TV Without Channel 10, but Two Channel 2s

Regulators push plan for Channel 2’s two operators move to seven-day broadcasting.

Channel 2

Faced with the possible demise of Israel’s Channel 10 television, regulators are rushing ahead with a plan to prevent the country’s television viewers from being left with a single commercial broadcaster and one source of local television news.

Shai Babad, the director of the Second Television and Radio Authority, together with Communications Minister Gilad Erdan, want Reshet and Keshet, which now share Channel 2, to each broadcast seven days a week on its own channels from as early as the start of next year.

In a plan unveiled this week, they also said they want the two franchise operators to break up their new joint venture.

On Thursday, Babad and Erdan got important backing for their proposal from the Finance Ministry, which offered to release 35 million shekels ($10.1 million) of the nearly 200 million shekels that Reshet and Keshet paid for the licenses in 2005.

The treasury doesn’t care whether Israeli viewers get enough “Big Brother” programming, but it does want to ensure sufficient competition in commercial television.

Nevertheless, the plan as it has been formulated has run up against strong opposition from the broadcasters, who say it will entail enormous expense for them. Among other things, they fear they will need to spend money on marketing and developing new programming in preparation for the split, even though Channel 10’s fate is unclear.

In fact, the Babad-Erdan plan is contingent on Channel 10. Channel 10, a perpetual also-ran in the ratings, has at least 100 million shekels in debt and is looking for an investor to replace the U.S. billionaire Ronald Lauder. That debt doesn’t include money owned to independent producers and other suppliers, nor has the station paid some 13 million shekels in license fees it owes the Second Authority.

Nevertheless, the authority is so determined to keep the broadcaster afloat that it hasn’t made an issue of the nonpayment.

Channel 10 executives remain optimistic about finding a new backer. They say they are seeking an extension of their license, which expires at the end of the year, believing they will find one before then.

Channel’s 10 rivals are also not confident they will have the playing field to themselves, noting that the station has been rescued at the last minute before, most recently in 2012. But others, including regulators, think Channel 10’s days are numbered.

“Channel 10 has no business plan,” one industry source told TheMarker, speaking on condition of anonymity. “They have burned through 1.4 billion shekels and now they have to arrange the funeral. The only thing that could save the channel is a miracle in the form of an oligarch with too much money.”

Apart from the question of whether Channel 10 will stay on as a competitor, there is the issue of the extra costs to Reshet and Keshet of each taking on a full seven-day schedule instead of sharing the week on one channel as they do now.

As it is, they were supposed to move to separate broadcasting in 2017; the Babad-Erdan plan would move up the schedule. That would have only a few months to ready programming and promotions, an effort that industry sources says could cost each of them anywhere from 250 million shekels to 400 million shekels. Of that, 150 million shekels would go on the creation of original programming.

The operators would need additional working capital, for which they would need bank loans, with guarantees provided by their rich shareholders.

In addition, the Babad-Erdan plan would require Reshet and Keshet to split up their joint news operation. That alone would cost each side some 50 million shekels each, unless one of them took over Channel 10’s news operations.

Reshet and Keshet executives say they don’t yet even have a plan for separate broadcasts – and they don’t want to devise ones until the future of the industry has been clarified. An executive for one of the two operators warned that as the proposal is currently written, the operator would not apply for a broadcast license, a step that would effectively thwart the government’s plan to ensure TV competition.

“We would be a lot more comfortable to continue broadcasting our content over cable and satellite, without the commercial broadcast channel,” the executive said.

“The regulator is the weak link in this story,” said one executive, who asked not to be named. “He needs to decide. We don’t want anything from him except for our due. Reshet and Keshet will cope with the reality created by the [Communications] Ministry. Basically we’re looking in from outside.”

Despite the broadcasters’ reservations, Babad is determined to see through his plan and to act quickly before political pressures begin to mount. As it is, the two Channel 2 franchise operators control 75% to 80% of all TV advertising revenues.

He also wants to reform broadcast licensing so that all the franchisees are subject to the same 15-year terms, although he will only go ahead with that aspect of his plan if Channel 10 is shut down before the end of the year.