News

Crown Revenue Surges Behind Hallmark Ad Sales

8/05/2001 8:00 PM Eastern

Crown Media International's second-quarter revenues were up 68 percent, driven primarily by advertising increases associated with the planned rebranding of its Odyssey Network cable channel to Hallmark Channel.

Crown was slated to launch Hallmark Channel on Aug. 5, complete with a new focus away from kids programming toward more adult family-friendly fare. But Crown president and CEO David Evans said the change has already affected advertising sales.

Second-quarter ad sales rose 140 percent to $9.5 million, fueled by subscriber increases.

The company said domestic distribution increased 78 percent, or by 5.3 million customers, to 31.3 million subscribers during the period. Internationally, subscribership rose by 48 percent to 41.8 million.

"We're attracting a real blue-blood list of advertisers," Evans said in a conference call with analysts.

The advertising gains also helped pare down cash-flow losses for the period. Crown Media reported negative cash flow of $34.8 million in the time frame, versus negative $36.6 million in the same span last year.

However, Crown's net loss widened to $47 million, or 72 cents per share, compared to $43.8 million, or 67 cents per share a year ago.

Evans added that the distribution numbers could go even higher, as a result of ongoing carriage talks with two MSOs — Cox Communications Inc. and Comcast Corp.

Hallmark already has distribution agreements with AT&T Broadband, EchoStar Communications Corp., Adelphia Communications Corp., Time Warner Cable, DirecTV Inc., Cablevision Systems Corp. and Charter Communications Inc. Crown is negotiating with those MSOs to expand the network's distribution.

Evans said the U.S. rebranding effort would include the introduction of original movies and series. The network is also on the lookout for third-party agreements to acquire even more programming.

While the bulk of Hallmark Channel's schedule will initially be drawn from the Hallmark library — Crown completed the acquisition of 700 films from parent of Hallmark Entertainment Inc. for $820 million on July 18 — Evans said he wants to diversify the programming roster to include dramatic series and half-hour comedies.

Crown has acquired Law & Order
in the United Kingdom, Dr. Quinn: Medicine Woman
in the U.S. and Sliders
in Asia.

"We are looking internationally to round out the schedule," he said in the conference call. "Up until recently, our schedule was 24-hour movies and miniseries. That's a very heavy format."

One thing Evans said that Hallmark Channel viewers will see less of is kids' programming. Hallmark Entertainment completed a deal last week to buy out EM.TV's 8.2 percent interest in Crown Media for $90 million.

As part of the deal, Crown also ended children's programming commitments with EM.TV subsidiary The Jim Henson Co., paying Henson $13 million.

"It [the deal] releases us from programming that is no longer compatible," Evans said. "It cost us $13 million, but we expect to save $70 million in programming costs."

September