Hallmark, Schleiff Return to FCC to Plead Case for Increased Distribution Fees
Schleiff Says Hallmark Gets ‘Fairly Sympathetic Ear in Washington’
By Linda Moss -- Multichannel News, 11/8/2007 8:03:00 AM
Earlier this week Hallmark Channel was back visiting the Federal Communications Commission seeking regulatory help in its contract negotiations with distributors, including one that has refused to open talks, officials from the network said Thursday.
“I think we have received, in my judgment, a fairly sympathetic ear in Washington,” Henry Schleiff, president and CEO of Crown Media Holdings, Hallmark’s parent said. “We’re more than cautiously optimistic that an appropriate form of legislative or regulatory relief will in fact be implemented very shortly.”
Schleiff made his remarks during Crown Media’s third-quarter conference call. He told analysts that he and other Hallmark Channel officials had been in Washington this week and met with FCC chairman Kevin Martin, and commissioners Jonathan Adelstein and Michael Copps.
On Tuesday, Hallmark made an ex parte filing in support of the agency’s proposed rules to give independent programmers more clout in carriage negotiations, according to Schleiff.
In a letter than accompanied this week’s filing, Hallmark Channel said that one of the distributors -- who it didn’t name and whose deal is expiring -- won’t even start talks on a new contract.
“In one case, the MVPD [multichannel video programming distributor] involved is refusing even to open negotiations or make a renewal offer,” Hallmark Channel said.
Hallmark Channel’s carriage deals with Comcast, Time Warner Cable and DirecTV all expire at the end of the year. Schleiff said Hallmark Channel is close to finishing renewals with two of the three, but he did not say which two.
But earlier this week, in a filing with the FCC, Comcast said that Hallmark Channel should not be able to turn to the agency for help just because it had decided to forsake its low-license-fee strategy.
“Now, as it renegotiates the carriage agreements, Hallmark Channel asks the government to put its thumb on the scales so that it can obtain higher fees,” Comcast said.
In early October, Schleiff also met with FCC members to plead the case of independent cable channels.
One possible relief being considered is “baseball-style arbitration” of contract talks between independent channels and distributors, according to Schleiff.
He claims that there is a “rather clear disconnect between the value of a network like Hallmark Channel and what are license fees are.”
Hallmark Channel has told the FCC it is getting just three cents a month, per-subscriber license fees, even though it is a top-10 rated network.
Crown Media chief financial officer Brian Stewart also talked about the company’s dispute with one of its investors and programming partners, the National Interfaith Cable Coalition.
NICC has told Crown it plans to exercise a put option for 4.3 million shares of the company’s stock.
But Stewart said Crown and the NICC, who have a programming deal that expires the end of the year, had negotiated a new pact, and one of its terms was that the NICC would not exercise its put option.
The terms of the new NICC-Crown agreement also included a continuation of an NICC programming block on Sunday on Hallmark Channel, but reduced to 6 a.m. to 8 a.m.; the elimination of a weekday NICC programming block and a discontinuation of NICC production funding by Crown, which was averaging $20 million a year.
Crown Media has now classified the Crown common stock held by the NICC as redeemable on its balance sheet, according to Stewart.
“We’re hopeful that dispute is going to be resolved shortly,” he said, adding that if not, Crown can repurchase the NICC share or sell them in the open market.
