Q4 Loss Up at Crown Media, But Ad Sales Promise Growth

Mar 12, 2008  •  Post A Comment

Crown Media said its fourth-quarter loss widened, but that the company expects its growing advertising and subscriber revenue to start falling to the bottom line next year.
Henry Schleiff, who joined the company as CEO in 2005 with a contract that would pay him bonuses in the event of a takeover, said the company, which runs Hallmark Channel, was not for sale.
“Our focus is on running our business,” Mr. Schleiff said in a conference call with securities analysts Wednesday. “That’s not to say we’re not attractive.”
In the fourth quarter, Crown reported a net loss of $37.3 million, or 37 cents a share, compared to a loss of $30 million or 29 cents a share in the year-ago quarter.
Revenues rose 19% in the fourth quarter to $69 million, but the gains were offset by legal expenses and other costs related to the termination of Crown’s programming relationship with the National Interfaith Cable Coalition.
Mr. Schleiff said the company has been able to use record ratings on Hallmark Channel to generate big gains in advertising revenue. In the fourth quarter, ad revenue was up 21%, and in some deals in the scatter market, ad prices on a cost-per-thousand viewer (CPM) basis were up 83%.
Hallmark also did bigger business in the calendar upfront, in which advertisers buy ad time in December for the following January through December. By the end of December, the network had closed $12 million in calendar upfront commitments, up 23% from a year ago, doing deals with 18 advertisers, up six the previous year, with a CPM increase of 11%.
Last year, the majority of Hallmark’s distribution agreements, which called for no or very small subscriber fees, expired. It has since signed new deals with EchoStar, Comcast, Time Warner Cable, DirecTV and others.
“Although we still believe Hallmark is undervalued, we’re pleased with the progress we have made,” Mr. Schleiff said.
The company expects revenue to be up 25% this year, partly because of increases in distribution fees and partly because of a 15% increase in ad revenues.
Crown, which was operating at about break-even this year, expects to generate $50 million in earnings before interest, taxes, depreciation and amortization and cash flow of $40 million in 2008, and EBITDA of $85 million and cash flow of $55 million in 2009.
Mr. Schleiff said the company plans to concentrate on additional distribution for the Hallmark Movie Channel, now in about 8 million homes, and the Hallmark Movie Channel, scheduled to launch in April. The new distribution agreements give operators the right to carry those networks.
“We think we have a real sleeping giant in Hallmark Movie Channel,” he said.


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