The privatisation of a public service broadcaster

TV 2 – a nationwide public service channel established In 1986 (opening 1988) the most popular television channel in Denmark (30% audience share), since 2003 funded by advertising, before that time partly also by license fees (app.30%), part of a public limited company running four commercial subscription channels.

Privatisation decided in 2002 (Agreement on media policy ) TV 2 transformed into a limited company in 2003 The sale announced in 2004 The sale postponed in 2005 due to a number of state aid cases at the EU commission and the EU court. The cases are not finalised yet. A reconstruction plan including subscription fees approved by the EU commission in A trail awaits at the Danish court in 2011 regarding compensation to Viasat for its losses due to TV 2’s misuse of its dominant position on the advertising market. Governmental changes in 2011 will likely result in abandoning the privatisation 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.

Ownershi p FundingRegu- lation PurposeDiver-sity DRpublicLicense fees yessocial+++++ TV 2/ Denmark publicAdvertisingyessocial++++ TV 2/ Norway privateAdvertisingyesprofit+++ TV 3privateAdvertising/ charges noprofit+

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 between privileges 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): – Euro

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 than estimated, and a number of investments (in a radio channel, a magazine, 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 on mainstream channels (like TV 2/Denmark) and to the abolishment of TV 2’s monopoly on nationwide television advertising. In 2009 the value of TV 2’s public service channel has totally disappeared as the operation of the channel created losses in both 2007 and 2008.

: The restructuring plan including sale of distribution network and closing of other activities has improved 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: Euro (Argo Securities)

The role of the EU trails on state aid: The original complaint from 2000 regarding financing TV 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 commission In 2009 a restructuring plan was investigated. In 2011 the plan was approved.

The decisions taken by the EU commission has been in favour of TV 2 and the Danish state. The conclusion: The state aid, the recapitalisation and the restructuring of TV 2 are all compatible with EU legislation. State aid has, however, not been legal, as the financing of TV 2 wasn’t notified in 1986 as required. This opens for a trail at a Danish court regarding compensation for illegal, but compatible state aid.

The EU cases has delayed the privatisation of TV 2 The actual media development has demonstrated that privatising TV 2 is less obvious now than it was ten years ago. TV 2 can not be sold without a guarantee for subscription fees that basically is incompatible to the public service remit (universality). Public service without public money seems to be still more unlikely to work!

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