As Hallmark Channel sets its sights on more original and thematic programming in 2003, as well as new business ventures, the programmer is also committed to maintaining independence on its own terms.
The family-friendly network overseen by Hallmark Cards Inc. unit Crown Media Holdings U.S. has bolstered its distribution to 49 million homes, and has grown its advertising base to 200 clients from 75 at the end of 2001.
And though its first-run content has received mixed reviews from the critics, Hallmark Channel's average weekly primetime rating ranged between a 0.5 to 0.7, up from its 0.3 to 0.4 range during its former life as Odyssey Network. (The network was rebranded and reformatted 16 months ago.)
On the downside, belt-tightening at Crown claimed the job of Hallmark president and CEO Lana Corbi. Crown Media Holdings Inc. CEO David Evans has assumed her duties.
Hallmark Channel has been engulfed in reports that it could soon be swallowed up by the likes of Viacom Inc., News Corp., AOL Time Warner Inc. or Liberty Media Corp.
Evans acknowledged that some conversations have taken place.
"We have a situation in this business where investment bankers often endeavor to drum up deals," Evans said. "Next thing you know, you get a knock on the door, or a telephone call from a banker or someone down the line with strategic development attached to their name, where they say they understand Sumner Redstone and Viacom are very interested in your company.
"We've responded to these dialogue requests, but inevitably, that dialogue has led nowhere. The discussions have all been pleasant, but have not come anywhere close to finding a strategic partnership of any sort that would work for us. And our principal shareholder doesn't want to sell."
Hallmark Cards owns about 70 percent of Crown Media.
As an independent network, Evans said, higher overhead costs, leverage and other issues build to the point where ultimately, it may be better to be under someone else's wing.
"It's safe to say that one day — and I don't know when that might be, or what form it would take — there will be a discussion with somebody that might lead to something," he said. "You can't be a standalone forever in this environment. But that one day is a long way off, and when it occurs, [Hallmark Cards] must be enthusiastic about whatever the proposition might be."
In a statement, Hallmark Cards CEO Donald Hall Jr. called the network an important cog in his company's future strategy.
"I believe the channel plays a key role in enhancing the Hallmark brand, providing opportunities for synergies with our other businesses," Hall said.
New ventures
Hallmark Cards has set its first-ever meeting between cable operators, company officials and channel executives for Feb. 4.
At that meeting, which will explore synergies, they're expected to discuss more participation by Hallmark's 4,500 Gold Crown greeting card and stationery stores; distribution of a separate digital network, programmed by former Odyssey partner National Interfaith Cable Coalition, which still handles some daytime slots on Hallmark Channel; and participation in new digital or interactive-TV networks.
Under a pact with DirecTV Inc., Hallmark Channel is already developing a number of ITV and video-on-demand ideas. At least one concept is in conjunction with Hallmark Cards subsidiary Binney & Smith, the maker of Crayola-brand crayons. The network also wants to expand its VOD partnership with In Demand.
Separately, Hallmark Channel may create another new source of revenue by becoming a back-office outsourcing agent for new digital networks.
"I've had approaches from a number of digital rollouts who are anxious to bring us in for back-office work to reduce their overhead," Evans said.
In the meantime, the network hopes to forge a stronger brand identity in 2003 beginning with the Jan. 18 premiere of The Last Cowboy
— the first of 24 telepics produced with sister company Hallmark Entertainment — that are slated to air by the end of 2004.
Gene tentpoles
Cowboy
will be accompanied by an on-air makeover that will continue to stress Hallmark Channel's "Great Stories" theme, but will place more emphasis on the channel's three genre tentpoles — holidays, westerns and mysteries.
Executive vice president of programming David Kenin said that after considerable research, Hallmark Channel determined that these areas "are the ones with broad family appeal and general-audience appeal.
Straight From the Heart, an original Valentine's Day film, is set for February. Originals geared to Easter, Mother's Day, Father's Day, Christmas and other holidays will also get special attention. Westerns and mysteries fill the original bill during non-holiday months.
The channel is in the midst of a blitz of first-run Christmas flicks. Santa Jr., the first of the bunch, premiered Nov. 30 to a 1.1 household mark, the third-highest for a Hallmark Channel original.
Also in December, the network will present Carnauba, a documentary on an expedition involving household-product magnate S.C. Johnson.
This fall, Hallmark Channel launched a Saturday salute to Westerns, involving The Rifleman, Have Gun Will Travel, half-hour Gunsmoke
episodes, Rawhide, The Young Riders, Bonanza
and The High Chaparral. Ratings have been promising so far.
Sunday-afternoon mysteries are up next.
"As we succeed with the mystery block, I'd like to see us do original mystery movies on a regular basis on Sunday nights," Kenin said. "The first thing is to lay that block in."
The second might be turning one of its mystery or western epics into a weekly drama series. Mystery Woman, Hallmark Channel's made-for-TV movie slated for August, is one series prospect.
Right now, Hallmark Channel has one original primetime series, Adoption, the Sunday-night reality hour that launched last June, to critical acclaim and praise from social organizations for its intimate study of the adoption process.
On most weeks, Adoption's rating matched or slightly topped Hallmark's primetime average. Several cable operators have executed adoption awareness projects with Wendy's and other show sponsors. New episodes will premiere next spring.
However, until Hallmark Channel grows to 60 million households, films and miniseries will remain the network's main source of original content. "Series is a high-risk business, but it's an important one for your viewers," Kenin said. "It helps put a signature on your network. It's very much a part of our plan."
Four months ago, Johnson County War, a four-hour western miniseries, was backed by a strong publicity push, notably a morning rush-hour cattle drive in New York's Times Square. The show tallied a 1.1 rating — a disappointment to some cable observers, given the promotional push. But Kenin called the show a success.
"We'll rerun it before the end of the year, and the rating for it will be high," he said. "As for that cattle drive, which was highly expensive and theatrical, people remarked how highly imaginative that was. For many, that expanded the expectation of who we are."
Expanded opportunities
For some operators, Hallmark Channel's overall performance has been enough to warrant more carriage. Early last week, Time Warner Cable signed a contract extension that will put the network before most of its 10.8 million customers in the near future.
Evans predicted that Comcast Corp. — the only major cable operator without a long-term deal — will sign on early in 2003, after it finishes absorbing the AT&T Broadband systems.
"As a result of that merger and a few creative ideas we have, we'll come out very strongly," he noted.
But some cable affiliates are waiting for a stronger original-programming identity or more loyalty to the medium before they bestow more carriage upon Hallmark.
At this point, Millennium Digital Media, which places Hallmark in 25 percent of its homes, doesn't plan to extend that reach.
"It's not real high up on our radar screen one way or the other," said Peter Smith, senior vice president of programming and product development. "But with all due credit to the hard work they're putting in for both programming and network branding, we need more time to judge. If it were a product exclusive to cable, and unavailable to DBS, I'd be rooting harder for them."
