When Crown Media Holdings Inc., parent company of Hallmark Channel and Hallmark Movie Channel, last fall named Henry Schleiff as its new CEO, the Studio City cable network was in a period of unrest. Founded in 2002 by Hallmark Cards Inc., the company had made a name for itself producing original and family-focused television dramas and feel-good programming, such as its popular Hallmark Hall of Fame series. Though the lineup frequently scored solid ratings, its median age was around 60 an age group considered unattractive to advertisers which meant the network couldn’t attract big-name products. And because Crown Media was an independent and didn’t have enough leverage to charge higher subscription fees from cable and satellite carriers, those lost ad dollars were especially painful. By late last year, Crown Media was in the red and floating plans to sell Hallmark Channel. In this environment entered Schleiff, who was coming off eight years as head of Court Television Network, where he shepherded its focus from purely legal news to a slate of entertainment and reality programming. His plan for Hallmark: keep most of the network’s programming but position it to appeal more to the moms and dads who pay the cable bill. The hope was that would bring the media age closer to 45 and lure advertisers who are shedding their long-held bias against baby boomers. “(Advertisers have) certainly gotten a lot more interested in the last two to three years as the research is now undercutting the old myths. That myth that you wouldn’t switch brands when you’re over 40-something,” Schleiff said in an interview earlier this month. “Well, that’s totally not true.” Schleiff said Hallmark Channel wants to capitalize on the transition and shed new light on the buying power of the baby boomer generation while also keeping its core audience of 29- to 54-year-old women. “We happen to be in this unique time where more and more attention and credit is being given to the baby boomers,” he said. Schleiff said has also called for a new on-air scheme and identity under the catchphrase “Make Yourself at Home.” The new campaign the first since the network came online in 2001 was rolled out March 1 and includes new graphics, music and advertising spots, in addition to a new website that premiered last year. But the more revealing change will happen off the air: Hallmark is making calculated changes in its casting decisions, which will now ebb “a little younger,” Schleiff said. While the alterations are not sweeping Schleiff calls them more “fine-tuning” he admits there is danger that it will alienate older viewers accustomed to channel’s signature look and feel. That’s why Schleiff is being extra cautious. He says the network is respecting the age group that helped build it. “The trick is to continue to dance with the person that brought you to the dance,” he said. “We’re not going to do anything dramatically undercut the core audience.” He said the channel is slowly turning around. Ratings are up 30 percent since last year and by the end of last year, Hallmark was the No. 9 advertiser-supported cable network in the nation. In December, it rose to the No. 1 spot during weekend prime time and achieved its highest rated quarterly, monthly, weekly and daily ratings ever. Ad revenue was also up 31 percent during the fourth quarter and the company’s loss around $60 million in the last quarter of 2005 narrowed to $30 million. Costs of services also fell from almost $77 million to $53.1 million, reported the company, which has about 130 employees at its Studio City headquarters. (Hallmark also reported licensing fees of just $38,000 for the period, the result of the company offloading its 600-title film library to a distributor last year.) Schleiff has also made headway on the subscriber fee front and just completed a deal with EchoStar Communications Corp., operator of DISH Network, to carry the network in 4 million additional homes. The deal pushes the channel’s subscriber base from 76.2 million to 80 million starting in April. Crown has also launched an effort to synergize business across all of the Hallmark platforms, which includes a magazine, 4,000 stores and numerous products. Schleiff said the new plans would spell results for shareholders. “Anything that increases the ratings or the personality, the distinctiveness of the brand I think translates into incremental advertising dollars, especially as we go into the up-fronts,” he said. But Steven Mallas, who follows the company for the website Motley Fool, is not convinced the plan will pay off. “The company’s annual losses and usage of cash, all in the name of just a couple assets, just doesn’t scream healthy to me,” he said. Mallas said the company has an awful lot riding on the new identity. “Crown Media better nail that re-branding effort, hopefully spending the minimal amount necessary to accomplish it. There are, simply put, better names in the media space for investors to look at.” Schleiff admits that while response about the new ad campaign so far has been enthusiastic, it’s far too early to gauge any financial impact. “It doesn’t happen overnight,” he said. Staff Reporter Chris Coates can be reached at (818) 316-3124 or at [email protected] .
