Crown Media Reports Higher Q2 Net

Completes Upfront Negotiations with Price Increases
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(Updated: 1:08 p.m. ET)

Crown Media Holdings, which runs the Hallmark Channels, reported higher earnings in the second quarter.

Net income rose 22% to $16.5 million, or 5 cents a share, from $13.5 million, or 4 cents a share.

Revenue rose 3% to $89.5 million. Ad revenue was up 3% to $68 million. Subscriber fee revenue increased 4% to $20.6 million. Programming costs were down 6%, the company said.

CEO Bill Abbott said Crown’s upfront negotiations are complete with revenue up and prices growing by mid- to high-single digits on a cost-per-thousand viewers (CPM) basis. (Crown’s earnings release mistakenly said prices were up by low- to mid-single digits.)

Speaking on the company’s earnings call with analysts, Abbott said “Getting into the original scripted primetime business gave us a strong position in the marketplace resulting in double-digit growth in volume on both Hallmark Channel and Hallmark Movie Channel.”

Demand was up for Hallmark Movie Channel, where upfront revenue rose 30%, Abbott said. The two channels sold between 45% and 50% of their ad inventory in the upfront.

The company also said the scatter ad market remains "robust." Scatter volume in the second quarter grew 39% from a year ago, despite slightly lower prices compared to a year ago. Those prices were still way up from the last upfront. Scatter prices were up 26% from upfront on Hallmark channel and up 20% on Hallmark Movie Channel.

Abbott said that in June, Hallmark Channel showed a slight decrease in distribution to 86.3 million subscribers. He said Hallmark was just one of  81 networks showing a decline according to Nielsen and chalked up the dip to a Nielsen issue "in terms of how they calibrated the subs."

During the call, several investors and analysts asked about the June SEC filing by Crown's largest shareholder, Hallmark Cards. Hallmark Cards, which owns about 90% of Crown, said its standstill agreement preventing it from buying more Crown stock expires at the end of the year and that it is evaluating its options. The options include buying the publicly held share and taking the company private.

Hallmark executives said they had no knowledge of Hallmark Cards' intentions beyond what was in the filing.