Hallmark Channel Greets Higher Ad Revenues, Ratings

Hallmark Channel's fourth quarter brought many happy returns to its parent company, Crown Media Holdings Inc.

Ad revenues jumped 79 percent to $31.2 million in the three-month period ended Dec. 31 compared to $17.5 million a year ago, with $24 million flowing to the Hallmark Channel in the United States. Full-year ad revenues rose 42 percent to $98.1 million in 2003, compared to $69.1 million in 2002.

Bill Aliber, chief financial officer of Crown Media, said that Hallmark Channel wrote between $4 million and $5 million in scatter advertising in the fourth quarter for a 10 percent to 25 percent CPM increase.

"It is a combination of the distribution, the household rating, the enhanced programming from our programming folks, and the support from marketing that is driving those gains," Aliber said. "We're seeing those continue into the first months of 2004."

Distribution rose 15 percent to 56 million subscribers in the United States in the fourth quarter, partly because of the long-term agreement with Comcast Corp. Distribution has now passed 58 million, said Crown Media Chief Executive David Evans.

Evans said Hallmark Channel wouldn't stop there, pushing toward becoming a fully distributed network in the future. For the first time, Hallmark Channel has long-term distribution agreements with each of the major MSOs and satellite providers that reach about 95 percent of cable and satellite households.

"It paves the way for Hallmark Channel to be a fully distributed network, which is our goal," Evans said.

Ratings also increased in the fourth quarter, with the channel's partnership with Hallmark stores bringing an estimated 12 million viewers in the fourth quarter of 2003 and 17 million a year ago. Hallmark Channel was the fastest- growing cable network in annual audience percentage growth for the second year in a row. Total day ratings rose 50 percent, and household impressions nearly doubled.

Total revenues rose to $62.5 million in the fourth quarter compared to $42.1 million during the same period in 2002. Annual revenues rose 29 percent to $207.5 million from $161 million in 2002.

Crown Media expects to be cash-flow break-even for the first time this year.

Net loss was $36.3 million/35 cents a share, in the fourth quarter of 2003 compared to $169.5 million/$1.62 a share a year earlier. Full-year net loss in 2003 was $205.1 million/$1.96 a share, compared to $313 million/$3 a share in 2002.

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