With Israeli formats in the global spotlight, Andrew Dickens looks at the potential consequences of international production giants buying into the country’s TV industry.

Given Israel’s position as one of the top sources of intellectual property in the world, as per every other conversation and headline ^[1] at MipTV last week, it was only a matter of time before global production companies wanted a piece of the pie.

In December last year, Endemol expanded its presence in the territory by taking a 33% stake ^[2] in Tel Aviv-based Reshet TV. The move followed the firm’s acquisition ^[3] of Kuperman Productions, which produces the Israeli version of Big Brother for rival network Keshet, earlier in the year.

In 2012, another big production group, Germany’s Red Arrow Entertainment, bought ^[4] prodco July August Productions, which makes The A Word for Keshet and the Israeli version of Ricky Gervais mockumentary The Office.

Meanwhile, ITV Studios’ 2012 joint venture with Reshet, The Lab ^[5], continues to pump out formats, with cookery-based reality show Game of Chefs launching at MipTV last week.

Other M&A deals and partnerships will surely follow as global demand for Israeli IP grows, following the success of formats like Homeland, Upgrade and In Treatment. But opinion about the consequences of such deals is divided.

While admitting to being “flattered” by global interest in Israel, Ran Telem, VP of programming at Keshet, warns of trouble ahead for the country’s smaller production companies.

“When you’re a small company with bright ideas and you bring your ideas to market, you sometimes make it, you sometimes don’t. But the ideas are yours, you decide where you want to put them,” Telem told C21 recently ^[6].

“But once you come under the umbrella of a huge company, there’s always the danger you’ll be left out; that their decision-making is not your decision-making. My only tip to these small companies is to take it carefully.

“There’s money involved there and the opportunity is always very sparkly when you want to take it. On the other hand, you could lose your own DNA and invention when becoming a small part of a huge company.”

Many Israeli producers, it seems, are taking note.

Ami Giniger, CEO of Taya Media Group, parent of Hertzeliya-based United Studios of Israel, believes the creativity of Israeli content could be threatened by the recent influx of international production conglomerates. “As an Israeli, I’m proud we became legitimate, but as a producer I have many concerns,” he says.

“We are already in a market that is over-competitive. I’m 100% for Reshet and 100% for Endemol – a process is a process. But now Reshet has a partner that’s a content provider but also a content distributor, and they will want to use their own content and distribute it. Ultimately, the quality of the content will suffer.”

His comments echo those of Gideon Raff, creator of Prisoners of War, the drama on which Homeland is based, who in March warned ^[7] that Israeli producers are now so fixated on getting a US remake that they forget their show has to work locally first.

“Producers and networks are aiming for US versions of their local shows. That’s a big danger. You see a lot of creators writing shows that they would never write unless they thought they had a chance to sell it into the US. There’s no advantage to doing a Law & Order in Israel. We only have an advantage if we do local stories.”

Nevertheless, the strength of Channel 2 franchisees Reshet and Keshet may cause problems for global giants looking to simply push their catalogues within Israel – particularly since both are set to get their own channels from November 2015 and Keshet now has its own distribution division to feed.

For Assaf Gil, founder of Tel Aviv’s Gil Productions, Reshet and Keshet will continue to “call the shots” when commissioning local content.

“I’m not sure whether there will be many more M&A deals,” says Gil. “If I were an international company like FremantleMedia and had a terrific original idea, if I sold it to Keshet or Reshet I would be losing the international rights. So, obviously, I wouldn’t get anything out of it.”

Gil admits he has declined several offers from international firms wanting to buy into his company, whose new gameshow Are You For Real? was the most screened format at MipFormats earlier this month. “We questioned how much of our original formats we could retain and own,” he adds.

For some producers, though, the M&A trend is a purely positive process.

Tal Shaked, co-founder and VP of business development at Tel Aviv prodco A Cappella, believes the arrival of international companies will only improve Israel’s content output, both domestically and internationally.

A Cappella, established by Shaked and CEO Einat Shamir in 2012, recently produced a pilot of interactive gameshow The Big Picture, which the firm was also shopping in Cannes.

“The fact that international companies are here just challenges the creators in Israel – the bar just gets higher and higher,” says Shaked, former head of acquisitions at Channel 10. “There’s going to be room for everyone, we have cable, satellite, public channels and good competition, and people are working hard to make this happen.”

From the international prodcos’ perspective, Floris Bauer, Endemol’s global head of corporate development and strategy, believes the Israeli television community has responded well to his firm’s presence.

Last month, Endemol unveiled multi-platform crowd-funding show Fundastic as the first format developed under its partnership with Reshet. It’s likely to be the first of many.

“Our deal with Reshet changes the landscape, but in a good way. As you see in most other markets, international players come in and fulfil a very important role in developing that market,” Bauer says. “We have a strong view that it will improve creativity in the broader sense and actually accelerate greater international interest.

“Next to being an extremely competitive landscape, Israel is not a big local market, and as a result of international investment, producers there are able to invest more in original formats and cross-platform concepts, which can be expensive.

“Also, because of the connection with larger international players, both content creators and broadcasters will receive increasing royalties from international exploitation that will flow back to Israel. And just as we have seen in other territories, it will encourage investment in original content.”

Meanwhile, Mike Beale, ITV Studios (ITVS) director of international formats, believes M&A activity will make it easier for Israeli producers to “shout more loudly” without the quality of content suffering.

“Channels are hugely competitive in Israel and because the market is small, producers have to develop ideas that can work everywhere,” Beale explains. “This is why Israel is slightly more risk-taking than the rest of the world and has been doing formats for quite a while.”

Beale says ITVS’s development deal with Reshet is not under threat, despite Endemol having a stake in the broadcaster. “It’s still the same. Endemol is a shareholder in Reshet and our deal with Reshet – in the sense of developing and distributing – will carry on,” he adds. “It might mean Endemol could develop some of the ideas that come out of The Lab, but we haven’t tested that out yet.”

Israeli distributors, Beale adds, will also be unaffected by the influx of global players, despite potentially seeing a number of their suppliers being engulfed by global conglomerates.

It’s a view shared by Avi Armoza, CEO of distribution and development outfit Armoza Formats, who says he prepared for the M&A trend “well in advance.”

“M&A is a natural and positive process and when you look at the deals happening, there aren’t too many companies going in for these mergers. But when they do, Israel is very high on the list,” he says.

“This is business and part of the responsibility of being a CEO is that you always need to keep developing growth – and this may mean having to join up with larger companies.”

Asked whether his firm could one day be pushed out of an industry it helped to grow by the arrival of global companies, Armoza responds: “We foresaw companies like Endemol coming in a few years ago and prepared by setting up a strong in-house development department.”

The message is clear: if global demand for Israeli IP is changing the landscape and bringing the big players to market, don’t be a middle-man – start creating some IP of your own.