Israel vs. Netflix

Listening to Benjamin Netanyahu, it’s sometimes easy to forget that Israel is not the Thatcherite playground he would have us believe it to be. Granted, it is no longer the borderline-socialist state it was in the 1950s. Over the past few decades, state-owned enterprises were privatized, benefits were slashed, and the market was set free–all contributing to the economic miracle known to all as the startup nation. But the Jewish State remains a complicated and expensive place to do business, even under the watchful gaze of a prime minister who has promised on many an occasion to take both axe and machete to the regulatory state.

Take for example a fresh batch of legislation regulating the providers of streaming television, first reported on by TheMarker on Monday. Currently under preparation by the government, said legislation might very well be the first of its kind in the world–not the most desirable of distinctions, in this case.

The legal lacuna targeted by the government is clear. In the beginning, circa 1968, Israel had only one television station, run by the state. In the 1990s, a second, privately run channel joined, and Israelis gained access to cable television. In the following decade came a third channel, along with satellite TV. All such channels and services, though privately run, are subject to the receipt of a government-granted permit, in accordance with the 1982 Communications Law. Alas, that law limited itself to cable and satellite broadcasters. The new law proposed by the government addresses all broadcasters of “audiovisual content,” thus requiring providers of streaming internet video to receive permits from the Israeli government, and to submit to certain other rules, depending on their share of the market. Some Israeli companies have indeed recently begun offering such services, to varying degrees of success. But due to the legislation’s opaque wording, the law could also be applied to non-Israeli providers targeting the Israeli market: Netflix, Amazon, YouTube, etc.

The most painful requirement that Israeli law has historically made of its broadcasters is surely the one that has most benefited Israeli audiences–and, by extension, international ones as well: Broadcasters are required to invest a certain percentage of their revenues in the production of local content. Without this requirement, there would be no BeTipul (and by extension, no In Treatment, its HBO remake), no Hatufim (Homeland, ditto), nor would the mighty Fauda ever have walked this earth. Israeli broadcasters would surely have preferred to take the easy path, and schedule more Seinfeld reruns.

But under the new law, Netflix could potentially be subject to similar requirements. Given the small size of the Israeli market–the streaming service has only been fully available here for about a year–that could be enough to scare it away. Precedents abound: When the Ministry of Transportation wouldn’t play ball, Uber–no stranger to regulatory struggles–essentially gave up the fight. The ride-sharing company Via didn’t even think to offer its services in Israel, despite it being an Israeli company; its brilliant algorithms, designed in Tel Aviv, instead serve the denizens of New York, Chicago, and Paris.

The Israel of Netanyahu, then, is only laissez faire when it wants to be. When it comes to the telecommunications industry, Netanyahu is decidedly hands on, to the detriment of both industry and himself (Netanyahu is currently under three criminal investigations, two of which revolve around his relationships with giants of the Israeli media industry; graft in exchange for favorable regulatory action is suspected). And the government’s most active recent efforts to deregulate Israeli television were designed to benefit a niche channel known for its sympathetic right-wing views.

Not all actions that risk offending global tech companies are necessarily a mistake, of course. Israel has begun taking initial steps to tax multinationals such as Google and Facebook for their activities in the country. But potentially treating YouTube as if it were an Israeli broadcaster granted valuable frequencies in the 1990s seems silly at best, and retrograde and potentially harmful at worst.