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Crown Losses Shrink as Ad Revenues, Affiliate Fees Grow

May 7, 2008  •  Post A Comment

Crown Media, which owns Hallmark Channel, said it narrowed its loss as advertising revenues and affiliate fees increased in the first quarter.
The company reported a first-quarter net loss of $14.7 million, or 14 cents a share, compared to a loss of $40.2 million, or 38 cents a share, a year ago. Revenues rose 32% to $70.6 million from $53.6 million a year ago.
Over the last few months, Crown has negotiated renewals of its carriage deals with most of its largest distributors. As a result of those deals, subscriber revenues nearly doubled in the first quarter to $13.8 million in the first quarter from$7.5 million in the year-ago quarter.
On the conference call with securities analysts following the earnings announcement Wednesday, one analyst calculated that the new agreements pay Crown an average of about 5.8 cents per subscriber per month for Hallmark Channel.
Henry Schleiff, president and CEO of Crown Media, during the call said he still believes the network is undervalued in terms of the sub fee it earns compared with the ratings it generates for cable operators. However, he added he was “pleased with the substantial progress we have made here.”
The next major operator Hallmark needs to negotiate an extension with is Charter Communications, which represents 5 million subscribers.
Ad sales revenues rose 23% to $56.3 million in the first quarter.
Mr. Schleiff said during the quarter, Hallmark Channel was getting ad rate increases on a cost-per-thousand-viewers basis of as much as 71% above upfront pricing. He said clients in the entertainment, travel, financial services and insurance categories had upped spending and that new clients have come on board, including Marshall’s, Frito-Lay, Motel 6 and Match.com.
Mr. Schleiff said he expected the upfront market “will continue to support the kind of growth we’ve seen in the past.”
Hallmark has been reducing its debt and extricating itself from some expensive program acquisitions; it turned cash-flow positive in the quarter. Programming costs were down 11% to $35.4 million, due mostly to the expiration of a programming agreement with the National Interfaith Cable Coalition.
“I believe we have finally entered a mature phase of this model, with a majority of the increases in our advertiser revenues and subscriber fees now flowing to the bottom line,” Mr. Schleiff said.

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