About three months ago Israel Twito, acting CEO of Channel 13 News, and Tali Ben Ovadia, the editor of the Kan public television investigative series “Zman Emet,” boarded a plane to London. The two were candidates to replace the ousted CEO of Channel 13 News, Golan Yochpaz, and they had been invited to meet with Len Blavatnik, the company’s controlling shareholder.
News of the trip aroused considerable surprise in the media industry. Blavatnik, who until then had not been involved in the broadcaster’s day-to-day business, was suddenly demonstrating a profound interest in the hiring process.
Channel 13 News was looking for a CEO after Blavatnik’s representative, Nadav Topolski, led a move to oust Yochpaz. Last week the board of directors decided to give Twito the job on a permanent basis. That came after Channel 13 CEO Yossi Warshavsky expressed support for Twito, who is judged likely to meet the needs of the shareholders and of Warshavky.
The hiring process at Channel 13 News illustrates the growing tendency of businessmen who own Israeli media outlets to involve themselves in news operations. Blavatnik, whose fortune is estimated by Forbes magazine at $17.3 billion, made his money in the energy industry after the disintegration of the Soviet Union. He has holdings in the chemical giant LyondellBasell Industries and several other large corporations, including Warner Music, the sports streaming service DAZN and Israel’s Clal Industries, which owns the cement monopoly Nesher.
Small player goes big
Until this year Blavatnik was a small player in the Israeli media market, owning one-third of the RGE Group, which owns Sport 5 and the Kids’ Channel. In 2015 RGE acquired control of Channel 10 Television, but Blavatnik had little involvement in the business and at one point even tried to sell all his holdings. When Reshet and Channel 10 merged, in January, he became the controlling shareholder of the merged channel, with a 52% stake.
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Blavatnik seems set on increasing his influence in Israel. Now his Israeli staff has approached Bezeq, Israel’s dominant telephone company, about buying its popular Walla website, which is up for sale. There are large gaps between the sides about the price, but if the deal is closed Blavatnik will have control of one of Israel’s two major websites.
The tightening control of the Israeli media by tycoons is a direct outcome of the shrinking media market. Revenues of media organizations have plummeted by tens of percentage points in recent years, mainly due to the decline in advertising spending and the move of much of the spending to the global internet giants Google and Facebook. In addition, phenomena unique to Israel, such as the popular free daily newspaper Israel Hayom and distortions in the commercial television industry, have created a media oversupply that has saddled the biggest players with losses and left them fighting for survival.
As a result, investors who in the past owned media outlets in order to make a profit now rarely do so. That makes it a buyer’s market for players who own media “for the wrong reasons.” These are people who care little about the red ink so long as they can boost their influence on the public discourse.
The trend of the shrinking of media organizations will probably worsen.
Like their counterparts across the developed world, Israeli media companies are trying to find a business model that will restore profits and increase revenues in the internet era. Haaretz-TheMarker, for example, has switched to a model of internet paywalls, but no other media outlet in Israel has fully adopted this model, and content continues to be distributed free of charge. That means that the traditional business model of media outlets, a combination of income from advertising and subscribers, is starting to be disrupted.
Blavatnik is not the only business mogul who has accumulated great power in the Israeli media industry in recent years. Due to structural changes in the industry, the ownership map has been changing. The good news is that quite a number of tycoons or other business groups, who took control of media outlets in order to increase their political influence, have exited from the market.
One of the biggest of the tycoons, Eliezer Fishman, declared bankruptcy, and nearly three years ago he ceded control of his holdings in the financial newspaper Globes and in the daily Yedioth Ahronoth to creditors.
Idan Ofer exited the local television market with the Reshet-Channel 10 merger while Shaul Elovitch ceded control of the Bezeq group, including Walla, under the combined pressures of Israel Securities Authority and police investigations and huge debts.
Yossi Maimon and Arnon Milchan unloaded their shares in Channel 10 in 2014. Two years earlier Nochi Dankner sold the daily Maariv as his IDB group was collapsing under the weight of debt. Before that, tycoon Lev Leviev sold his holdings in the Russian-language Israeli TV station Channel 9.
But the exit of these tycoons did not necessarily change the media market for the better and may have made the situation worse. The holdings of those who left the market were not acquired by media investors. On the contrary, control has moved to a new generation of billionaires and other problematic figures.
Israel’s commercial media has always been controlled by wealthy businessmen or people with significant business interests outside the media, but now their control is far more centralized.
Wertheim expands his control
Take the Wertheim family, whose business empire includes Central Bottling Company (Coca-Cola Israel), the Tara Dairy and Mizrahi Tefahot Bank, Israel’s third-largest lender. Together with his sister Drorit, David Wertheim now controls Keshet, the Channel 12 broadcaster, in the wake of the Reshet-Channel 10 merger. Prior to the tie-up, the Wertheim siblings had indirectly owned only about 25% of Channel 12 News. The businessman Yitzhak Tshuva also had 25%, and Reshet shareholders held the other half. After the merger, Keshet and Tshuva acquired full control of Channel 12 News on a 50-50 basis.
