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Sweet family offerings push the Hallmark Channel into cable's top 10

LOS ANGELES -- In January 2002, before David Kenin's first news conference as Hallmark Channel's programming chief, Kenin's then-boss told him that he'd be introduced with the mandate of making the fledgling enterprise a top-10 cable channel.

"I said, 'Could you just wait until I get back from the bar? I'm not going to be prepared to defend that right away,' " Kenin recalled .

Five years later, Hallmark has achieved what seemed unlikely for a channel that started with what Kenin called "flatline" ratings and gained early traction with reruns of hoary broadcast series including "The Rifleman."

Hallmark finished 2006 as the No. 9 advertiser-supported cable channel in US households, the result of its self-proclaimed "family friendly" prime-time lineup stuffed with TV movies as sweetly sentimental as a traditional Hallmark greeting card.

For fourth-quarter 2006, it came in at No. 6 and, during December weekend prime time, was the most-watched ad-supported channel. It bested competitors including TBS and USA Network with big seasonal guns like the original movie "The Christmas Card," and with the US TV premiere of the hit documentary "March of the Penguins."

In 2005, the channel ranked No. 11 in household ratings. It averaged 930,000 daily viewers in 2005, with the number rising to nearly 1.2 million last year.

The ratings indicate "there is an insatiable demand for what is now a very limited supply of family-friendly programming," said Henry Schleiff, president and chief executive officer of Crown Media Holdings Inc., which owns and operates the channel.

While most channels try to be "a little bit hipper, a little bit cooler, a little bit sharper than the other one," he said, Hallmark is serving audiences in search of "good stories and classic series."

Kenin, who oversees selection of the nearly two-dozen original movies that air annually on Hallmark, said he has a simple rule when reviewing scripts: "If I'm not crying, we don't do them."

"Most of our materials, in a very complex and troubled world, are situations that elevate the human spirit and cherish human relationships and celebrate life," said Kenin, Crown's executive vice president for programming.

It's natural for executives to tout their programs and ratings . But Hallmark is reaching for a different audience: the cable and satellite carriers it needs to convince that the channel's popularity should earn it higher license fees.

But the channel's subscriber fees are in the cellar despite audience growth.

"We're an independent, so we're not part of a larger group that says, 'If you pay us more we'll throw in such-and-such other networks.' We have to do it the old-fashioned way, which is to say on the merits," Schleiff said.

Other channels with comparable ratings but corporate connections can get up to $1 per subscriber per month . One news report put Hallmark's license fees at 5 cents per subscriber.

That has forced Hallmark to rely largely on advertising revenue, compared to the dual revenue streams of ad sales and carriage fees other channels enjoy, he said.

Schleiff insists he is optimistic about a happy ending for Hallmark -- especially if it delivers the right message to the industry and advertisers.