Next target for Rami Levy: Low-cost cable TV for all

Israel’s premium television content services, Yes and HOT, will be facing some new competition soon — from the same guy who upended the country’s cellular phone market. Within the coming months, Rami Levy Communications plans to market its own premium television services, with much of the same content that its satellite and cable competitors already carry — but at a far lower cost.

The new project, which will be officially announced next week, is the result of a collaborative effort between Rami Levy Communications and an Israeli start-up called Vonetize, which in the space of just a year and a half has turned into one of the major players in the world of premium television content. And if it works in Israel, Rami Levy’s new TV service could serve as a model for similar services in countries around the world.

Levy has a reputation as a maverick cost cutter. Several years ago, in response to the high cost of food, Levy slashed the price of chicken at the supermarket chain bearing his name to NIS 5/kilo (64¢/pound). This has since become a promotion common in Israeli supermarkets. After that, Levy threw the Israeli cellular industry a curve ball by cutting prices on cellphone service by up to 80% — forcing the established phone companies to do the same.

Priced between $70 and $100, the movie, entertainment, sports, music, and kids’ channels offered by Israel’s premium content providers — Yes via satellite, and HOT via cable — is too expensive for many Israelis’ tastes. With the help of Vonetize, said CEO and co-founder Noam Josephides, Levy will be able to do for premium TV content what he did for chickens and cellphones — shrink prices by 50% to 80%. Thus far, the service price list has yet to be released.

Vonetize will be doing the work of acquiring and distributing the content for Rami Levy, which will be the “brand name” for the new service, to be delivered via set-top boxes connected to the Internet. Vonetize is in a unique position to be able to do this, said Josephides. “We are among the dominant companies in the digital content space,” he said at an investor event in Herzliya Wednesday. “We have licensing deals with top content owners, like Disney, Warner Brothers, and many others, as well as local content providers in many countries. We deliver this content onto smart TVs from companies like Samsung, LG, Toshiba, and with the Smart TV Alliance,” which partners with manufacturers like Vestel and Philips for digital content apps.

Vonetize has exclusive deals with all these manufacturers to install its content apps on their devices, for delivery of TV shows, movies, concerts, and other premium content. For example, all Samsung smart TVs, tablets, and smartphones sold in Israel come with Vonetize’s SmartVOD app, which allows users to watch shows and movies on any of the devices. Viewers can start a show on their TVs, then pause it and pick up where they left off on their tablets or phones.

Vonetize negotiates the deals with the content providers, builds the delivery apps, and takes care of the subscriptions and payments. Everyone’s happy, said Josephides; the manufacturers get a first-rate source of content for their devices, without having to deal with the details, the consumers get to watch popular shows and movies, and the content providers have another opportunity to license their material.

Vonetize is a lot like Netflix, the premium US online television and movie service, in that it develops delivery technology and negotiates deals with content providers. But the comparison stops there, said Josephides. “You won’t see a Vonetize brand name anywhere as a provider of content, as you do with Netflix.” Instead, he said, the content itself is the brand. Thus, Vonetize licenses content from different sources and provides VOD (video on demand) via its apps for smart TVs, and also bundles programming for cable and satellite distribution. For example, it has a Bollywood channel, which consists of popular Indian movies and musicals. “It’s the content that is the brand name, not Vontetize,” said Josephides.

Vonetize’s experience in gathering and distributing top content is of high value to Rami Levy and its upcoming battle against established service providers. There are almost no programs that are exclusively licensed to either that Vonetize doesn’t already have access to, or could easily license as well. “No studio or TV program distributor does exclusive deals for any of their properties, so there is plenty of opportunity to provide content, even if it already is licensed by Yes or HOT,” Josephides said.

The reason why some TV shows end up on Yes while others end up on HOT are due to internal decisions made by those companies. “The TV shows are not always the same, but the same movies show up on both platforms,” said Josephides — and as a matter of fact, “thanks to the deals we have with many distributors, we have access to the newest movies weeks before Yes and HOT do.” In any event, Josephides added, Rami Levy TV will have plenty to keep customers happy.

Vonetize is unique in many ways, said Nathan Low, President of the Sunrise Financial Group and head of Ziontech, a new investment fund based on the crowd-funding model that brings together qualified investors to pool money into one or several companies the fund invests in. “Vonetize has been profitable almost since the company was established and started selling in 2012,” Low said at an investor conference he organized for dozens of angel investors from the US, the UK, and Israel. “They are also unique in that they do everything in-house and bootstrap everything, taking no money from potential partners or customers.”

In fact, Josephides said, the company had turned down numerous investments, including a generous offer by Samsung Ventures, in order to remain independent and keep its options open. “The fact is, manufacturers love us, and they need us,” he said. Low said that Ziontech was the first fund Vonetize agreed to work with because of Sunrise Financial Group’s reputation among Israeli start-ups; over the years, Low said, “I’ve done 109 angel investments so far, 60 of them in Israel,” and Josephides believes that Ziontech can help Vonetize effectively grow and expand.

And there’s plenty of expansion in the cards, said Josephides. “2014 is predicted to be a major growth year for smart TV use, and we are here to serve the countries around the world where content from Hollywood and from American TV networks is not available,” he said. “We are going to be announcing a lot of new agreements with content providers and manufacturers in the coming weeks, and we are working on several deals similar to the Rami Levy one, to deliver premium TV content via set-top boxes over the Internet in other countries. With the widespread use of fast Internet technologies, we can stream very high-quality video over Ethernet and wirelessly. There are 170 countries around the world that Netflix and other premium content providers do not serve, and those are the markets we are going after.”