Gov’t Panel Proposes Big Shake-up of Television Industry

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A Channel 2 television studio.Credit: Daniel Bar-On

A government committee is proposing the first big shake-up of Israel’s television market in 25 years, with a wide-ranging plan to inject more competition into a market now shared by just four major players.

An interim report obtained by TheMarker prepared by an interministerial committee led by Shlomo Filber, the director general of the Communications Ministry, outlines a plan to remove barriers to new entrants to the TV market, reducing requirements for a minimum amount of locally producer content, and rules designed to encourage new players.

Israel’s TV market is dominated on the commercial broadcast side, which relies on advertising for its revenues, by Channels 2 and 10, which control 66.5% and 28.1% of all advertising spending, respectively. The remaining 5.4% is split between a handful of tiny broadcasters like the all-music station Channel 24 and Channel 9 in Russian.

The market for multichannel television which generates its revenues from paid subscriptions, is shared by Hot with its approximately 828,000 cable subscribers and Bezeq’s Yes satellite TV unit, which has 639,000. Cellcom TV, which was launched last year by the mobile telephony company, is way behind them with about 50,000 subscribers.

Prime Minister Benjamin Netanyahu, who is also communications minister, has expressed support for more competition in TV and appointed the Filber committee last September to propose recommendations about how to do it.

The government wants to encourage more entrants to the broadcast market mainly by exempting them from the requirement to produce news programming or “elite” original programming until it captures significant market shares. New multichannel entrants would be able to enter the market without meeting any requirements at all.

The committee report is highly critical of Israel’s current TV regulation, which has raised costs to viewers and failed to adapt to changing broadcast technology. Theoretically, anyone can apply for a TV broadcast license but there have been no takers because of Channel 2’s dominant position in the market.

But the Filber committee said the TV market is going through an interim phase where broadcast infrastructure and content are two separate businesses, much like Hot and Yes operate now. That phase won’t last long as the television market is rapidly moving to a new era where viewers don’t distinguish between how their video content reaches them – by cable, satellite or Internet.

The Internet doesn’t suffer the same limitations as broadcast and can host a virtually unlimited number of broadcasters, opening up new possibilities for competition, the report said. When that happens, the committee said, it hoped plans under way for a single regulatory body would be in place to replace the Second Television Authority and the Cable and Satellite Council.

The Knesset resumed debate on the new unified authority last week.

Meanwhile, the government is hoping to break Channel 2’s lock hold on broadcast television in October 2017 when the licenses of the Reshet and Keshet franchisees expire. The two companies, which now share Channel 2, will be forced to offer seven-day-a-week programming in complete competition with each other Channel 10.

The Filber committee said the main barrier to new entrants into broadcast TV is the high costs for original programing and news, which together can reach 130 million shekels ($32.7million) annually. Exempting them from the two requirements for at last three years or until they capture an as yet undefined market share should encourage both general broadcasters and those wanting to serve specific categories, like all news or all music.

Existing broadcasters will also enjoy some regulatory relief, particularly over content, such as strict definitions of programming categories– a power the Second Television Authority this month exercised when it vetoed plans by Channel 2 to extend the length of its nightly news broadcast – and power to approve broadcast schedules.

The Filber committee also wrestled with the issue of how to regulate Internet broadcasters, which became a serious practical challenge with the entry of the American web broadcaster Netflix earlier this month to Israel.

The panel was also concerned with local content disappearing if requirements are eliminated to produce it. It estimated that the current rules create 400 million shekels annually in spending on local programming. The Filber panel rejected a plan proposed in the past to set up a government fund to produce programming and said instead it hoped competition would encourage broadcasters to produce it to attract viewers.

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