The most famous billionaire in Israeli media is Sheldon Adelson and his wife Dr. Miriam Adelson. They got a foothold years ago with Israel Hayom and have increased their public influence since 2014 by buying the weekly religious Zionist newspaper Makor Rishon from Shlomo Ben Zvi, for 14 million shekels ($4 million at current exchange rates).
Another tycoon who has increased his power is Yitzhak Mirilashvili, son of the Russian oligarch Michael Mirilashvili. Yitzhak is the controlling shareholder of Channel 20. The channel never met the requirements of its license, according to which 70% of its content had to do with “Jewish heritage.” Nevertheless, in 2017 its status was upgraded in an expedited legislative procedure, entitling it to broadcast any content, including news. However, the channel is in deep trouble in light of its low ratings, and produces almost no original content these days.
In 2018 Mirilashvili also acquired full control of the ultra-Orthodox radio station Kol Hai, thereby increasing his influence on the public discourse in the Haredi sector.
Globes, which was controlled by Fishman, was acquired by Alona Bar-On and Anat Agmon in 2017. As opposed to Fishman, who had used his media power to support his other wide-ranging business interests, the new owners are making significant changes and making the newspaper editorially independent, while placing an emphasis on public trust.
However, the two women are not active only in the media industry. Bar-On is the daughter of the newspaper’s founder, the late Haim Bar-On, as well as a shareholder in the Bait Vegag real estate firm. Agmon is the ex-wife and partner of Marius Nacht, one of the founders of the cybersecurity firm Check Point Software Technologies, whose personal fortune is estimated at over $2 billion.
The suspect who wants more control
Various laws have been passed in Israel to curb cross-ownership, when one group has holdings in several media organizations at the same time, in order to avoid a situation in which a small number of corporations has outsized influence on public opinion, possibly to the extent that it affects the actions of decision makers.
One law prohibits the owner of a newspaper from having shares in a television broadcaster. The Business Concentration Law, passed in 2013, set the bar even higher. It is designed to prevent a broadcast license from being issued to any business group designated as having control of a particular industry.
But in effect, in light of the changes in the media map, the owners of the media groups are succeeding in centralizing power. The most significant transaction now on the agenda is Yedioth Ahronoth publisher Arnon Mozes’ plan to strengthen his hold over the media group.
Before he can act, Mozes has to wait for a decision regarding an indictment in Case 2000, an investigation of allegations that Mozes and Benjamin Netanyahu discussed a deal to increase positive coverage of the prime minister.
In the meantime, some of Mozes’ partners in the group have expressed interested in acquiring Fishman’s 34% stake in Yedioth from creditor Bank Hapoalim.
A deal in this vein had been show to the court for approval, but after it was opposed by other shareholders, including the Yudkovsky family and Mozes’ sister Judy Shalom Nir Mozes, it was abandoned. The assumption is that Mozes is as determined as ever to make it happen, and that it will come up again soon in one version of another.
The Yedioth empire is extensive, including not only the daily paper but also the Ynet website, the financial daily Calcalist, the Yedioth magazine network and the Yedioth chain of local papers. Mozes also has a stake in the Israeli sports channel ONE. In addition, Mozes’ daughter and son-in-law, Hadas Mozes and Yaron Lichtenstein, own the ADD production company.
Another publisher who has increased his power in recent years is Eli Azur. After the collapse of Maariv, Azur bought the paper for just only 4 million shekels. But he already owned the English-language daily The Jerusalem Post, the sports broadcasting company Charlton and the 99 and 103 regional radio stations. (Proper disclosure: The Jerusalem Post has filed two lawsuits for slander against TheMarker and against this writer.)
The German Dumont Schauberg Group, which holds 20% of the Haaretz-TheMarker Group, is offering its holdings in the newspaper for sale. In the past there was a possibility that the Schocken family, which owns 60% of the newspaper, would purchase Dumont Schauberg’s share, but at this point there is no deal on the horizon.
Vis-a-vis the television industry, lawmakers tried to find a way of offsetting the deleterious effect on money-losing media outlets and their control by businessmen. In 2014 the law to replace the Israel Broadcasting Authority with the Kan public broadcaster was founded. With an annual budget of 750 million shekels, the corporation was supposed to fix the market failure of commercial broadcasting while creating news content and also doing investigative reporting — areas in which commercial broadcasters struggle when they are losing money. But Kan broadcasts mainly entertainment and cultural programs rather than news and investigative content. It hasn’t met expectations.
When that is the situation in the industry, it’s no wonder that three of the police investigations concerning Netanyahu deal with the problematic web of relationships among business, media and politics. They disclose alleged attempts by Netanyahu to control the public conversation by granting favors to the owners of popular media outlets.
But the real failure is not Netanyahu’s actions, it’s the ownership structure of the media market, which enabled Netanyahu — and of course many other politicians, before and alongside him — to have such a corrupt relationship with owners of the media outlets. And on this matter the trend looks very negative.