Why Hallmark Is Betting It Can Create a New Cable Network

CEO Abbott also pushing into SVOD, publishing
Bill Abbott_4WEB.jpg

At a time when its bigger competitors are merging and looking for weak networks they can shed in a consolidated, skinnier and bundled TV world, the Hallmark channels are sending a different greeting to viewers and distributors.

Crown Media Family Networks, which runs the Hallmark Channel and its companion Hallmark Movies & Mysteries, plans to launch a new network, Hallmark Drama, on Oct. 1.

In another old-school media move, Hallmark is also creating a book publishing business, albeit a digital one, as its searches for more stories to turn into original movies and series.

Working from more of a digital age playbook, the company is also going direct to consumers with an over-the-top streaming subscription video-on-demand service called Hallmark Movies Now that will cost $5.99 a month or $59.99 a year and serve up the brand’s familiar family-friendly content. It launches Oct. 3.

“We don’t think the linear television business is going away any time soon,” said Crown Media CEO Bill Abbott. "It will certainly evolve and change and what was once 100 million homes in terms of distribution will be significantly less, but that doesn’t mean that the appetite for good quality content will be any less. And we’re believers in that long-term strategy.”

Crown Media is able to make these counterintuitive moves partly because it is no longer subject to second-guessing by public shareholders. The company was taken private by Hallmark Cards in 2016.

Investing to launch a cable channel probably wouldn’t go over too well with stockholders and analysts, Abbott said, noting that the ideas of launching the Hallmark Channel in 2001 and Hallmark Movies & Mysteries in 2006 weren’t too popular in their time either but resulted in success.

“We’ve heard this story before and we’ve seen this movie before,” said Abbott. “The irony is our business has never been better.”

Related: Family Dramas Feel Like Home

Before the company went private, its ratings were up, ad revenue growth was at an industry-leading level, and profits were rising thanks to its family-friendly original movies and series and its holiday-focused programming.

Research company Kagan sees Hallmark Channel’s cash flow rising 11% to $180.9 million this year. Net ad revenue is forecast to hit $358.1 million, up from $320.4 million.

Kagan pegs Hallmark Channel’s sub fee at 8 cents per month. With nearly 90 million subs, affiliate revenue is flat at $83.3 million.

At Hallmark Movies & Mysteries, Kagan sees cash flow increasing 14% to $85.2 million this year from $75 million in 2016, when it jumped 66% from $45.2 million. Net ad revenue is expected to grow 16% to $133.5 million. But with a sub fee of just 1 cent per month, affiliate revenue is forecast to be $7.5 million in 2017.

The numbers back up Abbott’s contention that the Hallmark brand is strong enough to overcome the company’s disadvantage as an independent cable programmer. “We’re the Notre Dame of independents,” he said.

And the same strength that’s propelling Hallmark Channel and Hallmark Movies & Mysteries will drive Hallmark Drama, he said, noting that viewers know and like the Hallmark brand: “You don’t have to sell it. You don’t have to market it all that much. We have great DNA in the drama area with Hallmark Hall of Fame and we certainly know how to make original content that resonates with a core audience.”

Related: Layer3 TV Adds Hallmark Networks

Abbott said he doesn’t have any commitments to carry the new channel yet. And he doesn’t have any major carriage agreements coming up for renewal soon. But he believes the new channel will resonate with distributors.

“We’re confident we’ll be successful here,” he insisted. “The value proposition with distributors is very good.”

Consolidation on the distributor side could help Hallmark Drama get launched. “You can get there pretty quickly with a couple of deals where somebody feels good about carrying a quality brand that’s family-friendly and a very low cost,” Abbott said.

Read more at broadcastingcable.com.