EUROPEAN COMMISSION

Brussels, 23.VIII.2007 C(2007) 4059

PUBLIC VERSION

WORKING LANGUAGE

This document is made available for information purposes only.

Sir,

Subject: State aid N 360/07 – Scheme for the production and broadcasting of Danish TV drama and TV documentary programmes

1. PROCEDURE

1. Following a pre-notification meeting on 12 June 2006, the Danish authorities notified the European Commission on 27 June 2007 the Scheme for the production and broadcasting of Danish TV drama and TV documentary programmes.

2. DESCRIPTION OF THE AID SCHEMES

2. The Danish Media Agreement for the period 2007-2010 implies the establishment of a special Public Service Pool (hereinafter "the Pool") administered by the Danish Film Institute. 3. The objective of the Pool is to support the production and broadcasting of Danish TV drama1 and TV documentary programmes. 4. The Pool holds DKK 75 million (appr. EUR 10 million). It is planned to grant DKK 15 million (appr. EUR 2 million) in 2007 and DKK 30 million (appr. EUR 4 million) in 2008 and in 2009.

Udenrigsminister Per Stig MØLLER Asiatisk Plads 2 DK – 1448 København K

1 TV drama in this context is to be understood as original TV fiction in a broad variety of genres. This may take the form of programmes based on a new concept, programmes that on the face of it address too small a target group, or programmes that quite simply are in need of extra funding in order to acquire sufficient production value. The aim is thus to extend the provision of original and innovative programmes by public service broadcasters to commercial broadcasters, so that the audience will meet with Danish culture on a broad range of television channels.

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5. Support may exclusively be granted to TV programme undertakings. The support may not be granted to licence-financed public service undertakings or to non-commercial local TV stations. In order to obtain funding, the language of the programmes must be Danish, the programme must be broadcasted during the hours 18:30-23:00, and it must be transmitted on a channel that reaches a minimum of 50 per cent of Danish households. No support can be granted to TV programmes transmitted on pay TV. 6. The most recent viewer ratings (most ratings date back to 2006) for the penetration of TV stations in show that the following stations would be entitled to support: SBS Net (previously ), TV 3, TV 3+, Kanal 5, MTV, , Eurosport, all of which are private commercial stations, as well as TV 2, TV 2 Zulu and TV 2 Charlie, which are commercial state-owned channels. 7. The reason why DR, the regional TV 2 enterprises and the non-commercial local TV stations are not included in the group of those entitled to support is that for non- commercial local TV stations there is already a support system in place and their penetration is far below what is required. For DR and the regional TV 2 enterprises, the background is that they are financed exclusively through licence funds and are required to meet established public service obligations. In addition, the regional TV 2 enterprises transmit mainly news and current affairs programmes for which no support is proposed. 8. Also TV 2/DENMARK is subject to public service obligations, but receives no licence funds. It is a condition for any support granted to TV 2 that it is not used to fulfil the existing public service obligations. 9. Proposals for the Pool will be assessed by a group of ”readers/consultants”, having a thorough knowledge of the Danish and international TV world and having experience in the assessment of programme proposals. The readers/consultants must not be associated with the TV stations involved nor any associated production companies. 10. The readers will assess the proposals in the light of originality, programme quality, current interest and the like, and recommend them for one of the following categories: • Not suitable for support • Potential for development • Ready for production support. 11. The recommendations will be considered by a steering committee of three competent persons with TV experience. On the basis of the recommendations, the steering committee will select the suitable proposals and invite the applicants to a presentation of the programme idea. Against the background of these presentations, the steering committee will recommend support proposals to the management of the Danish Film Institute that will take the formal decision. 12. The Pool is divided up into grants earmarked for TV drama and TV documentaries, respectively, with a 70/30 distribution key between TV drama and TV documentaries. There is, however, room for a certain degree of flexibility to ensure that the distribution also takes into account the quality and volume of the programme proposals submitted in the various categories. Support for TV drama will amount to a maximum of 50% of the costs and for TV documentaries up to a maximum of 80% of the costs. 13. A maximum of 75% of the costs can be granted for the development of drama and documentary films. The development support will be targeted at projects for which a basic concept has been drawn up in detail, for example in the form of a manuscript, but where

