After 16 Stormy Years, Israel's Channel 10 Due to Go Off the Air

Merger with rival, which won an antitrust nod last week, will leave Israel with just two commercial broadcasters

Tali Moreno on Israel's Channel 10.
Screenshot

Just like the big U.S. banks that were bailed out in the 2008 financial crisis, Israel’s Channel 10 was long regarded as, if not too big to fail, at least immune from failure. Over its 16-year lifetime, it survived multiple financial crises, came close to collapse, burned through tens of millions of dollars of capital and fought with regulators and politicians.

But until last week, Channel 10 survived it all. Now that Antitrust Commission chief Michal Halperin has approved a merger, rival broadcaster Reshet will be swallowing it up. The only surviving remnant will be Channel 10’s news division. 

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Halperin gave the nod on the assumption that if the merger wasn’t approved, Channel 10 would be shut down anyhow after its shareholders said they would put the broadcaster into receivership. 

The only condition she set for the tie-up was that Reshet sell its 50% stake in its joint venture TV news unit with its former Channel 2 partner Keshet. That will at least assuage the fears of the Antitrust Authority that if the merger hadn’t gone through the Reshet-Keshet joint venture would have dominated the broadcast news industry.

The merger still needs the approval of the Second Television and Radio Authority, which in turn will consult with the government committee on business concentration. The authority is likely to add further conditions on the merger. In addition, at least one non-profit, Hatzlacha, is planning a court appeal.

>> The Independence of Channel 10 News Must Be Protected | Editorial 

Sources have told TheMarker that Reshet and Keshet are seeking to wind up talks on the sale of Reshet’s news stake in a deal that values the division at 200 million shekels ($53.8 million).

Channel 10’s problems preceded its formal launch in 2002. The Second Channel Authority grossly overestimated the size of the television advertising market and awarded the Channel 10 franchise to two companies, one of which, Eden Broadcasting, quickly failed. That left Channel 10 as the sole licensee.

Its backers were some of the biggest names in Israeli business at the time, including Yossi Maiman and Alfred Akirov, but it was unable to present real competition to the dominant Channel 2 franchise and quickly sought a stay of proceedings. 

A year later, however, the American billionaire and Zionist activist Ron Lauder invested in the broadcaster and two years later the Israeli-American Hollywood producer Arnon Milchan joined him. All told, shareholders lost some 1.6 billion shekels on Channel 10, but it was Maiman who lost the most. “Every month I lose the equivalent of a villa in Kfar Shmaryahu,” he once quipped.

In 2008, its then CEO Mori Friedman, decided the time had come to take on Channel 2 as equals and invested heavily in programming like the Israeli version of “Survivor.” The expensive bet at the peak of the reality show fad brought high ratings but didn’t save the business.

A year later Channel 10 was not only in debt to independent producers but also to the regulators for unpaid royalties and licensing fees. The Second Television Authority threatened to take away its franchise, but under political pressure ultimately gave the broadcaster a two-year extension.

The Knesset was ready to ease Channel 10 license terms, but in 2011 the broadcaster’s Raviv Drucker exposed the “Bibi Tours” affair, earning the enmity of the prime minister and the start of a lengthy campaign to close it down. 

In any case, Channel 10 was on the brink of closure by the end of 2011, this time over debts, and again at the end of 2014 over failure to meet the terms of its broadcast license. Netanyahu became personally involved in the broadcaster’s fate, an issue that now stands at the center of the Case 1000 investigation against him and the gifts he received from Milchan

Again and again Channel 10 got regulatory breaks and in 2015 control moved to RGE, whose shareholders included the American billionaire Len Blavatnik. Netanyahu directed his efforts at putting allies in control of its news division, but to no avail.

While formally a merger that will give 60% of the shares to Reshet’s shareholders and 40% to Channel 10’s owners, the reality of the deal is that Channel 10 will cease to exist and the commercial TV market will return to its pre-November 2017 parameters. Then, there were two players – Channel 2 versus Channel 10; now, it will be Keshet versus Reshet-10.

Not only will 120 Channel 10 staff lose their jobs, demand for independent TV productions will drop even more after a brief surge when Channel 2 was split into two. Industry sources estimate that several hundred jobs will disappear as a result.

On the other hand, Keshet, and to a lesser extent Reshet, has its eye on developing programs for overseas, which could lead to a renewed surge of spending on productions. 

As for the advertising market, little change is expected. Although the Channel 2 split brought an increase in advertising minutes available for sale and (against expectations) did cause a decline in ad rates, ad revenues for the broadcasters failed to increase.