Maybe Not the Very Best, But Hallmark Gains

Ratings are up 60% over '02; distribution has doubled since '01

The Hallmark Channel is not yet the top-10 cable network its former CEO promised a year ago it would be. But the network, which has struggled since it took over the former Odyssey Channel in August 2001, did crack cable's top 20 in April. That may seem like a modest gain, but, for Hallmark, it's a big move.

Crowning Achievement
The King and Queen of Moonlight Bay
Hallmark's prime time averages
Source: Nielsen Media Research
August 20010.5
August 20020.5
April 20030.8

Bolstered by strong ratings for original movies, Hallmark climbed to a 0.8 prime time rating in April, according to Nielsen Media Research, a 60% improvement over the year before. May numbers are also pacing well above last year's marks at a 0.7. Back in the Odyssey days, ratings were more like a 0.4 in prime.

With the upfront market moving into full swing, the growth story comes at an opportune time for Hallmark.

"Its brand name generally has transcended ratings performance," said media buyer John Rash, senior vice president at Campbell Mithun. Still, he added, "any [ratings] growth, particularly at this clip will encourage discussions with advertisers."

Steering Hallmark is David Evans, president and CEO for corporate parent Crown Media Holdings Inc. It's his first time overseeing a cable network, a job he took on after the short tenure of Hallmark chief Lana Corbi, who was bounced last fall after eight months on the job.

For the first quarter, Crown's domestic operations generated $14.6 million in revenue and a $22.5 million loss, according to securities filings.

Evans is aided by several cable veterans, including head programmer Dave Kenin and marketing chief Chris Moseley. Their plan to grow Hallmark resembles the tactics some general-entertainment nets employ: Use acquisitions to drive ratings and original movies for Nielsen spikes and promotion. Indeed, programming has been the main driver to Hallmark's new success.

Hallmark's distribution gains also have helped improve its fortunes. Currently in 52 million homes, Hallmark says it's adding new subscribers at a rate of 600,000 per month. Distribution has nearly doubled since Hallmark took over the channel.

However, Hallmark's biggest distribution hole, unfortunately, is on Comcast, the country's largest MSO. Evans said recently that there have been very good discussions with Comcast and that Hallmark "will get a deal, it's just a matter of when." (Hallmark does have a few million Comcast subs that were formerly AT&T Broadband homes.)

Increasing distribution improves Hallmark's pitch to advertisers. In the first quarter, Hallmark's ad revenues were up 80% to $18.3 million. Hallmark is reaching more subscribers in heavily populated counties and strengthening its 18-49 demographics.

In this upfront market, Executive Vice President of Ad Sales Bill Abbott hopes to draw 120 advertisers, including 30 new clients, and aims to raise CPMs by double digits. "We think we'll beat the market for the value we offer and the growth we've had," he said.

"We're embracing the Hallmark brand but attacking as a general-entertainment network," explained Kenin, who once headed original programming for USA.

The strategy works for cable powerhouses like USA Network and TNT. Now Hallmark is trying it with a family-friendly twist.

To give viewers consistency, Hallmark created themed programming blocks, such as Westerns on Saturdays and mysteries on Sundays. During the week, it strips tested shows like Touched by an Angel
and, come September, M*A*S*H, which Hallmark picked up from FX.

Hallmark's two acquired movie franchises, Disney flicks on Friday nights and selected Hallmark Hall of Fame movies (like The Parent Trap
and Sarah, Plain and Tall), are contributing solid ratings. Classic acquired miniseries like The Thorn Birds
and Roots
have commanded strong Nielsen marks.
Another classic, NBC's 1980 miniseries Shogun, will air on Hallmark in July.

But original movies, Hallmark execs say, are the key to growing the network. The channel plans to air one original per month for two years. Kenin would like to make more for 2004-05. Recent originals Audrey's Rain
(1.7 rating) and Love Comes Softly
(2.7) have far outdelivered Hallmark's average Nielsen marks. Hallmark ties most movies to holidays, like upcoming family drama The King and Queen of Moonlight Bay
for Father's Day.

With this mix of acquisitions and originals, Kenin explains, scheduling is just as important as the shows. "We're not putting programs on the air without any support. When we do something like a movie, we'll find a way to springboard." That, he contends, is the way to build viewership and, ultimately, ratings.

By 2004, Hallmark may look to add an original scripted drama to its lineup.

Hallmark will spend about $70 million on programming this year, according to Kagan World Media. It will get another $450 million to spend over the next several years.