Anatomy of a Station's Demise

Channel 10 has been mired in debt since its inception.

Monday's Knesset Finance Committee decision to force Channel 10 to repay its debt on time may end up being the straw that broke Channel 10's back, but the commercial station has never been a stable enterprise.

Since January 2002, when the station was founded, it has racked up an estimated NIS 1.3 billion in losses, according to Yossi Maiman, the majority shareholder.

Before it even went on the air, the bidding process was subject to legal wrangling. The outcome was two franchise holders, just as with Channel 2, Israel's first commercial television station. But only one of them, Israel 10, actually ended up broadcasting, and it had a hard time getting ratings and creating new TV-watching habits.

After sustaining heavy losses, Channel 10 suspended operations in April 2003. It was rescued from oblivion by shareholders Ron Lauder, an American Jewish billionaire and president of the World Jewish Congress, and Shlomo Ben-Zvi, who established Israeli media conglomerate Hirsh Media that year, with Lauder.

Between 2004 and 2006, Channel 10 accumulated heavy debts in money owed for content, for its required investment in Israeli cinema and for franchise and royalty fees.

In 2008, as Channel 10's first franchise term was coming to an end, it owed more than NIS 100 million, which it was supposed to repay before its franchise was extended. After an agreement on the matter was postponed, the Second Television and Radio Authority began preparing for a new tender for Channel 10. In the summer of 2009, Maiman, the CEO of the brokerage house Ampal-American Israel Corporation - who holds 51 percent of the shares and has long been considered the station's financial backbone - announced that he and the other shareholders would not put more money into the station.

It looked like the station was once again at the end of the line, but after a struggle that involved the Channel 10 employees, an agreement was reached allowing the channel to pay its debts gradually. It also allowed for the franchise to be extended by two years.

The station paid its debts to content providers and took other steps to meet the franchise conditions, such as preparing to move its news department to Neveh Ilan. But it still has a debt of some NIS 60 million in franchise payments and royalties, of which it is supposed to receive a NIS 15 million refund from the Second Authority. The current franchise term, which has already been extended, ends at the end of January.

According to an agreement reached two years ago, Channel 10 was supposed to repay all its debts by the end of this year. But that agreement was reached when it was thought that a licensing system would replace the franchise system in early 2012, and that date has since been moved to 2013 - prompting the request Channel 10 was denied on Monday, for a one-year extension of the deadline by which it must repay its debts.

Maiman said in a statement through Merhav Group, whose companies are involved in project development, contracting and finance, that the government is expected to do its part to help Channel 10 survive.

"No one is asking to renounce the debt, just to defer it by a year," he said. "Over a decade it has been clear that the business is not making a profit and [the shareholders] continued to put in money. Now they expect the government to act in a way that will enable [Channel 10's] continued existence."