2 there may be a need for the projects to mature prior to an application for production support. The development support is limited to projects and concepts that are innovative and for which the TV station can establish that support is needed in order to implement the projects. Development aid will be counted as part of the eventual later total production aid. 14. Since there are no other support schemes targeted at the production of TV fiction and TV documentaries, cumulation of aid from different sources can be excluded. 15. No territorialisation of expenses is required. 16. No support is granted for post production or other specific filmmaking activities. 17. The Danish authorities committed that if the Commission should issue a new communication regarding State aid for cinematographic and audiovisual works, requiring Member States to bring into conformity existing aid schemes with the new rules, Denmark will take the relevant steps to abide to this request. 18. The scheme cannot be launched until it has received the approval of the EU Commission. 19. The Pool will be evaluated in 2009. 20. The legal basis for the scheme is Retningslinjer for fordeling af Public Service-Puljen, jf. § 11a i lov om radio- og fjernsynsvirksomhed, jf. lovbekendtgørelse nr. 338 af 11. april 2007

3. ASSESSMENT

3.1. Existence of aid

21. According to Article 87 (1) of the EC Treaty, save as otherwise provided in the Treaty, any aid granted by a Member State or through State resources in any form whatsoever, which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market. 22. The present scheme consists in the provision of direct grants. Consequently, State resources are involved. 23. The direct grants constitute a payment that the beneficiaries would not receive under normal market conditions. Therefore, the scheme provides an economic advantage to the beneficiaries. 24. The scheme is selective in nature as its only beneficiaries are TV programme undertakings. The beneficiaries compete with other undertakings involved in the production and broadcasting of audiovisual works, including those which do not benefit from the schemes. Consequently, the scheme distorts or threatens to distort competition. 25. Since films are traded at an international level and considering that Danish films are world-wide in competition with films from other European Member States, the financial advantage granted on the basis of the scheme possibly affects trade between Member States. 26. Consequently, the scheme constitutes State aid within the meaning of Article 87 (1) of the EC Treaty and it is therefore necessary to assess its compatibility under the provisions of Article 87 (3) of the EC Treaty.

3 3.2. Compatibility

27. The so called Cinema Communication2 provides criteria for assessing State aid to cinematographic and audiovisual productions under Article 87 (3) (d) of the EC Treaty. Accordingly, the Cinema Communication is applicable for the aid for the production of TV films. 28. The aid can be justified if the aid complies with the general legality principle and the four specific compatibility criteria regarding cultural content, territorialisation, aid intensity and aid supplements, as set out in the Communication. 3.2.1. General legality principle

29. As stated in point 2.3. a) of the Cinema Communication, the Commission must first verify that the scheme does not contain clauses that would be contrary to the EC Treaty provisions in fields other than State aid. 30. On the basis of the information provided by the Danish authorities, the notified scheme does not raise any issues in this respect. 3.2.2. Cultural content

31. According to point 2.3. b) (1) of the Cinema Communication, the aid must be directed towards a cultural product. Each Member State must ensure that the content of a production which benefits from aid is cultural according to verifiable national criteria in compliance with the application of the subsidiarity principle. 32. The scheme supports the production and broadcasting of Danish TV drama and TV documentary programmes. The aim is to extend the provision of original and innovative programmes by public service broadcasters to commercial broadcasters, so that the audience will meet with Danish culture on a broad range of television channels. Proposals are assessed by a professional, independent group of ”readers/consultants" and by a steering committee. To qualify for a subsidy, the proposals are assessed in the light of originality, programme quality and current interest. 33. It is therefore made sure that aid is granted to a cultural product in accordance with the Cinema Communication. 3.2.3. Territorial conditions

34. According to point 2.3. b) (2) of the Cinema Communication, the producer must be free to spend at least 20% of the film budget in other Member States without suffering any reduction in the aid provided for under the scheme. In other words, the Commission

2 Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions on certain legal aspects relating to cinematographic and other audiovisual works (COM(2001)534 final of 26.09.2001,OJ C 43 of 16.2.2002); prolonged by Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions on the follow-up of the Commission communication on certain legal aspects relating to cinematographic and other audiovisual works of 26.09.2001 (COM(2004)171 final of 16.3.2004, OJ C 123 of 30 April 2004; Prolonged by the Commission Communication concerning the prolongation of the application of the Communication on the follow-up to the Commission Communication on certain legal aspects relating to cinematographic and other audiovisual works on 13 June 2007, OJ C 134 of 16 June 2007, page 5.

