Hallmark Celebrates Strong Upfront, But Bearish On Rest Of Year

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Hallmark Channel enjoyed a strong upfront market this year, with revenue up 22% to $116 million, but officials warned Wednesday that the second half of the year looks more difficult for advertising because of the weak economy.

The network’s parent, Crown Media Holdings, talked about its second-quarter results in a conference call with analysts, in which CEO Henry Schleiff discussed Hallmark Channel’s ad outlook for the rest of the year.

“Given that our business is not immune to the broader trends that are currently affecting the economy, it is likely that for the balance of the year, our advertising revenues may not quite equal their historic industry-leading 17% to 22% rate of growth, a potential shortfall which, however, we would expect to be able to cover by savings in other areas of the company,” Schleiff (pictured) said.

A Top 10-rated network, Hallmark Channel registered a good performance in the upfront market, due in part to its increased ratings and the fact that it sold 53% of its ad inventory this time around, rather than the just-under 50% it has in the past, according to Schleiff. Hallmark Channel saw price increases of 7%, at the top of the range that cable garnered overall during the upfront.

But Hallmark Channel’s ad sales team has seen a softening in demand in the scatter market now, according to Schleiff.

During the past 18 months Hallmark Channel has secured carriage renewals with six of its major distributors, including Comcast, Time Warner Cable, DirecTV, Dish Network, Cablevision Systems Corp. and the National Cable Television Cooperative. 

Hallmark Channel’s deal with Charter Communications expires at the end of the year, and accounts for 5 million of its subscribers, Schleiff said. The network is already in talks regarding that renewal.

The programmer launched Hallmark Movie Channel HD in April. At the end of the second quarter, Hallmark Movie Channel in HD and standard definition had more than 7 million subscribers, and by the end of July that number jumped to 9.1 million, Schleiff said. That distribution will increase again, to more than 10 million, when Cablevision launches the movie channel this weekend.

Crown Media reported revenue of $71.5 million for the second quarter, a 28% increase from $55.9 million in the year-ago quarter. Subscriber-fee revenue increased 124% to $14.6 million, from $6.5 million in the prior year, as a result of higher net effective rates on average, primarily due to higher contractual rates, a decrease in subscriber acquisition fees applied against revenue and an increase in paying subscribers as a result of previously amended distribution agreements.

Advertising revenue increased 15% to $56.6 million during the quarter, from $49.3 million a year ago, primarily due to an increase in advertising rates and increased advertising on Hallmark Movie Channel, the company said.

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