Shortly after Minister of Communications Shlomo Karhi presented the main points of his plan for a new broadcasting law last week, the market began to rumble. Most of the players in it rushed to explain why they are the big victims of the minister’s moves, and some went as far as to say that this was a plan "to kill off Israeli media and creative production."
The kernel of Karhi’s bill is the closure of The Second Authority for Television and Radio and The Council for Cable and Satellite Broadcasting, and the setting up of a slimmer regulator with fewer powers; ceasing to allow the Israel Public Broadcasting Corporation (Kan), Israel’s public service broadcaster, to sell advertising; and, conversely, allowing satellite television company Yes and cable television company Hot to sell advertising.
As Karhi said at the press conference at which he presented his proposals, the new broadcasting law will in effect change everything about the way the broadcasting market has been run up to now. One thing, however, remains unchanged: the relaxations for small players. According to Karhi, this is intended to benefit new players in the long term, but in the short term the aid is mainly to Channel 14, a television channel identified with Karhi’s brand of right-wing politics, and which, even under the new definitions, remains a small player. As such, and in combination with additional steps that Karhi plans, the channel is not obliged to invest in local content and is exempt from distribution fees, while, in addition, current barriers will be removed.
Last week, the draft bill was published for public comment. Even with maximum effort from Karhi, the earliest that the bill can be legislated is at the end of the year. Who will win and who will lose from each of its sections, if indeed it becomes law, and what are the motives behind its provisions? We dived in.
Setting up a slim regulator
The danger: Blatant political interference in broadcast content.
There has been much talk over the years of closing The Second Authority for Television and Radio and The Council for Cable and Satellite Broadcasting, and setting up a new regulator, slimmer and with fewer powers. The body that Karhi proposes will be called "The Broadcast Communications Authority and Council", and it will be defined as an auxiliary body (a body that operates within the framework of a government ministry). It will comprise nine members: three civil servants recommended by the minister of communications, the minister of finance, and the minister of the economy; two representatives of the minister of communications; and three representatives recommended by a search committee; and a chairperson.
"At the conceptual, constitutional level, this is perhaps the most significant move. It’s an attempt to take control of Israel’s media through political appointments," a senior market source says.
A further point relates to the responsibility of the new regulator: Karhi talks of free media and opening up the market, but this will not be a statutory authority. The new regulator will have no legislative, legal, or judicial powers independently of the Ministry of Communications.
The reason for this is that Karhi does not want the regulator to deal with the content of the broadcasting channels, to dictate how the market operates, or to intervene in the business models and broadcasting schedules of the companies. It is not clear, however, what it will do, what its powers will be, and to what extent it will act as an enforcer in matters to do with competition.
Besides this, there is Karhi’s approach to ratings. He seeks to set up a new rating board that will be based on additional data apart from the People Meter’s remote control sample. The viewer rating serves as an agreed currency between the broadcasting channels and the advertising agencies, and is used to price advertisements for the whole market. One of the arguments in the market is that the state should not interfere with this. Moreover, even is a new board is set up and measures ratings, there is no assurance that its method will be acceptable to the channels and the advertisers, and they may decide between them on a different pricing method. In short, the move leads to intervention where neither side asked for it.
News broadcasting license
The winners: The platforms and i24 News.
The losers: Channels 12, 13, 14.
Under the heading of a free market and undirected media, Karhi wants to abolish the need to obtain a license for news broadcasting and the deposit of a NIS 3 million guarantee. The aim is to encourage the free market and the formation of new media bodies.
All that the channels will have to do is to register on the Ministry of Communication’s registry, with no obligation to set up a separate news company. Currently, there is an obligation on them to form a separate company, as a barrier to prevent commercial interests permeating news content, and intended to preserve the integrity of the news content reaching the viewer.
Karhi’s proposal of course helps players such as Patrick Drahi, a shareholder in Hot and the owner of the i24News channel, which broadcasts in French, English, and Arabic, but up to now has not been able to set up a Hebrew language channel. For the rest of the market, this means more competition, which will particularly affect Channel 14, as Drahi wants to set up a competing right-wing channel.
