Will Martha Stewart/Hallmark gamble pay off?

MSLO, channel say next week's move is a win-win for both

NEW YORK -- In a TV commercial, Martha Stewart calls her new partnership with Crown Media's Hallmark Channel "a perfect fit."

The alliance between Martha Stewart Living Omnimedia and Hallmark Channel kicks in Monday when "The Martha Stewart Show" and other lifestyle programming begin running on the cable network. The move is designed to boost the fortunes of both brands, which have been struggling amid a challenging syndication market and a widening rift between those cable channels that have strong content and personalities and those that don't.

With Stewart becoming the first major TV star to move her syndicated show to cable -- ahead of a similar move by Oprah Winfrey next year (and Conan O'Brien's move from NBC to TBS) -- Hallmark, owned by Crown Media, and Stewart are aiming to become a match made in TV heaven.

"The cable channel business is quickly migrating into haves and have-nots, especially now that cable operators must also pay broadcasters retransmission-consent fees," RBC Capital Markets analyst David Bank said. "Hallmark is trying to make itself more relevant and a necessary, must-have channel" with the help of a big name to avoid struggling for carriage deals.

"For Martha Stewart, the benefit is a more predictable schedule of her flagship show and becoming a bigger, more stable TV franchise player with the ability to also try the Oprah model of launching new talent," Bank added.

"Martha Stewart" will anchor the daily 10 a.m.-6 p.m. MSLO lifestyle programming block on Hallmark, which also includes "Mad Hungry With Lucinda Scala Quinn," executive food editor at MSLO, and "Whatever With Alexis and Jennifer"; the latter's Alexis Stewart and Jennifer Koppelman Hutt also host a show on Sirius XM Radio.

On Tuesday, Crown Media and Hallmark Channels president and CEO Bill Abbott, a former ad-sales chief at Hallmark Channel, and his team unveiled a brand name for the eight-hour block: Hallmark Channel Home.

Both say this deal is one of those win-win situations.

MSLO will get a bigger TV presence than ever before and get paid for bringing "Martha Stewart" -- not to mention new shows with newer talent and other specials -- to Hallmark. It also will get an undisclosed revenue cut from advertising sales.

"Viewers will now be able to find Martha on a single channel at the same time every day," MSLO executive chairman Charles Koppelman told THR. The daily 10 a.m. "Martha Stewart," plus two reruns in the afternoon, should boost the cumulative daily reach for ad partners, he noted.

The show, believed to be a money loser, has continued to lose ratings momentum this year, which Stewart has attributed to the different times that TV stations air the show in syndication. "I watch a lot of cable these days," and being able to produce shows in regular slots on "a really viable home" channel is very appealing, she said in January.

Also, analysts say TV shows are a key branding tool that helps fuel MSLO's big businesses: licensing and magazines. "It's not so much about the TV business alone as about driving interest in and sales (of) the brand," Bank said.       

Meanwhile, the goal for Hallmark Channel, controlled by the Hall family that owns Hallmark Cards, is to sharpen its profile in the crowded cable space to attract a larger slice of its 25-54 (particularly female) target demo.

Nielsen ratings show that Hallmark's average total-day viewership was 450,000 this summer, down 20% from the year-ago period, and its 25-54 demo deliveries fell 16% to 153,000.

Also, the median age of a Hallmark Channel viewer was down to 59.5 in 2009 but still above its goal, the company said in a recent regulatory filing. Current programming focused on such TV favorites as "I Love Lucy," "Who's the Boss?" and "Little House on the Prairie" is popular but skews older.

Abbott believes that a more targeted and younger demo will prove to be a boon to his business.

"We will go from a network that was predominantly off-network (program) acquisitions to something that will be fresh and original and a real destination," he said.

Plus, Stewart fans and younger demos targeted with the program block should make the audience "more upscale than we have ever been historically," thereby fetching better ad rates, Abbott said.

Indeed, older audiences and a lack of a breakout original hits have been Hallmark's key challenges, said Brad Adgate, senior vp and director of research at media buying firm Horizon Media. But Stewart "is a brand unto herself, and her content will lead to product-placement and branded-entertainment opportunities that are always appealing to marketers," he said.

Hallmark can use an ad boost; its second-quarter ad revenue fell 4% at a time when most TV channel groups posted strong gains.

In a sign of impending success, Hallmark's upfront season ad sales were up 25% this year, driven by the new lifestyle block. And the company recently told investors that time during the block sold at ad rates 117% higher than a year ago. Asked if that could lead to an ad revenue record for the company, he told THR that "for 2011, we are very optimistic."

Abbott also acknowledged the importance of marquee programming and brand names in the age of carriage showdowns.

"Having product that is in high demand and a must-have is critical in this landscape," he said. "You want to be part of [viewers' and distributors'] eight or 10 favorite channels. Martha helps us get there really quickly."

AT&T U-verse recently dropped Hallmark in the industry's latest carriage showdown. Abbott said Tuesday that U-verse has not returned to the bargaining table.

Hallmark has backed up its bet on MSLO with a multimillion-dollar, multiplatform "Make the Move With Martha" advertising campaign with such blue-chip advertisers as Farmers Insurance and Macy's. Sources said that, at an estimated $5 million-$8 million, it's Hallmark's biggest campaign ever.

Although at least two media buyers, who didn't want to be named, said that they aren't convinced that the Stewart-Hallmark gamble will work out, Abbott said the sides will not make "rash judgments" on the success of their multiyear deal. "We do expect it will take time [for the audience to find it] and not be an overnight success," he said. "We are planning for a few bumps in the road."

The MSLO experiment might be the first step of a broader change at the network.

Hallmark Channel's primetime is likely to see the introduction of self-developed lifestyle series and shows next year, which could mean it will move more movies to the fast-growing Hallmark Movie Channel. "We are looking to really establish them as two really different brands," Abbott said.

Why not make Hallmark Channel the Martha Stewart Network?

"Martha will be a key voice, but we have many projects in development," Abbott said. "Look at Oprah; it has taken them a very long time [to develop OWN], no knock on them. But Martha in lifestyle is Oprah's equal, and in eight short months, we got a whole daytime block started with her."

But Stewart likes the idea of deepening the cooperation ahead.

"We have four shows coming up on Hallmark Channel," she told THR on Tuesday. "And we have two more shows planned for January that are in preproduction -- one about pets and another one about food."

Hallmark said it has yet to make a decision on those shows.