• by David Goetzl  @dgoetzl, August 26, 2010

Once again, Martha Stewart has become a flashpoint. With her flagship talk show set to join Hallmark Channel next month, both the channel and one of its distributors are involved in a dispute about rates and reach.

Using a pointed word for a family-friendly channel, Hallmark Channel said AT&T U-verse has "threatened" to drop the channel if a new carriage agreement is not reached before Sept. 1. Hallmark Movie Channel would face the same fate.

Hallmark said negotiations are in a holding pattern. Bill Abbott, who leads Hallmark Channel, stated it seems "likely" that the network will be off U-verse.

AT&T said in a statement that Hallmark Channel parent Crown Media is making "unreasonable and inflexible demands," but it wants to keep the networks on its air at a "fair price" and is "making every effort" to reach a deal to do so. U-verse said it's surprised that "Hallmark has decided to take its negotiations public," adding that Crown Media is asking for payments greater than other distributors to carry its networks. 

U-verse no doubt wants to drive down affiliate payments. Hallmark has to balance any lost carriage against any potential reduction in ad rates -- or guarantees it may have to offer advertisers.

But unlike Disney-owned channels negotiating for new deals covering close to 20 million homes, Hallmark is in a lower-stakes game, which is unlikely to have much impact on its ratings. Hallmark and the movie channel are in no more than 2.5 million U-verse homes. That's less than 3% of the approximately 90 million homes Hallmark Channel reaches and slightly more for Hallmark Movie Channel and its approximately 36 million homes.

Responding to  AT&Ts remarks, Abbott noted: “It is unfortunate that AT&T U-verse’s statement of the situation is inaccurate. They are a multibillion dollar organization bullying one of the nation’s last surviving independent cable networks by insisting on unreasonable rates that would seriously jeopardize our longevity.  Hallmark Channel and Hallmark Movie Channel are two of the few remaining family-friendly networks offered on television and represent less than 1% of AT&T’s total basic programming fees!"

If Martha Stewart and other Hallmark programming (notably original movies) is compelling enough, AT&T customers left without the channel could switch to a cable or satellite operator. Hallmark has adopted a standard tactic in carriage disputes, setting up a hotline for viewers to complain to U-verse.