Taking Stock / What Hefetz Knew

At the last possible second, Israel's TV and advertising industries gathered together Sunday to save Channel 10. Their motivation is clear: Channel 10's collapse would be the harshest blow they have felt for years. Thousands of families would lose their living, the advertising industry would reel, and the monopolistic structure of commercial television would be restored in all its ugliness.

The rise and fall of Channel 10 will be the talk of the town for months, and not only because of the PR ruckus that it has drummed up in recent months. No, the reason will be due to the length of the list of casualties. The behavior of its key shareholder, Yossi Maiman, will be studied and discussed in great detail.

But at the moment, the hottest story is who stands to gain from the channel's collapse. Ostensibly, the chief, and maybe only, gainer is Channel 2. The relaunch of its ill-fated rival cost it advertising revenues and led to a sharp increase in costs. But the main beneficiary of Channel 10's implosion is a surprise candidate who hasn't been involved in the TV industry at all.

That would be attorney Zvi Hefetz, deputy chairman of Ma'ariv and the man chiefly known, until two weeks ago, as Vladimir Gusinsky's representative in Israel.

Hefetz has a vested interest in the fall of Channel 10. During January and February this year, he negotiated an investment in the station with Maiman and Channel 10's management in Gusinsky's name.

But in March, he suddenly announced, on Gusinsky's behalf, that the idea had fallen through, because the investment wasn't a good deal and involved excessive sums of money. He added that in contradiction to statements from Maiman's associates, the talks never reached an advanced stage, but had been preliminary in nature.

A few days after abandoning the talks, Hefetz granted his first interview to Haaretz. Inviting the reporter to his home in plush Savion, Hefetz discussed how rich and powerful he is, and that he isn't associated with Gusinsky at all.

"I lived in Savion before meeting Gusinsky," he said. "When they write in the papers that I represent him, that is a mistake, but I'm sick of correcting it. To the best of my understanding, a representative is when some big cheese hires a general to take care of his interests. That is not the situation here. Gusinsky has an official representative in Israel to handle his Russian television matters. In recent years, I have devoted most of my time to Ma'ariv, but now I'm looking to get into business for myself," Hefetz said.

Three days later, the connotation of his disclosures became apparent when Hefetz announced he had bought half of Formula Systems' shares in Israel News. The agreement includes an option to increase his stake.

Hefetz paid $800,000 for the stake, and said he had bought it for his personal interests. Gusinsky holds a 25 percent interest in Ma'ariv, and is precluded, for regulatory reasons, from buying a stake in the news channel.

The deal is surprising not only because $800,000 is a hefty chunk of change for a private individual, but also mainly because Israel News hasn't been able to get its act together for a year now, and most analysts foretell its failure.

Market sources had been saying that Maiman's decision to set up an independent news company for Channel 10, instead of using Israel News' services, signed its death warrant. Israel News' entire business plan had been based on selling news content to Channel 10.

Moreover, Maiman poached Ran Landes from Channel 2, giving him a $15 million budget to establish the independent news company. He then broke Israel News' professional backbone by lifting the price tags of star quality, who were in turn poached from Israel News.

So why would Hefetz suddenly invest in a channel that's been considered a walking corpse for months? His reasons may have become clearer this week as Maiman threw up his hands and gave Channel 10 one more week to live.

The looming collapse of Channel 10 took many in the television industry by shock, but not Hefetz. During the protracted talks he held for Gusinsky, he must have learned just how much cash the young commercial channel was burning up, and how desperate Maiman had become to find fresh investors. He probably guessed that its demise would be a lot sooner than anybody thought.

The death of Channel 10 could well be the harbinger of renewed life for Israel News, for several reasons:

1. The market suddenly will be flooded with TV people, equipment and studios desperately seeking a happy home. The cost of employing anchors, correspondents, editors and producers will nosedive. Israel News can snap them up at bargain-basement rates.

2. Channel 10's collapse makes Israel News the only alternative against Channel 2 for advertisers. Unlike Channel 10, Israel News is not committed to expensive independent productions. It now has a stellar opportunity to establish a lean, mean news machine that could become profitable within a few years.

3. Channel 10 may wind up merging with Israel News, a step most of the regulators around the table supported Sunday.

Some advertising and media sources remain skeptical about an Israeli news channel's right to exist, given the crisis pervading the advertising sector. But what's sure is that if Channel 10 collapses, the news channel's chances suddenly soar, as does the value of Hefetz's stock in the company.

But Hefetz still hasn't received regulatory approval to buy the Israel News shares. One wonders if Zvi I-bought-this-Savion-house-before-meeting-Vladimir Hefetz will be able to convince the watchdogs that he really is an independent businessman who decided to have a fling, or whether they will rule that he is, after all, coordinating every step with Gusinsky.