL PROFITS SEEMS OVER (TV
  PRODUCTION, EXHIBITION,)
• WILLINGNESS TO INVEST DECLINING (POOR RESULTS,
  SPECTACULAR GROUPS CRASH, BANKS CAREFULNESS)
• BACK TO A CREATIVE / INDUSTRIAL APPROACH ?
• PRODUCTION ACTIVITIES GROWING FASTER THAN OTHER
  BRANCHES BUT FINANCIAL SITUATION REMAINS WEAK
• NECESSITY TO REVIEW THE REALLOCATION POLICIES
  BETWEEN THE BRANCHES (INVESTMENT QUOTAS IN TV,
  IMPLEMENTATION OF DIGITAL CINEMA, TAXING VIDEO
  PUBLISHERS/DISTRIBUTORS,)
• TRANSMISSION SECTOR TO BE INVOLVED IN THE
  FINANCING ?