Taking Stock / Saving Yossi Maiman

Yossi Maiman is threatening to close down Channel 10. At every opportunity, he repeats that he'd prefer to keep the channel alive, and that he would do everything in his power to make it happen. But in the same breath, he adds that he won't keep paying its bills unless the rules of the TV game are changed.

When businessmen level threats at the state, consumers, regulators, at us all - one's immediate instinct is to lash back. It's a free market, go ahead and pull the plug if you want.

Maiman says that in the current regulatory environment, the channel has no right to exist. He cannot recruit additional investors or compete with Channel 2, he says. He's probably right. But he hasn't said what's changed to lead him to that conclusion.

The regulatory environment hasn't changed in the last six months, and the sorry situation of the advertising market was known back then too. So why did he insist two months ago that the channel was perfectly viable, and that he'd keep it in clover until it hit the black? Whereas now he insists it's a doomed duck that should be put out of its misery?

The answer is that Yossi Maiman failed to understand one or more of the markets - the TV market, the advertising market or the capital market. Either his revenue forecasts were excessively optimistic, or his costs estimates were, or he thought that any day now, he'd rope in some sap happy to share the costs because TV is "sexy."

For half a year now, most analysts familiar with economic and advertising issues have been advising Maiman that given the economic situation and Channel 2's grip on the market, there was almost no chance of making Channel 10 profitable in coming years. He'd have to spend hundreds of millions of shekels until that happy day arrived, they said.

Staying cool

But Maiman played it cool. I can finance the channel, he shrugged, smiling modestly when starry-eyed reporters asked if he really was worth $3 billion, and how many yachts and private jets he has.

That was until last week. Overnight, he changed his positioning. From Maiman the billionaire who always overcomes the odds, alone, for whom money is no object - he became Maiman the royally screwed, whose business was ruined by the regulator. Time out, he shrieked. Help! I can't take it any more, I want out, I can't finance this channel any more.

So it is highly tempting to say - Mr Maiman, thanks very much, we got it. It's a free market, and if you don't like the odds, do it! Pull the plug and go back to businesses you do understand. You can't just run to the government and ask for relief if you stumble.

But that would be to fundamentally misread the situation, because the market in question isn't a free one, it's a market that was ruled for a decade by a privately-held monopoly holding a franchise from the state.

It isn't a free market because it's the government that granted the monopolistic franchise, and that arbitrarily changed the rules of the game a year ago, and broke the law, when it decided to extend the franchises held by Telad, Reshet and Keshet to run Channel 2 for another two years.

And when it's the government creating a monopoly and protecting it over ten years, it can't up and chirp one fine morning, okay, from today it's a free market. You make it, more power to you. You don't - bye bye.

When there's a single player with a monopolistic stranglehold, especially if it was born through government actions, then it's the government's job to intervene in the market and assure that new players have a chance.

Maiman's story is of course a rerun of the satellite TV story. Everybody knows by now that the government intervened in the market, granting the satellite broadcaster special privileges at first. Otherwise it wouldn't have stood a chance against the entrenched, and aggressive, cable monopoly.

It is also clear to every household in Israel that the advent of satellite improved the quality of multichannel television. Some 70 percent of Israel's households receive much better TV today than they did before satellite came along. The question is, how should the government intervene this time?

Pyrrhic victory

What's sure is that it mustn't do it through financial infusions. Businessmen are the only ones who should be risking money. Intervention could only be at the level of the channel's obligations regarding original productions. Forcing a certain minimum was fine for the era of the monopoly, but becomes less relevant when competition kicks in.

The first ones who should get the point are the creators. They fought bitterly to have Channel 10 forced to invest in expensive original shows, having failed to notice they were sawing off the branch on which they sat.

Another claim is that Channel 10 doesn't deserve help because it signed outrageously expensive contracts with stars. The claim sounds weighty, but actually, it makes no economic sense. Yossi Maiman didn't promise Miki Haimovitch hundreds of thousands of dollars because he doesn't know what to do with his money, or because he assumed he could roll it over onto viewers, or taxpayers.

Maiman cut fat checks to stars because his managers couldn't figure out any other way to attract an audience, and advertisers. But as things are, the stars, and all the rest of the managers and employees and producers, may have to accept salary cuts. Unless Maiman can show a reasonable level of overhead and a rational business model, he'll never find partners or bankers to help finance the endeavor.

Maiman and his managers are conducting a carefully timed, and publicized, crisis, with a clear strategy of obtaining as much relief as they can. Their declarations should be taken with a generous helping of salt. The question is how to break Channel 2's monopoly without giving the marketplace the message that Daddy Government is there to bail out anybody whose business turns sour.

What's sure is that if Channel 10 collapses, no one else will try to set up any other commercial TV station for years to come. That is the worst option for the viewers, the advertisers, the creators - and the employees.