Turner Eyes Hallmark Deal

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Turner Broadcasting System may have interest in adding top 10-rated network Hallmark Channel to its suite of services.

Spokeswomen for both Turner and Hallmark confirm that Turner chairman and CEO Phil Kent and Turner Entertainment Group president Mark Lazarus met with Henry Schleiff, CEO of Crown Media Holdings, parent of Hallmark Channel, at the network’s New York offices on Sept. 6.

While it was unclear what directions the discussions took, or whether they centered on a sale, an investment in Hallmark, or some strategic relationship between the parties, there is some interest from Turner’s camp.

“We met with Henry,” said Shirley Powell, senior vice president, corporate communications at Turner. “To comment specifically would be premature, but we meet with any network that is for sale.”

Powell added that Turner is “always willing to review assets that are aligned with our portfolio.”

Hallmark Channel in a statement said: “It’s our fiduciary responsibility to explore any and all potential partnerships that would benefit our shareholders.”   

In May 2006, Turner parent Time Warner Inc. completed the acquisition of the interest in Court TV, helmed by Schleiff, thatit didn’t already own, paying $735 million in cash for Liberty Media’s 50% stake in the network. Following the completion of the deal that valued Court TV at just under $1.5 billion, Schleiff served as Court’s non-executive chairman during a transition period. He assumed the Crown Media post last October.

It was unclear at press time if Turner’s interests were in owing Hallmark outright, or perhaps acquiring the 6.1% stake the programming provider National Interfaith Cable Coalition holds in Crown. According to Crown Media’s 10-Q, NICC has a “put” right it can exercise for the 4.4 million Crown shares it owns through Nov. 1 

In August 2005, Crown Media said it would explore “strategic alternatives” for Hallmark Channel. Officials familiar with the situation at the time indicated that a number of media giants, including Turner parent Time Warner Inc. and News Corp. had expressed some interest in the network.

However in April 2006, Crown Media said it had decided to continue operating Hallmark Channel and its spinoff Hallmark Movie Channel, which is slated to spawn a high-definition version of the movie service sometime in first quarter 2008.

Still, Schleiff, who took over the reins of Crown Media 11 months ago, has made thinly veiled pitches for a network buyer. For instance, during a May conference call, he told analysts that cable and satellite operators negotiating carriage fees for the service --Hallmark has already inked deals with Mediacom Communications, EchoStar Communications and the National Cable Television Cooperative this year -- should do so before it is bought by a broadcaster wielding retransmission-consent clout.

Schleiff noted that with retransmission consent battles erupting between station groups and distributors over the past couple of years, carriers would be well served to pay up now, rather than at a higher price later. 

Hallmark, which receives gross monthly subscriber fees in the four cents range, has contracts with other top distributors, notably Comcast , DirecTV, Time Warner Cable and Cablevision Systems, which are slated to expire at the end of 2007 or early next year.

Presenting a family-friendly lineup, featuring a bevy of original telepics, Hallmark Channel has become a fixture in ad-supported cable’s top 10. During this past summer,

Hallmark was tied for seventh in basic cable, averaging a 1.2 household ratings mark in primetime, translating into 1.26 million viewers.

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