FCC arbitration threat played a 'huge factor'

The Hallmark Channel has engineered a multiyear carriage renewal with Comcast.

Henry Schleiff, prexy-CEO of Hallmark’s Crown Media parent, said the threat of binding arbitration by the Federal Communications Commission was a “huge factor” in getting Comcast to buckle down and clinch the deal; the old contract was about to expire. Hallmark is at the mercy of cable operators and satellite distributors because it’s a stand-alone indie, not part of a media goliath such as Disney/ABC/ESPN or Time Warner/Turner.

Comcast and Hallmark declined to comment on the terms, but an analyst who covers Crown Media, Tom Eagan of Oppenheimer & Co., said he estimates that Hallmark will receive a monthly fee of 4¢ a subscriber for the first year, with the fee rising by about a penny a year and topping off at 8¢ in the final year of the renewal.

Although not confirming Eagan’s figure, Schleiff said he’s satisfied that the deal is fair even though the fees are well below what Comcast should pay for a network that, in November, averaged 1.36 million total primetime viewers. The total was 7% higher than that of November 2006 and propelled Hallmark into seventh place among all ad-supported cable nets for the month.

The rap against Hallmark Channel is that it skews too old. In November, it averaged only 277,000 adults 18-49, putting it in 28th place.

Schleiff said the Comcast deal could serve as a template for deals he’s working on with Time Warner Cable and DirecTV, whose carriage contracts are up for renewal. He added that if it looks as though “there’s a lack of good faith in our negotiations” with TW or other cable operators because they’re favoring nets they own (or are affiliated with), he’ll go back to the government for redress.

An indication of how little money Hallmark is getting, on average, from cable/satellite license fees is that the overall figure comes to only about 20% of the network’s total revenues. The average cable net receives up to 40% of its revs from cable and satellite fees.

As part of the Comcast deal, the Hallmark Movie Channel will receive a carriage pickup for both its standard-definition iteration and its high-def duplicate, which launches in March.

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