4 accepted as an eligibility criteria territorialisation in terms of expenditure of up to 80% of the production budget of an aided film or TV work. However, this must be limited to the minimum degree required to promote cultural objectives. 35. No territorial obligations apply to the aid. It follows from the above that the aid beneficiaries are able to spend at least 20% (in the case at hand even 100%) of the film budget in other Member States without suffering any reduction in the aid provided for under the scheme. Thus, the scheme is compliant with the Cinema Communication. 3.2.4. Aid intensity

36. According to point 2.3. b) (3) of the Cinema Communication, aid intensity must in principle be limited to 50% of the production budget with a view to stimulating normal commercial initiatives inherent in a market economy and avoiding a bidding contest between Member States. Difficult and low budget films are excluded from this limit. The Commission considers that, under the subsidiarity principle, it is up to each Member State to establish a definition of difficult and low budget films according to national parameters. 37. The Communication further provides that, in view of the comparatively limited geographic extension of certain languages and cultures and given the limited circulation of those cultural products within the EC and world markets, the Commission could accept aid intensities higher than 50% where proven to be necessary. 38. Support for TV drama will amount to a maximum of 50% of the costs and for TV documentaries up to a maximum of 80% of the costs. A maximum of 75% of the costs can be granted for the development of drama and documentary films. Development aid will be counted as part of the eventual later total production aid. 39. According to the Danish authorities, the reason for granting up to 80% for documentary films is that it is difficult to have this type of programme financed due to the limited spread of the Danish language and because documentary programmes have as a general rule considerably lower earnings than fiction programmes, they are more difficult to sell and therefore also more difficult to finance. 40. In view of the limited economic success of TV documentary films, the Commission finds that a maximum aid intensity of 80% is appropriate and complies with the rules of the Cinema Communication. In case of TV drama films, the aid intensity will not exceed 50%. Development aid will be counted as part of the eventual later total production aid. 41. The Commission therefore considers that the scheme complies with the aid intensity rules of the Cinema Communication. 3.2.5. Aid supplements for specific film-making activities

42. According to point 2.3 b) (4) of the Cinema Communication, aid supplements for specific film-making activities (e.g. post-production) are not allowed in order to ensure that the aid has a neutral incentive effect and consequently that the protection/attraction of those specific activities in/to the Member State granting the aid is avoided. 43. Aid for the development of projects cannot be considered as a supplement for a specific film-making activity in the meaning of the Communication, because it occurs prior to the film production and has a neutral incentive effect. There are no aid supplements for specific film-making activities and the scheme complies with the conditions of the Cinema Communication.

5 3.2.6. Conclusion

44. The Commission has therefore concluded that the Scheme for the production and broadcasting of Danish TV drama and TV documentary programmes constitutes State aid within the meaning of Article 87 (1) of the EC Treaty, but is compatible with the common market on the basis of Article 87 (3) (d) of the EC Treaty as the scheme fulfils the conditions set out in the Cinema Communication.

4. DECISION

On the basis of this assessment, the Commission has decided to consider the scheme as being compatible with the EC Treaty. The scheme is approved until 31 December 2009 on the basis that the Danish authorities have undertaken to implement any changes to the scheme which may be required after the expiry date of the Cinema Communication which is at the latest on 31 December 2009. The Commission requests the Danish authorities to submit an annual report on the implementation of the scheme. The Commission further reminds the Danish authorities that any plans to modify this scheme must be notified to the Commission.

If this letter contains confidential information which should not be disclosed to third parties, please inform the Commission within fifteen working days of the date of receipt. If the Commission does not receive a reasoned request by that deadline, you will be deemed to agree to the disclosure to third parties and to the publication of the full text of the letter in the authentic language on the Internet site: http://ec.europa.eu/community_law/state_aids/index.htm.

Your request should be sent by encrypted e-mail to [email protected] or, alternatively, by registered letter or fax to:

European Commission Competition Directorate-General State Aid Greffe B-1049 Brussels Fax No: +32 2 296 1242

Yours faithfully

For the Commission

Neelie KROES Member of the Commission

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