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Ad Revenue Dips At Crown Media In Q2

Crown Media Holding reported second-quarter results Thursday, but offered little insight into a pending recapitalization proposal from its largest shareholder.

Revenue declined 5% to $68.2 million in the period and advertising revenue fell 8% to $51.9 million. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the period were $21.3 million, an 8% increase over the prior year.

Crown said that a shift in its scheduling strategy -- moving to three-hour programming blocks to more specifically target its core audience of women 25 to 54 -- caused a disruption that led to lower ratings, which in turn served to reduce revenue.
Hallmark Channel ended the period with about 86.2 million subscribers. On the conference call, CEO Bill Abbott said that the channel will launch an HD version next year. Its Hallmark Movie Channel (which already has an HD version) currently has about 18.6 million subscribers and Abbot said on the call that would rise to 25 million by the end of the year.
The programmer had little to say regarding a pending proposal by its largest shareholder Hallmark Cards to restructure its debt.The proposal, also the subject of a lawsuit brought by one minority shareholder in July, would swap $1.1 billion in debt for $500 million in new debt and $550 million in equity. Opponents have argued that the plan would dilute existing shareholders into oblivion.

Crown appointed a special committee of independent directors to evaluate the proposal and Morgan Stanley was hired last month to serve as financial adviser.

On the conference call, Crown chief financial officer Brian Stewart said the special committee was still evaluating the Hallmark proposal and that it would be inappropriate to comment at this time.