Hallmark Channel, Schleiff Look For Distribution Leverage At FCC

Washington – The Hallmark Channel is turning to the Federal Communications Commission for some possible regulatory leverage in upcoming carriage renewal talks with cable and satellite TV companies.

Henry Schleiff, president and CEO of Hallmark parent Crown Media Holdings, made the rounds at the FCC last week, meeting with aides to FCC chairman Kevin Martin and FCC member Deborah Taylor Tate, according to an Oct. 4 FCC filing.

His message: Pay-TV distributors are not paying Hallmark, a top-10 rated network, what it deserves, probably because the channel is unaffiliated with a major cable company or broadcast TV network.

In a phone interview Tuesday, Schleiff said Hallmark’s carriage deals with Comcast, Time Warner, and DirecTV expire in December.

He went to the FCC, he said, because the agency itself had proposed rules that would give all independent networks more clout in carriage talks.

“This was an FCC-initiated proposal,” Schleiff said.

In his discussions at the FCC, Schleiff provided data showing that Hallmark was paid 3 cents per subscriber monthly and generated a 1.1 prime time rating. Cable channels affiliated with Comcast (Golf Channel, E! Entertainment Television) and Time Warner (CNN, Court TV) had higher license fees but lower prime time ratings than Hallmark.

“I am not sure that [FCC officials] were aware of the magnitude of that disconnect [between license fees and ratings] before we went down there to show them in chapter and verse,” Schleiff said.

He insisted that his efforts at the FCC were not intended to gain an advantage in carriage talks with distributors.

“I don’t think it’s about leverage. I think it’s about the playing field being more level,” he said. “This is not about leverage at all.”

In the FCC filing, Hallmark’s outside lawyer did not accuse any cable or satellite company by name of using low-ball bargaining tactics; instead, the letter referenced “MVPDs,” or multichannel video programming distributors, FCC-created initials.

“The Hallmark Channel’s success in correcting this disparity in upcoming agreements could provide meaningful information about the willingness of MVPDs to treat independent programmers – in this case, a top-tier programmer offering pro-social content – fairly by offering competitive rates and carriage terms,” Hallmark said in a two-page filing about its FCC meetings.

The FCC filing didn’t say when the new carriage talks would start and didn’t mention the license fee Hallmark would seek from a particular cable or satellite TV provider.

The FCC is studying whether it needs to adopt rules designed to foster greater cable carriage of unaffiliated programming. Hallmark, however, is complaining more about compensation than carriage.

“The license fees paid to the Hallmark Channel by certain large MVPDs are manifestly inconsistent with its status as a top-ten cable network and with its strong appeal among MVPD subscribers,” Hallmark said.

Hallmark endorsed a number of options, including “meaningful discovery opportunities,” timely resolution of disputes, and reliance on baseball-style arbitration in which parties present their best and final offers, with the FCC acting as arbitrator of last resort.

“Baseball-style arbitration would encourage parties to bargain realistically and reasonably with each other and would make it unnecessary for the [FCC] or an arbitrator to fashion detailed remedies with respect to specific compensation rates and terms of carriage,” Hallmark said.