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Crown Media Reports Higher 2Q Earnings

Updated 1:08 p.m. ET

Crown Media, which runs the Hallmark Channels, reported
higher second-quarter earnings as both ad revenue and subscriber fees

Net income rose 12% to $13.5 million, or 4 cents a share,
from $12.1 million, or 3 cents a share, a year ago.

Revenues rose 14% to $86.7 million in the quarter.

"For second quarter, Crown Media continued to
experience impressive revenue and earnings growth," Bill Abbott, president
and CEO, said in a statement.

Ad revenues were up 15% to $66.5 million.The company
attributed the gains to audience growth, increased distribution and higher ad
prices. Ad revenue at Hallmark Movie Channel increased 40% to $11.5 million in
the quarter from a year ago.

During the company's conference call with analysts, Abbott
said that Hallmark Channel was getting prices 36% above upfront levels and that
Hallmark Movie Channel was getting 34% price increases.

But Abbott said Crown was concerned about a slowdown in the
scatter market in the third quarter. "There no question that the third quarter
is softer than we would like," he said. 

Despite the slowdown, Crown CFO Andrew Rooke said that with
encouraging upfront results and new daytime programming in the works, "we
certainly anticipate achieving that [previously given as guidance] mid- to
high-single digit revenue growth for the full year and indeed would expect
improvements in our operating margins."

Abbott said that during the upfront, the Hallmark Channels
registered price increases at the mid-single digit level and saw volume increase
by double digits.

Crown said the Hallmark Channel's new daytime programming,
including the daily show Home and Family, was drawing CPMs that were 80%
to 100% above its off-network daytime fare. Home and Family and Marie,
another daytime series, attracted first-time advertisers including KitchenAid,
Electrolux, Visa and General Motors to the channel.

Subscriber fee revenues increased 10% to $19.9 million. The
company said that it completed a carriage renewal with Charter and an agreement
with a carrier representing 15% of Hallmark Channels households expires at the
end of the year. "We don't anticipate any problems," general counsel Charles
Stanford said.

Programming expenses fell 5% to $34.5 million as a number of
program license agreement expired.