Unless the unexpected occurs, a new era in Israeli media will begin in November. In the words of Second Broadcasting Authority chairman Motti Sklar, there will be “a celebration of Israeli media and creativity”. Advertisers, who finally won their intense fight for competition in television advertising and broke Channel 2’s monopoly, will also celebrate. There is also a channel for a target audience – the news junkies.
Two quintessential Israeli commercial stations (stations had to promise to provide Israeli-oriented content to win the tenders) are being added to the cable and satellite offerings, joining the new digital channels that were added in the past year. However, only time will tell whether the itchy fingers of the Israeli viewers will settle on Channel 7 (news) and Channel 10 (the new commercial channel), as the stations take on the Sisyphean task of convincing audiences to give up their soap operas and game-shows and begin viewing the daily realities of Israeli life as reflected in news and originally produced dramas and documentaries.
Rivlin: I’m not Minister of Content
Minister of Communications Reuven Rivlin said he intends to act to combine the Second Broadcasting Authority and the Cable and Satellite Broadcasting Council into a Commercial Broadcasting Authority, which will oversee all commercial channels in Israel. “I am not the Minister of Content. I believe that the Minister of Communications should be the market regulator who only sets the rules of the game, but should not intervene in the game itself,” he said.
Commenting on the launching of new channels during a time of economic uncertainty, Rivlin said that he is convinced that the news channel is a matter of necessity now, especially given the multiplying newsworthy events in Israel. “A news channel, like CNN, that is updated in real time and broadcasts in real time, and is all in Hebrew, will be a business success story for its entrepreneurs, and will be a success story for the public as well,” he said.
Regarding the new commercial channel, Rivlin admitted that the present reality is different from the atmosphere when Channel 2 was launched. He said a change in tactics and mergers, both for Channel 2 and the new channel, might be in order.
Israel 10 co-general manager Johanna Prenner does not reject the possiblity of a merger. “It's definitely an option,” she said. During her appearance before the tender committee on Monday, she had to answer questions about whether a commercial television company could survive in an era of economic uncertainty.
Israel 10 was the leading consortium throughout the tender proceedings. Prior to weighing the economic-financial factors, the consortium had a score of 59.6%, and had a score of 85.47% after the economic-financial considerations were factored in. The tender committee members stated that the bid was so good and organized, that it became the standard against which the three competing bids were judged.
Eden Broadcasting general manager Motti Kirschenbaum declined to comment about a possible merger, stating only that the consortium, "was pleased with the decision and will establish a worthy channel.”
In the area of content, which was the main category considered by the tender committee, both Israel 10 and Eden Broadcasting committed to airing at least 56 hours of high-quality programming (investigative reports, culture, documentaries, and dramas), as required under the terms of the tender. Eden Broadcasting, which focused on documentaries, committed to 76 hours, while Israel 10, which focused on dramas, committed to 110 hours.
Sklar said that unlike Channel 2, which benefited from its unique status, conditions are different now. For one thing, competitors in this tender guaranteed to spend “absolute and fixed sums of money” in order to produce certain programs. These include NIS 30.3 million for 60 hours of dramas; NIS 14.3 million for 64 hours of documentaries; and NIS 12.6 million for two Jewish and Israeli historical serials.
The news channel
Ofer group’s Avi Levy: We believe we’ll be profitable
Avi Levy, the financier of the Ofer group, which owns 24% of Hadashot 24, does not think that investing in a media group today is based merely on a desire to have cultural clout. “It's not economic suicide. First and foremost, we believe we'll be profitable. This is a business which has to be managed, and we'll manage it properly and profitably,” he said.
Refering to the revenue model, Levy sounds like someone who has carefully studied the advertisers' credo, which states that advertising will expand. (in contrast to the pessimistic forecasts by Channel 2 franchisees). “Many groups that haven't advertised on television to date, because of the high prices dictated by Channel 2, can now permit themselves to do so. We'll adapt our advertising to the different target audiences of the different programs, and we can also sell regional advertising,” he said, citing the successs Israel Radio has had by adopting regional advertising as an example.
Levy said that even if the company does not sell news to the second commercial channel, it will reach the break-even point in 2004, with an investment of only $25 million. This sum seems quite modest, considering that $10 million will have to be invested just to set up a broadcasting center. By comparison, Channel 2 News, which does not broadcast round-the-clock, spends almost $10 million a year.
Before it turns a profit, Hadashot 24 will soon begin recruiting talent looking for a home (“a few top-notch individuals”), prepare a broadcasting schedule, sign a real estate contract for a broadcasting center (“in the Dan region”) and conclude strategic cooperation agreements with international groups such as CNN, CNBC, and others.
Hadashot 24 is owned by Comverse (Nasdaq: CMVT), the Ofer group, Israel Theaters (20% each), Dankner Investments (4.9%) and founders Amnon Dick, Shai Nesher, Nissim Mishal, and Yaacov Ailon (25%).
Eden Broadcasting: Not revealing content
Even after winning the tender, Eden Broadcasting declines to reveal the details of its bid. “We'll reveal our programming when the time is ripe,” said the consortium today.
Eden Broadcasting is owned by Ehud Ben-Shach's Aba Communications – 20.3%; Shavit Broadcasting, which is owned by contractors Ocif – 20.1%; The Ordar group, owned by Avi Lerner and Danny Dimbort of Los Angeles – 10%; Hanan and Miriam Zoglowek via New ComLine – 10%; Eli Papouchado's Red Sea Hotels – 10%; and minor shareholders Talit Entertainment owned by Yehuda Talit, Liora Landau's Omer Productions, Capital which is owned by Sharon Harel-Cohen and Ronald Cohen, and Sentinel Capital Ventures. The general manager is former Israel Broadcasting Authority chairman Motti Kirschenbaum.
Israel 10 is owned by Yosef Maiman-controlled Swift concern – 40%; Alfred Akirov's Alrov group – 20%; Yosef Hackmey's Israel Phoenix – 13.5%; Zalman Shoval's ICC Investments – 10%; Dov Tadmor via the Saridav company – 5.1%; Mediana, owned by Johanna Prenner and Ronni Algranti – 6.5%; Anani Communications (4.9%), owned by Udi Miron, Iris Hod, and Aviv Giladi – 4.9%. Johanna Prenner and Ronni Algranti are the co-general managers.
Commercial channel operating terms
Commitments:
- Franchise fees: First year – NIS 18.5 million; second year – NIS 13.05 million; third year – real increase of 3% annually. Bids: Israel 10 – NIS 10 million; Eden Broadcasting – NIS 13 million.
- Royalties: Exempt for the first year and 4% of revenue in the second year.
- Financing of broadcasting facilities: NIS 2.5 million.
- Financing for the Israeli Rating Council: NIS 1 million.
- News company operations: First year – NIS 33.6 million; second year – NIS 50.4 million; third year – NIS 63 million; fourth year – an additional 3%. Under the tender terms, the franchisee may buy news from the new news channel, or Channel 1 of Channel 2 News in the first year, but must set up an independent news company in the second year. The franchisees are apparently planning to try to have this article rescinded, in order to ease their financial burden.
News Channel operating terms
The News Channel has a 10-year franchise to broadcast news 24 hours a day from its first day on air, even though the tender terms demand only 8 hours of broadcasting a day for the initial 18 months, between 16:00-24:00, and 12 hours broadcasting a day after the 19th month of operations.
The basic costs include a NIS 30,000 participation fee, a NIS 110.000 licensing fee, government guarantees of NIS 10 million and NIS 50 million in equity, of which NIS 30 million is for the tender and NIS 20 million for the franchise.
Published by Israel's Business Arena on 18 April 2001