Panic Station? Regulators and Lawmakers Mulling Future of Channel 10

The long-struggling television station has only two options left to guarantee its survival: legislation to extend its franchise or the easing of its licensing terms.

Tomer Appelbaum

The hot potato called Channel 10 is once again being tossed back and forth between politicians and regulators – and no one wants to be the one left holding it, and bearing responsibility for its fate. Prime Minister Benjamin Netanyahu, who is also the acting communications minister, has not expressed a position on the matter of the future of the television station, while the Second Authority for Television and Radio is taking its time and is interested in finding ways to “legalize” the station’s problematic situation. The Knesset Economic Affairs Committee, meanwhile, also is in no rush to discuss the matter.

The Second Authority’s governing council will meet this Wednesday for its first discussion on the future of the commercial channel, best known for its news and investigative shows. The Economic Affairs Committee is supposed to meet on the matter a few days later. The people standing on the sidelines and watching, and waiting with their own long list of demands, are the two franchisees of Channel 2: Reshet and Keshet. Also waiting in the wings – and ready to attack any signs of giving in to the television broadcasters – are the organizations representing the independent production side of the business.

Special legislation

After Netanyahu recently decided, in a quite unusual move, to freeze the proposed law that would split up Channel 2 – which also would have allowed the continued operation of Channel 10 by lowering the entry barriers to new competitors – Channel 10 has only two options left to survive and continue broadcasting as of January 1, 2015, when its broadcasting franchise expires.

The first option is special legislation in the Knesset intended solely to grant Channel 10 an extension to its franchise for a year or two, similar to the extensions the channel has received before. While such legislation could come from the government, or as a private member’s bill in the Knesset, it is unlikely that such legislation could be passed in the month remaining before the franchise’s expiration.

Many think Netanyahu is interested in keeping the television broadcasters weak and subservient, so if he does allow Channel 10 to continue operations, it will only be in a format where its franchise is extended for a year or two at most – and then it will again be at the mercy of the politicians. Netanyahu has put a close Likud confidante, David Sharan – also head of the Prime Minister’s Bureau – in charge of communications matters. Sharan is expected to be put in charge of all contacts and seek an agreement with Channel 10.

If a law to extend the franchise does come before the Knesset, the Channel 2 franchisees will not sit on the sidelines any longer. They are expected to demand a long list of better conditions for themselves, including lessening demands for original productions and lowering payments to the state. In particular, they will demand equality with the terms granted to Channel 10, including also extending their franchises – in other words, allowing things to remain the way they are currently until the end of 2019.

The second option open to Channel 10 is receiving various concessions that will allow it to begin operating under the new license system, with a broadcasting license for 15 years. This is definitely the preferred solution for Channel 10 CEO Yossi Varshavsky.

In the past, the station mostly made declarations about the possible entry of new investors. This time, however, it is preparing for continuing operations under the present ownership structure, in which none of the shareholders – Yossi Maiman, who is the controlling owner; and film producer Arnon Milchan – is willing or able to put up more money. The Dutch investor Nina Storms has officially said she is no longer interested in investing, as did another possible investor, who seems to have realized just how dire the situation at Channel 10 is.

The problem is that in order for Channel 10 to receive a license under the new rules, it must show financial strength and stability. Since it does not have a deep-pocketed owner, management is now trying to present a rosy picture – as if the station was financially stable on its own at the moment. In reports to potential investors, Channel 10 has claimed it will show an operating profit of 6 million to 8 million shekels ($1.5 million to $2.1 million) for the fourth quarter of 2014, and has openly declared it is on a firm financial footing.

The change in the financial situation for the long troubled and money-losing channel is the result of both cuts on the spending side and improved revenues. On his return to Channel 10, Varshavsky instituted a series of deep spending cuts, including firing staff and cutting salaries, alongside cutting down the costs of production and canceling expensive productions such as consumer affairs show “Kolbotek.”

At the same time, Channel 10 had a number of on-screen successes that increased revenues, along with a consistent rise in ratings for its evening news program. The problem is that advertising revenue is still down, mostly because the media purchasing companies are really the ones funding Channel 10’s operation in practice by paying for advertising time in advance – in return for higher fees returned by the station.

Who will postpone the debt payments?

The main battle being fought by Channel 10 is against the Second Authority and its CEO, Shai Babad. Babad, who was behind the law to split up Channel 2 from the beginning, is still a big supporter of the change, despite the blow from Netanyahu. Babad has the support of Avishay Braverman (Labor), the chairman of the Knesset Economic Affairs Committee. However, without a communications minister – since Gilad Erdan left to become interior minister – it seems Babad has no partner and the law will remain frozen.

In order for Channel 10 to receive its hoped-for broadcasting license, it must first perform some very tricky legal acrobatics. The Second Authority’s legal adviser, Hila Shamir, will be the one who needs to provide the official legal stamp of approval for postponing the station’s debts – and other legal issues – and it seems she is unwilling to be pushed into such a position. Firstly, the deadline for requesting a broadcasting license has already passed, and the Second Authority was supposed to have provided an answer by the end of March 2014. However, it has relied instead on a legal opinion allowing it to delay providing the answer until the very end of the year.

Franchise fees

Channel 10’s biggest violation of its franchise agreement – and licensing terms – is the huge debt it has accrued to the state for its franchise fees – 33 million shekels. In fact, this debt should have led a long time ago to the cancellation of its franchise permit – or, at the very least, to the seizure of the financial guarantees the station put up, based on the 2012 law when Channel 10’s franchise was extended.

The Second Authority is considering calling in the station’s 45 million shekels in guarantees, which in turn could result in Channel 10’s immediate closure. The authority also does not accept the station’s position that it is in stable financial shape. In any case, granting Channel 10 a license under such circumstances, with such high debts to the state, is impossible, and even Channel 10 knows it must somehow find the money to pay its debt.

The station also owes another 17 million shekels to film industry investors, though this sum can be put off for a year – if the broadcasting authority agrees. Channel 10 also owes some 12 million shekels for underfunding high-quality programming content, but the station hopes the Second Authority will view this as just a minor infraction and offset it with overinvestment from previous years, which will allow it to delay the payment.

Ultimately, it seems likely that Channel 10 won’t shut down and will continue broadcasting. At this stage, though, the hot potato is still being passed around and no one wants to take responsibility for being the one to sign off on the closure of the station – or for saving it through controversial methods. Things are now in the hands of Channel 10’s employees, who will soon be forced to venture out and take up the fight for their livelihood.