ANDRE LANGE Head 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)

EUROPEAN AUDIOVISUAL MARKET SIZE ( ) EUR Million 2000 : 72,4 Billion EUR

GROWTH OF THE VARIOUS BRANCHES OF THE FILM & TV INDUSTRY IN THE EUROPEAN UNION ( ) Operating revenue in EUR million Soure : OBS

PROFIT MARGIN OF VARIOUS BRANCHES OF THE FILM & TV INDUSTRY IN EUROPEAN UNION ( ) – in % Profit before Taxation / Operating Revenues Source : OBS

PROFIT MARGIN OF THE TRANSMISSION COMPANIES IN EUROPE ( ) in %

POPULATION OF TV COMPANIES IN THE EUROPEAN UNION Number of companies for which data is available ( )

GROWTH OF PUBLIC BROADCASTERS (Radio & TV) EUR Thousand Average Annual Growth : 4,9 %

AVERAGE ANNUAL RATE OF GROWTH OF PUBLIC BROADCASTERS INCOME ( )

GROWTH OF REVENUES OF PRIVATE BROADCASTERS ( ) EUR Thousand

AVERAGE ANNUAL RATE OF GROWTH OF PRIVATE BROADCASTER INCOME (1997/2000)

RESULTS OF THE TELEVISION BRANCH IN EUROPEAN UNION ( ) EUR Million Source : OBS / AMADEUS

FINANCIAL PERFORMANCE RATIOS OF THE TELEVISION BRANCH IN THE EUROPEAN UNION ( ) (in %))

PROFIT MARGIN OF TELEVISION COMPANIES IN EUROPEAN UNION ( ) (in %) Source : European Audiovisual Observatory

PROFIT MARGIN OF NATIONAL TV SYSTEM ( ) (in %) Source : OBS / AMADEUS

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)

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 ?

ANALYSING THE THE TV PROGRAMMES MARKET: METHODOLOGICAL 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

TRADE BALANCE IN AUDIOVISUAL PROGRAMMES BETWEEN EUROPEAN UNION AND NORTH AMERICA (film, TV, video) ( ) Millions USD

ORIGIN OF IMPORTED FICTION (feature films + TV Fiction) BROADCAST BY 101 LEADING TV CHANNELS IN EUROPE in hours Source : ETS / OBS

ORIGIN OF IMPORTED EUROPEAN FICTION (feature films + TV Fiction) BROADCAST BY 101 LEADING TV CHANNELS IN EUROPE ( ) in hours Source : ETS / OBS

VOLUME OF TV FICTION PRODUCTION ( ) (in hours) Source : Eurofiction

THE 10 LEADING TV PRODUCTION GROUPS IN THE EUROPEAN UNION ( ) Operating revenues in EUR million Source : OBS ENDEMOL ENTERTAINTMENT (NL) RTL Group (Content) (DE) Thames Television (GB) 114 n.a. - Grundy France 81 n.a. - Grundy UFA 75 n.a. MEDIATRADE (IT) BAVARIA FILM (cons.) DE284 n.a. EXPAND(FR) (est.) TELE-MÜNCHEN (est.) ITN (GB) 153 n.a. THE TELEVISION CORPORATION GRUPO ARBOL PRODUCCIONES LAGARDERE ACTIVE (est.) 100 n.a.

GROWTH OF THE TV PRODUCTION COMPANIES IN EUROPE ( ) EUR million

PROFIT AND LOSS OF TV PRODUCTION COMPANIES IN EUROPEAN UNION ( ) EUR million Source : OBS

PROFIT MARGIN OF EUROPEAN TV PRODUCTION COMPANIES ( ) in % Source : OBS

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 ?