Hallmark Fare Makes Cut on Cable

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When Time Warner Cable Inc. started trimming its underperforming channels last month, it quickly cut Ovation, an arts channel. It also signaled that it was considering chopping We TV, IFC and Crown Media Holdings Inc.’s two Hallmark channels.

The New York media giant needed to drop little-watched channels to curb programming costs, and Crown appeared to be a victim. But it was spared at the last minute, a reprieve so significant that it boosted the company’s stock 9 percent to $1.93 for the week ended Jan. 2, making it one of the biggest gainers on the LABJ Stock Index. (See page 32.)

It was not clear why Time Warner made the turnaround. But Crown, a Studio City company that runs the Hallmark Channel and the Hallmark Movie Channel, said last week that it reached a long-term agreement with Time Warner for carriage of both channels.

“This would be a material deal for someone the size of Crown,” said Amy Yong, an analyst at Macquarie in New York who covers Time Warner, who noted that Time Warner provides Crown’s channels with 13 percent of their audience. “If they lost the deal, they would lose affiliate fees, advertising revenue and the ability to negotiate higher fees in the next round of negotiations.”

Details of the agreement were not released.

In an email to the Business Journal, a Crown spokesperson said the company was pleased with the deal.

The rise of streaming video and programming costs means cable companies such as Time Warner have been looking for channels to cut. It was widely reported that the Hallmark channels were among those at risk.

In an investor conference call last month, Time Warner Chief Executive Glenn Britt said the company had to jettison the weakest performers.

“We’ve accumulated networks that hardly anyone watches,” he said. “A number of them are trying to reach the same audiences of the ones that are maybe more successful.”

Independent arts channel Ovation was quickly cut from the roster because of low ratings. Time Warner initially kept Current TV, a channel founded by former Vice President Al Gore, but dropped it last week after Current was sold to Arab news network Al-Jazeera.

“The cable carriers are looking at whether there’s something about the channels that creates loyalty,” said Zach Miller, director of research of Three Peaks Capital Management in Castle Rock, Colo.

Crown’s lineup includes reruns of programs such as “Golden Girls,” “Cheers” and “Who’s the Boss.” Programming by Crown, which is 90 percent owned by Hallmark Cards Inc. in Kansas City, Mo., will focus more on original shows in 2013, Miller said. In June, the company will run scripted series “Cedar Cove,” starring Andie MacDowell and based on books by Debbie Macomber about a small-town judge.

“A big trend in the TV industry right now is that cable networks are trying to move more toward original scripted content, something that will draw viewers to your network,” Miller said. “If ‘Cedar Cove’ does well, it can create a little more loyalty to the channel throughout the year.”

The company had 12 Christmas movie premieres in 2012, with titles such as “It’s Christmas, Carol!” and “The Wishing Tree.” The movies’ average viewership increased 8 percent compared with the previous year, Miller said.

In another successful attempt at original programming, made-for-TV film “Puppy Love,” about a couple taking care of a runaway dog, attracted about 1.7 million households, a strong rating for the Hallmark Channel, for its debut in September. The movie was a product of a strategy the channel took last year when it stopped carrying “The Martha Stewart Show” in favor of original shows and movies.

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