Crown cuts 150 to stem red ink

Cable reorg trims 30% at Hallmark parent

NEW YORK — With pressure mounting to get profitable quickly, Hallmark Channel parent company Crown Media has announced a drastic 30% staff cut as part of a reorganization of the cable network’s U.S. and overseas operations.

The elimination of 150 positions is designed to get the company to cash flow breakeven in the second half of 2003. The layoffs include Lana Corbi, president and CEO of Crown Media United States, which operates Hallmark Channel U.S.

Corbi will stay on as a consultant through the end of the year.

The publicly traded Crown, controlled by Hallmark Cards of Kansas City, also announced it would be taking up to $75 million in noncash writeoffs in the fourth quarter, including $55 million-$60 million on children’s programming acquired via its acquisition of the Faith and Values network last year. Other noncash charges include $15 million on excess transponder capacity and unused facilities. Cash severance charges from the downsizing are estimated at $5 million.

Hallmark reaches 47 million U.S. subscribers and 48 million abroad with its various Asian, Latin American and European channels.

Company says its U.S. programming will be unaffected by the streamlining of its operations.

Most of the cost savings will come from shifting all marketing and distribution responsibilities for international channels down to the local and regional level. In fact, the London office will be adding 20 new people to support its growing European, Middle Eastern and African distribution efforts.

In Latin America, Crown says as yet-unnamed, local distributor will take on its 11 million subs in the wake of a strategic relationship forged between the two.

Some 75-80 of the 150 job cuts are coming from the company’s Denver office, where the centralized operations for the international networks were based to a large extent. The remaining job cuts are spread around the U.S., most heavily in Los Angeles.

Ad model suffered

“The ad model isn’t what it was when we put the channel together two years ago,” noted Mindy Tucker, Crown’s VP of corporate development.

Crown Media CEO David Evans told Daily Variety that in light of the difficult overseas market and the decline in advertising, the channels need to run as efficiently as possible.

“Our management was top heavy, and we regret losing Lana. … In the meantime I will become a more hands-on CEO of the channel.”

Combo considered

Tucker also said that while “we believe that the channel works as a stand-alone operation, we see advantages of combining with another network.”

Sources close to negotiations have indicated that a possible tie-up with a network such as Court TV could be in the works.

Hallmark Channel’s aggressive programming strategy of producing original movies and buying original series like “Touched by an Angel” has paid off in adding new subscribers and boosting overall viewership.

In subscriber growth, more cable systems added Hallmark in the last year than any other cable network in the U.S. From October 2001 to last month, Hallmark shot up by 13.39 million subscribers, swelling its total to 47.1 million.

Primetime prime

And more people watched Hallmark in primetime during the 2001-02 season than ever before in the network’s history. It jumped by 25% in primetime ratings compared with the 2000-01 season, averaging 235,000 households. The network displayed double-digit growth in the key adult demographic categories: 18-34, 18-49 and 25-54.

The family-oriented network currently plays “Touched by an Angel” weeknights at 8 followed by a movie. Many of its movies come from the existing Hallmark library.

Hallmark’s highest Nielsens have come from the world premiere of three inhouse four-hour movies: “Mark Twain’s ‘Roughing It,’ ” “Stranded” and, six weeks ago, “Johnson County War.”

Hallmark Channel’s strategy to commission as many as 12 original movies per year is reflected in its annual programming expenses. According to Kagan World Media, Hallmark Channel will spend a projected $80 million for both original and acquired programming in 2002 and $88 million in 2003.