Advertisements for almost everyone
The winners: Yes and Hot.
The losers: Channels 12, 13, 14.
From the beginning, Karhi made clear that he did not want the Ministry of Communications to intervene in the business models of the companies, and he is therefore abolishing the prohibition on broadcasting advertising for all platforms.
It should be pointed out that most of the companies, apart from Hot, have switched most of their users to OTT (over the top) broadcasting via the Internet, where there is no prohibition on broadcasting advertising. Nevertheless, the move finally completes the removal of the obstacle. The result: the broadcasting channels, which are already fighting over advertising budgets, will have to cope with additional competitors.
Israel Public Broadcasting Corporation stripped of advertising
The loser: The Israel Public Broadcasting Corporation.
The winners: Everyone else.
The budget of the Israel Public Broadcasting Corporation (IPBC) is anchored in law, and stands at NIS 700 million. Another NIS 100 million comes from revenue from advertising and content. According to Karhi, since the IPBC is budgeted by the state, there is no reason that it should compete in the advertising market with the commercial players.
The IPBC believes that such a move will prove a critical blow to it, since the additional revenue is invested in radio content, royalties to artists and creators, and new productions. Without it, dozens of employees will be laid off, productions will be cancelled, and royalties will not be paid. The most pessimistic estimates speak of the possible closure of radio channels.
Investment in local content
The winners: The channels and the platforms.
The losers: Israeli creation.
Today, television companies with licenses are obliged to invest 40% of their revenue in original external productions. Hot and Yes are obliged to invest 8% of the subscription revenue in such productions.
Karhi wants to lower the level of the obligation, but to impose it on more players. Platforms with annual revenue of up to NIS 300 million will have no obligation for original productions; those with revenue up to NIS 600 million will have to invest 2% of it in original productions; and those with revenue over NIS 600 million will have to invest 4%.
For channels, the rule will be that a mid-size channel will be obligated to invest 6% of revenue in original productions, while a large channel will have to invest 12%.
All this amounts to a reduction in investment for all players, but some will benefit more than others. Partner and Cellcom will have no obligation to invest, because their revenue is below the threshold. The same applies to Channel 14, as a small player. Karhi talks of international players such as Netflix having an obligation to invest in local original productions, but they have already expressed doubts about the matter.
Ultimately, this is a blow to Israeli creation, as the existing players will be able to reduce their investment in local productions, and there are no additional players that come into the relevant categories. A market source told "Globes": "We’re light years behind regulators elsewhere in the world. Original Israel productions will disappear from the screen without trace. All that we’ll see will be American productions and productions from other countries."
The losers: The IPBC and the creators.
The winners: The platforms.
The damage to Israeli creation will be made worse by another prohibition: the IPBC will not be allowed to sell its VOD content (such as "Teheran", "Hamefakedet" ("The Commander"), "Kupa Rashit" ("Main Checkout")) to the various platforms. Karhi justifies this by the fact that the state has invested the budgets, and argues that there is no reason that the IPBC should receive additional payment.
There are two arguments against this notion. The first is that anyone who wants to view the content can do so on the IPBC’s platforms for free. The payment that the IPBC demands relates only to commercial players that want to use its content and derive profit from it. The second arguments is that it means harm to local production. When the IPBC sells content to a third party, half the proceeds go to the IPBC itself (which invests it in more content), and half to the creators and producers. Prohibiting such transactions represents a double blow.
Shortcut buttons on the remote control
The losers: Channels 12 and 13.
The winners: The small channels.
Karhi has determined that each platform can decide where the television channels that it transmits will be located, as long as they are adjacent locations. At the same time, he wants to intervene in commercial agreements between the companies to forbid them from putting shortcut buttons to specific channels, because of the claim that this harms variety.
The criticism of this is that at stake are legitimate assets of the platforms, and that they are entitled to make use of them in negotiations with the channels. For example, a platform could pay less to a broadcaster, in return for giving it an attractive channel. It is not clear why Karhi is choosing to interfere, if he talks about a market that operates independently.
Published by Globes, Israel business news - en.globes.co.il - on July 30, 2023.
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