A Facelift Is Not Enough for Ron Lauder's Channel 10

The beleaguered television station got a new lease on life in December. But six months later, programming and money woes return.

In May, the employees of Israeli television's Channel 10 threw a grandiose party in Tel Aviv to celebrate the extension of their operating license. The guest of honor was the channel's principal financier, American Jewish businessman Ron Lauder, heir to the Estee Lauder cosmetics empire, who owns 30 percent of the channel.  At the start of the evening, attendees stood, with prompting from the channel's leading meteorologist Danny Roup, and applauded Lauder.

They had good reason: To date the billionaire has invested about $100 million in the losing channel, which today is entirely dependent on him. Although the controlling owner of the channel, Israeli businessman Yossi Maimon, has invested about half a billion shekels in recent  years, this year he stopped because of problems with his company Ampal, which used to pipe gas from Egypt to Israel.

At the party, Lauder spoke of the channel's great importance to him. He mentioned the Second World War and said that television is the only means of guaranteeing freedom in the world. He added that when he meets with leading Jews around the world, they ask him about his television station rather than about the schools he funds in Europe.

But the situation at the station that means so much to him is still deteriorating.

Two weeks ago, senior executives met in the luxurious El-Al lounge at Ben Gurion International Airport on their way to meet Lauder in the United States. The members of the group were board chairman Avi Balashnikov, new CEO (and popular TV presenter) Rafi Ginat, Deputy CEO Yoav Heldman, and the CEO of Channel 10 News, Golan Yochpaz. Arriving on a separate flight was Michal Grayesky, chairwoman of the channel's finance committee.

The trip came half a year after the Knesset Finance Committee voted to rescue Channel 10 from closure, owing to its staggering debts. The channel immediately went to Lauder for help and he promised to inject NIS 80 million – which is now almost used up.

So they went back to ask for more: Industry sources claim that the senior Channel 10 executives asked for another NIS 60 million – NIS 70 million to finish out 2013 and achieve operational balance in 2014.

In January 2013 things looked different. The channel embarked on a new path with new management, new investment, a variety of new programs – and a new regulatory horizon, at the end of which a permanent license awaits. But even then, it was clear that Lauder's NIS 80 million wasn't enough to guarantee the channel's future. Whether from a new investor or from Lauder himself – someone would have to bring in more money.

The main objective for Balashnikov, Grayevsky and Ginat six months ago was to breathe new life into the channel and financially strengthen it either by finding a new investor or merging with the Channel 2 franchisee Reshet. At the moment, they're still far from their goals.

The deadline approaches

The average prime time ratings for Channel 10 have not only failed to pick up, they actually declined by about 20 percent in the first half of 2013, compared to the first  half of 2012 when the channel also offered a weak broadcast schedule and a large number of reruns. Its dependence on external capital is far from over, and Lauder is still the only one willing to provide breathing space for the channel. Without a fast improvement in its condition, it's hard to see how the channel will be able to achieve independence in the foreseeable future.

And the deadline is approaching. By the year's end, the channel will have to submit a request for a permanent license. As part of the agreement with the government, its business plan will be examined, and a balanced budget is one of the main requirements to ensure that the channel will be able to return its NIS 60 million loan to the government, and meet other regulatory obligations. Without operational balance and debt repayment, the channel won't get the license.

In terms the channel's prime time viewing share, there was a decline from 29.5 percent during the first half of 2012 to 24.8 percent in the present half. The low ratings of the channel's news programs are worrying senior industry officials, including some who work with the channel regularly. But the channel did succeed in increasing the number of advertising minutes and sponsorships, in some part due to the recovery of the advertising business in general.

On the leadership side, the choice of Ginat as CEO took the Israeli television industry by surprise. His appointment, which was signed and sealed months before the channel's license was extended, was mostly a matter of image since he's seen as strong and influential. According to industry estimates, Ginat's switch from Channel 2 to Channel 10 came with a salary of NIS 5.6 million – NIS 6.6 million annually, before taxes. The channel still stands by its choice.

"Since we appointed Ginat and Yochpaz, the channel has been undergoing a serious facelift," claims board chairman Balashnikov, calling the atmosphere one of activity and creativity. "There is greater satisfaction with these appointments, and there is new blood flowing in the system."

But Balashnikov refused to discuss the issue of additional investments by Lauder.

"The shareholders have set a goal of turning Channel 10 into Israel's leading channel, and we're working on that day and night," he says. "We aren't abandoning the administrative and budget aspects and are working in parallel."

Though the channel won't discuss the search for more investments, one senior official said, "Channel 10 has been blessed with shareholders who want it to succeed, are committed to it and are providing the support necessary for the channel's activities."

Ron Lauder
Bloomberg