The privatisation of a public service broadcaster

TV 2 – a nationwide public service channel establishedIn 1986 (opening 1988)

the most popular television channel in Denmark (30% audience share),

since 2003 funded by advertising, before that time partlyalso by license fees (app.30%),

part of a public limited company running four commercialsubscription channels.

Privatisation decided in 2002 (Agreement on media policy 2002-2006)

TV 2 transformed into a limited company in 2003The sale announced in 2004

The sale postponed in 2005 due to a number of state aid cases at theEU commission and the EU court. The cases are not finalised yet.

A reconstruction plan including subscription fees approved by the EUcommission in 2011.

A trail awaits at the Danish court in 2011 regarding compensation toViasat for its losses due to TV 2’s misuse of its dominant position onthe advertising market.

Governmental changes in 2011 will likely result in abandoning theprivatisation of TV 2.

Privatisation: Public institutions sold to private companies in order to achieve:

- Investments (capital, know how)- Joint ventures- Market orientation (user friendliness, cost/benefit)- Efficiency - Reduction of state activities (ideology)

Privatisations are based on the assumption that the market is a better devise for allocation of resources than the state.

Traditional public service idea:Public service broadcasting is based on the assumption that the market can not provide the amount and quality in programming that a society needs, as commercial funding has a negative impact on programming quality, diversity and editorial independence.

New public service idea:Public service broadcasting is (mainly) about specific programme output that could be delivered independently of legal status (public/private) and way of funding (license fee, advertising, user charges).

Public service is broadcasting is based on a “contract” between the state and the broadcaster.

Ownership

Funding Regu-lation

Purpose Diver-sity

DR public Licensefees

yes social +++++

TV 2/Denmark

public Advertising yes social ++++

TV 2/ Norway

private Advertising yes profit +++

TV 3 private Advertising/ charges

no profit +

Media policy agreement, 2002: The privatisation of TV 2 depends upon fulfilling the same

public service requirements as previously (“invisible” privatisation)

Privatisation as an exchange of

privileges (access to audiences, brand name, etc.) and

obligations (public service requirements, payment, concession fees, etc.)

Privatisations requires a balance betweenprivileges and obligations

Key questions to the privatisation of TV 2:

Selling prize (could include concession fees)

Amount of public service requirements

Requirements to buyers qualifications (nationality,experiences, competences, market position, etc.)

Duration of broadcast permission and buy-back clause

The value of TV 2 (in 2004):

Monopoly on nation wide television advertising,must carry status,brand value

Estimated selling price (2004): 130.000.000 – 400.000.000Euro

Changing value of TV 2

In 2007 TV 2’s earning on the advertising market declined,resulting in a loss at app. 24 million Euro or 10 % less thanestimated,

and a number of investments (in a radio channel, amagazine, etc.) didn’t pay.

In 2008 TV 2 received rescue aid from the state in order to avoid bankruptcy.

In 2009 digitalisation has lead to decline in viewing onmainstream channels (like TV 2/Denmark) and to theabolishment of TV 2’s monopoly on nationwide televisionadvertising.

In 2009 the value of TV 2’s public service channel hastotally disappeared as the operation of the channel createdlosses in both 2007 and 2008.

2009-12: The restructuring plan including sale ofdistribution network and closing of other activities hasimproved finances, as TV 2 has paid back its debt.

2012: The introduction of user charges will increase TV 2’s income with app. 40 million Euro per year.

Estimated sales price: 400.000.000 Euro (Argo Securities)

The role of the EU trails on state aid:

The original complaint from 2000 regarding financingTV 2 by license fees from 1995 to 2000 came from SBS.

In 2004 the commission decided that the funding of TV 2 was compatible with EU state aid rules except for app. 80 million Euro, by which TV 2 has been overcompensated for its public service activities.

In 2008 the EU court in First Instance annulled the commissions decision

In 2011 the commission decided that TV 2’s state aid from 1995 to 2002 was compatible with EU’s rules.

In 2004 the recapitalisation of TV 2 was notified at the EU commission (a consequence of the decision on state aid)

In 2008 rescue aid was notified to the EU commissionIn 2009 a restructuring plan was investigated.In 2011 the plan was approved.

The decisions taken by the EU commission has been in favourof TV 2 and the Danish state.

The conclusion: The state aid, the recapitalisation and therestructuring of TV 2 are all compatible with EU legislation.

State aid has, however, not been legal, as the financing of TV 2wasn’t notified in 1986 as required.

This opens for a trail at a Danish court regarding compensation forillegal, but compatible state aid.

The EU cases has delayed the privatisation of TV 2

The actual media development has demonstrated thatprivatising TV 2 is less obvious now than it was tenyears ago.

TV 2 can not be sold without a guarantee for subscriptionfees that basically is incompatible to the public serviceremit (universality).

Public service without public money seems to be still moreunlikely to work!

Media policy

2002 2003 20032004 2004 2005

Media policy Rapport Limited TV 2 put on Pre-The sale is

Agreement on selling company the marketqualifi. cancelled

TV 2 development

1986 2000 2003 2004 2005 20062007 2007 2008 2012

(2008)TV 2 Zulu Comm. Charlie TV 2 TV 2 TV 2

TV 2 Financial Userestab. funding Film News Sport

Radio crisis charges

2000 2002 2004 2004 20042005

Complaint Procedure Decision: Recapita- Trail at Trail at

to EU Com. started overcompen- lisation EU court: EU court:State aid sation state aid recapitalis.1995-2000 1995-2002 1995-2002

2008 2008 2009 2009 20092009

EU Com. EU court Restruct. Trail at EU Com. EU courtaccepts annulles: plan to EU court: investigation rejects casesrescue aid overcomp. EU com. rescue aid on restructure

2011 2011

EU com EU com.approve approvereconstruction state aid

1995-2002