Creating the Perfect 10

Channel 10 has some good points. It competes against Channel 2 in the news arena, it led to a 30-percent drop in television advertising costs and it even helped promote the market for local productions.

Channel 10 had rotten luck from the beginning. It was launched in January 2002, at the height of the second intifada, a time of serious economic crisis, rising unemployment and negative growth. All of its economic ambitions were dashed by the facts on the ground. Since then, there have been a few good years, but the channel loses about NIS 100 million a year and its cumulative losses number some NIS 1 billion.

The channel's first years were rife with mistakes on both the managerial and the editorial sides that contributed to its financial losses, but the state also played a large part in keeping it from developing. The state wanted to have it all: to be both a commercial channel and a high-brow culture channel. A channel that would be entirely advertising-supported, but which would also spend money on quality programming, original Israeli dramas and documentaries. The only problem is there are not enough viewers to support that kind of programming, and when there are not enough viewers, there is not enough advertising revenue.

In addition, the state built a monster known as the Second Authority for Television and Radio, with 60 employees and a budget of NIS 70 million. The enormous budget comes not from the state, but rather from the entities under the authority's supervision: Channel 2 and Channel 10 (plus a small amount from the commercial radio stations). Channel 10 alone feeds about NIS 30 million every year to the Second Authority.

And the Second Authority has a rather well-developed appetite. It spends a few million shekels a year just on advertising and public relations, as well as NIS 7 million on "independent productions" whose viewer ratings are likely to be near zero.

If the state wants a culture channel with a high proportion of "elite genre" programming, it has the state channel, Channel 1, for that purpose. It is the channel that is supposed to broadcast high-brow programming because it does not have to worry about advertising and viewer numbers. The channel is supported by the licensing fee that every household is obligated by law to pay. This year each household will pay NIS 376 and Channel 1 will received NIS 600 million which it will use to underwrite hidden unemployment and nostalgic television, drowning in rebroadcasts from decades past - it's a far cry from any "elite genre."

Nevertheless, it is true that Channel 10 has not met its obligations. The station owners were aware of all of their obligations in advance, but failed to meet them. The channel does have some good points. It competes against Channel 2 in the news arena, it led to a 30-percent drop in television advertising costs and it even helped promote the market for local productions. In addition, in a democracy there is an added value to having another television channel. After all, the media is in effect the "fourth estate," providing information and facilitating a broad range of opinions. For that reason, it is worth making an effort to keep Channel 10 alive.

For that to happen, the regulatory burden must be reduced. The budget of the Second Television and Radio Authority must be drastically cut and the treasury must learn to live without royalty payments (four percent of revenues) for as long as the channel is losing money. The demand for "elite programming" should also be reduced to enable the channel to survive for another two years.

That's because in two years' time another big change is coming. Israeli television broadcasting will go digital, a step that will reduce costs and allow for an increasing number of channels. That would be an appropriate time to abandon the obsolete franchising method in favor of licensing.

The franchising system is totally distorted. A few government clerks determine the number of commercial channels and what they will broadcast at any given time, all of it in a fat book numbering hundreds of pages. It is suitable to North Korea, not a democratic state. Under the current system, a few officials sit as supreme judges in a kind of beauty pageant as each potential franchisee promises the moon and stars without any intention of delivering the goods.

Under the licensing method, anyone with sufficient capital can start a commercial channel. All they have to do is pay a modest licensing fee, comply with simple regulatory guidelines and undertake to provide a reasonable amount of high-brow "elite" programming.

Several groups of investors would be able to establish a few commercial stations that would compete with each other. This would also do away with the current duopoly in commercial television. Channels 10 and 2 will have rivals - and only the best will survive.