Hallmark

Supported by Greenhaven Road Capital, finding value off the beaten path.

On Variety’s Strictly Business podcast, Bill Abbott, president and CEO of Hallmark Channel parent Crown Media Family Networks spoke about the obstacles of running the business.

“When you say it’s a ‘Hallmark movie, you know what it is.” 

There’s a lot of emphasis on branding because a good brand affects a business like an All-Star affects an NBA team. With one, everything is easier. In 2013, Mark Pendergast finished his book about the Coca-Cola company. Near the end of a very thorough research process, he asked if he could finally see the secret recipe. Mark got lucky, a spokesman let down his guard and…

“He grinned, ‘Mark,’ he said, ‘let’s say this is your lucky day. I happen to have a copy of that formula right here in my desk…There you go. Now what are you going to do with it?”

Mark might sell it, but it would have to be a different name. He might market it, but not with those classic red and white colors. He might hint that it tastes just like Coca-Cola but as he found in his research, it’s not so much the taste that people like. Coke tastes better when people see the label (wine is this way too). Brand is one way to create Alchemy.

The Coca-Cola Company also has a successful distribution network. Hallmark, does not.

“(Disney via Hulu) shouldn’t have the ability to not carry us and carry Lifetime in a premium position when they own half of Lifetime.” 

Alex Rampell called this ‘the TiVo problem‘. Can incumbents with distribution creat innovation before upstarts with innovation attain distribution? We saw this same problem play out with Barefoot Wine. In that case, the founders tweaked the distribution model. 5-Hour Energy.

As content evolves, the distribution economics evolves too. Eventually (probably) the Hallmark content will be on their Hallmark Movies Now service, however, those economics are tough.

“I think the whole SVOD ecosystems has to go through a major change because there are now ways the economic model works if you’re creating this volume of content.” 

“It’s too much content for too low a price.”

This was the Pixar problem. Their movie investments only paid off if their movies were always awesome. One slip was trouble, two slips and bust. Pixar’s acquisition changed the economics.

Abbott is open to different ideas. As Rory Sutherland fondly notes, maybe your problem has already been solved someplace else.

“The landscape has to change in some way…the video game business has been very successful in portioning out pieces.”

“Yeah, if you want to find out if the guy gets the girl, fifty cents at the end.”

If peripheral content (like Pixar) is one model then video games are another. No matter what direction Hallmark strikes out in, they’ve got a good start. It’s a strong brand, selling out advertising each holiday season, even turning down questionable ads and being #1 in the women 25-54 bracket.

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I wrote an ebook based around the content of this blog. It’s Idea Trails and it’s a collection of 50+ ideas from the blog with stories that go along with them. My concept was a book of trailheads of ideas worth exploring. Here’s an audio sample.