"The cable and satellite companies are losing in a big way," says Ami Ela, the Israeli franchise holder of the Hallmark channel, which at the end of this year will no longer be available to HOT subscribers. "Instead of signing long-term agreements with their content providers and preparing themselves for rapidly approaching technological advancements, they are parting with prize assets. It's like building a mall and chasing away Castro, Fox and Honigman. What will you replace them with? You have to realize the viewers aren't idiots."

And not only Hallmark. Due to annual losses of billions of shekels, HOT and Yes plan to dramatically cut costs. To a large extent, the losses stem from the fierce competition between the two companies over imported content. Now both HOT and Yes have decided to cut content costs. The cable TV company is farther along in the process than Yes is. HOT is currently negotiating tough deals with several channels whose contracts will expire at the end of the year. Those who do not agree to cut their price may find themselves out of the box.

Apart from Hallmark, which broadcasts movies and TV series, danger looms over BBC Prime, National Geographic, Eurosport News and CNN. In fact, CNN, rather than HOT, may sever the partnership. Insiders say Time Warner, which owns CNN, will condition the deal on the return of other channels it owns - the TCM movie channel and the Cartoon Network.

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Hot discontinued the two channels a year ago for budgetary reasons, following a public battle with the international media giant. At now of all times, it is unlikely to want to reinstate them.

The Viva Platina telenovela channel is also on the reevaluation list, but there is a fair chance HOT and production company Dori Media will ultimately reach an agreement.

Quantity, not quality

Other cable channels, while in less dire circumstances, will soon undergo considerable budget cuts and drop millions of dollars worth of content. The movie channels are among them, both the digital (HOT Drama, HOT Fun, HOT Action and HOT Prime) and the basic movies channel (channel 4). The cut will obviously be evident in the new content - not necessarily in terms of its quantity, but definitely in terms of quality. The effect will probably be more noticeable on the movies channel than on its digital counterparts: It has many content agreements with the big studios that expire this year, and they are not likely to be renewed.

HOT is now engaged in an arm-wrestling contest with the channels, and it won't necessarily end with the latter pinned to the table. If the above-mentioned channels are indeed taken off the air, it will affect a wide range of viewers. Hallmark, for instance, is a very popular niche channel, and middle- to upper-class women of all ages watch its shows, including "Gilmore Girls" and "McLeod's Daughters."

Shows such as "Law and Order" and "ER," whose new seasons are broadcast exclusively on Hallmark, win many male viewers of those social strata. BBC Prime, National Geographic and CNN target a similar audience. Then there's Viva Platina, which appeals to women of all classes, according to surveys. While Viva Platina is not included in the basic cable package like the other endangered channels, 150,000 viewers have purchased it "a la carte."

Hurting the public

HOT's plan to remove channels from the basic package has upset the Israel Consumer Council.

"The rationale behind the basic package and its controlled price is that the largest possible share of the public - including those without money to spare - should be able to enjoy a variety of content," reads a recent council document. "The more popular a channel, the more likely that if it is removed from the basic package, it will still be purchased. Therefore the companies have an inherent interest to take unique channels (such as CNN and National Geographic) out of the package to sell separately. This phenomenon has already been realized several times in the past, for example when the Sports Channel (Channel 5) diluted its content and moved some of it to the 5+ Channel.

"The Consumer Council calls on the Council for Cable and Satellite Broadcasting to protect consumers and block companies from arbitrarily removing channels from the basic package, when the chief factor in the choice is cutting costs," the council writes.

And what is the broadcasting council's position on the matter? Director Yoram Mokedi, who will soon be retiring, does not appear to be very excited by HOT's threat to remove channels. "Since I have not been presented with a concrete request," says Mokedi, "I have no intention of becoming a pawn in HOT's negotiations with the channels."

HOT promises viewers will be harmed by the content cuts. How exactly will it pull this off? If one is to believe the cable company, the packages will be supplemented with more quality content and some of the channels will become pay channels, while others will be broadcast via Video On Demand. The two latter solutions will come at the consumer's expense, unless HOT lowers the price of the basic package.

The cable companies claim that in order to survive, they must cut content costs. At the recent Rosh Pina Festival, HOT senior officials said that despite heavy annual losses, the company still puts 40 percent of its overall income into content, while for other companies around the world, this figure is 20 percent.

HOT told Haaretz: "We do not intend to respond to the endless rumors circulating on this matter. When we decide, the public will be infor med."

Yes' vice president of content, Yona Wiesenthal, refuses to say which channels may go, but does not deny the process is underway: "Each time an agreement with a channel expires, we examine its continuation. In several fields - news, science and entertainment - there is an excess of channels, which do not truly serve the audience. In these fields the market will adjust itself, and some of the channels will be dropped."