Hallmark takes a trimming

Lana Corbi out, as parent firm whacks 140 jobs and frets over growing deficit

In March, Hallmark Channel chief Lana Corbi confidently told reporters her channel would break into the top 10 in cable Nielsens in just two years. Eight months later, she is out, and the Hallmark Channel is trying simply to hold on.

Corporate parent Crown Media Holdings Inc. ousted Corbi, formerly president and CEO, last Monday and shaved about 140 jobs, or 30% of its workforce. Most cuts came from Crown's international channel, as the company decentralizes international operations from Denver (which lost 80 jobs) to three foreign regions. That division's top exec, CEO and President Russel Givens, emerged unscathed.

Crown Media CEO David Evans adds Hallmark to his watch. Crown Media took over Odyssey Network in spring 2001 and relaunched it as Hallmark in August '01.

Corbi, a business-side veteran, took the Hallmark reins when veteran programmer Margaret Loesch left a year ago. It was her first shot at running the creative side.

With Crown focusing more on the U.S., "there were really two CEOs and only one business," she said. "For the health of the whole, you have to rearrange the parts." She will stay on as a consultant until year-end.

Crown has to pay the remainder of her contract, $1.5 million in base salary over two years, according to company documents.

It's in a tough financial spot. Securities filings show it about $804 million in debt and losing about $150 million a year, with an accumulated deficit of $580 million.

The company will take a $20 million charge in the fourth quarter, including $5 million in severance costs, and write down $60 million in programming costs.

To Salomon Smith Barney analyst Jill Krutick, the restructuring adds uncertainty to vulnerability. "A challenge for Crown Media will be to achieve improved ratings and profitable pricing for its channels in the face of growing competition," she said in a report.

The shakeups come as Hallmark's ratings are stagnating. By and large, it sits in the lower echelon of cable Nielsens, averaging a 0.4 to 0.5 prime time rating in recent months. The channel has seen a few spikes in the past year, including strong ratings for replaying ABC's Roots
miniseries. Recent original movie Johnson County War
logged an above-average 1.1 rating, a disappointment given its promotional blitz (including parading stars Burt Reynolds and Tom Berenger and a herd of cattle through Times Square).

The first year-to-year ratings comparisons since relaunch paint an erratic picture. In September, Hallmark registered a 0.5 rating, down 17% from 2001. Delivery to key demos was off: 16% in adults 18-49 and 19% in 25-54. August ratings were flat year-to-year in households, at 0.5, but up 26% in 18-49 and 28% in 25-54.

Distribution rose 13.4 million homes between September 2001 and September 2002, to 47 million subscribers, according to Nielsen Universe Estimates.

Evans contends the channel needs time more than radical changes. "It takes time to grow ratings, and there is a limit to what you can spend on [advertising]."

He is banking on time-tested acquired fare. Reruns of M*A*S*H
and Touched by an Angel
join the schedule soon. He still plans to make 24 original movies and miniseries in the next two years. The exec in charge of those projects, though, former ABC miniseries chief Maura Dunbar, fell victim to the layoffs.