Crown Media Holdings Announces Revenue Increase of 39% for Fourth Quarter of 2005

Operating Highlights for the Quarter

-- Solid revenue growth. Crown Media's net revenue in the fourth quarter of 2005 increased 39% to $60.5 million, from $43.6 million in the prior year's fourth quarter. This significant improvement was due to growth in advertising revenues of 28% to $40.6 million and an increase in subscriber fee revenues of 108% to $5.4 million. For the full year, Crown Media's total net revenue increased 43% to $197.4 million from $138.2 million in the prior year. This was primarily due to an increase in advertising revenues of 37% to $146.1 million from $106.3 million in 2004, the contribution of $10.8 million in other income from the sublicensing of Little House on the Prairie, and subscriber fees of $18.7 million in 2005 which were nearly doubled as compared to 2004.

-- Continued subscriber increase. Hallmark Channel subscribers increased 9% to 70.7 million as of December 31, 2005, from 64.6 million subscribers as of December 31, 2004. Since the beginning of 2005, Hallmark Channel added more than 6.0 million new subscribers, maintaining its steady growth even at its higher penetration levels. The company is continuing to increase viewer awareness and rollout its Hallmark Movie Channel. Subsequent to year end the Hallmark Channel has added an additional 1.8 million homes to bring it to a total of 72.5 million subscribers across the nation.

-- Record ratings. Hallmark Channel ended the quarter and the year with record ratings. For the fourth quarter, the channel delivered its highest quarter, month, week, weekend, day and telecast and ranked among the top ten cable networks in household rating for both total day and prime time. This success completes a year in which the channel achieved its highest-ever-rated first, second and third quarters as well as each month's best-ever performance throughout 2005.

-- Popular holiday programming. As the destination for the holidays, Hallmark Channel repeated its past success with an appealing line-up of themed holiday programming and a "watch and win" sweepstakes with the 4,000 Gold Crown stores. One of this year's premieres, Meet the Santas, earned a 3.6 household rating, making it the channel's highest rated telecast to date and the highest rated ad-supported cable movie in the week it aired. The channel attracted an additional 18 million viewers in the month of December, significantly expanding its audience base at the start of 2006.

"The results of the past year demonstrate the tremendous appeal ofour programming with outstanding ratings success driving our growth inadvertising revenues and subscriber fees," stated David Evans,President and CEO of Crown Media. "In each quarter we delivered recordratings and double digit growth in total revenues as compared to 2004.For the fourth consecutive year, Hallmark Channel is one of thefastest growing cable networks. While we are committed to the successof our business operations, we are also engaged in a process ofpursuing strategic alternatives. With the oversight of our SpecialCommittee to the Board, we are continuing to explore potentialtransactions with interested parties and will provide further detailson these at the appropriate time."

"As we look ahead in 2006, our success continues with our highestrated Original Mystery Movie featuring Dick Van Dyke and otheroriginal programming contributing to a record breaking first quarter.Once again we were rated among the top ten highest rated ad-supportedcable networks for both total day and prime time. We are confident inour ability to deliver another year of ratings highs, solid revenuegrowth and continued expansion in subscribers."

Financial Results

Historical financial information is provided in tables at the endof this release. In connection with the sale of the internationalbusiness which was completed on April 26th, 2005, the operatingresults of the international business have been classified asdiscontinued operations in the accompanying statements of operationsand for all cash flow information contained herein for the quarter andyear ended December 31, 2004 and 2005.

Operating Results

Crown Media reported revenue of $60.5 million for the fourthquarter of 2005, a 39% increase from $43.6 million for the fourthquarter of 2004. Subscriber fee revenue increased 108% to $5.4million, from $2.6 million in the prior year's quarter, primarily as aresult of the increase in distribution and the ending of waivedsubscriber fee periods for certain of our domestic distributors.Advertising revenue increased 28% to $40.6 million during the quarter,from $31.6 million in the fourth quarter of 2004, reflecting thegrowth in subscribers, an increase in ratings and higher advertisingrates and volume. Licensing fees for our film library increased to$14.3 million during the quarter, from $9.4 million in the prioryear's quarter. Generally, a significant part of our annual librarysales occurs in the fourth quarter.

Crown Media reported revenue of $197.4 million for the year endedDecember 31, 2005, a 43% increase from $138.2 million for the prioryear. Subscriber fee revenue increased 90% to $18.7 million, from $9.9million in the prior year's period. Advertising revenue increased 37%to $146.1 million from $106.3 million in the prior year. Licensingfees for our film library were essentially flat at $21.7 millioncompared to $22.0 million in the prior year. Sublicense fees and otherrevenue was $10.8 million due primarily to the sub-licensing of LittleHouse on the Prairie to a third party.

For the fourth quarter of 2005, cost of services increased 29% to$76.9 million from $59.8 million during the same quarter of 2004.Within cost of services, programming expenses increased 20% quarterover quarter to $34.9 million, because of the continued licensing ofhigher quality programming for our domestic channels (including theintroduction of the Mystery Movies in the first quarter of 2005) andthe related amortization.

For the fourth quarter of 2005, the impairment of film assets was$2.6 million and $2.7 million for the fourth quarter of 2004. For thequarter ended December 31, 2005, amortization of film assets increasedto $18.4 million from $16.4 million during the same quarter of 2004primarily due to an increase in the internal use of the library assetsby the Hallmark Movie Channel.

Subscriber acquisition fee expense was $9.0 million in the fourthquarter of 2005 versus $7.7 million in the same period of 2004. Ourdomestic subscribers increased from 64.6 million at December 31, 2004,to 70.7 million at December 31, 2005, and the Company incurredadditional subscriber acquisition fees related to this increase. TheCompany amortizes these costs over the remaining life of thedistribution agreement, which has resulted in an 18% increase in oursubscriber acquisition fee amortization expense for the period endedDecember 31, 2005, as compared to the prior year period. Other cost ofservices increased 204% from $3.9 million to $11.9 million for thefourth quarter of 2005, primarily due to a $7.0 million increase inbad debt expense.

Selling, general and administrative expenses decreased to $12.6million for the quarter ended December 31, 2005, from $16.0 million inthe year earlier period primarily due to a decrease in consultingexpenses associated with Sarbanes-Oxley and a decrease in compensationexpense associated with the restricted stock units at the end of 2005as compared to the end of 2004. Marketing expenses of $5.1 million forthe quarter ended December 31, 2005 were flat to the prior year periodof $5.2 million.

For the year ended December 31, 2005, cost of services increased44% to $255.3 million from $177.8 million during the prior year.Within cost of services, programming expenses increased 34% periodover period to $120.6 million. For 2005, an impairment of film assetsof $25.5 million was recorded as compared to $22.0 million in theprior year. The impairment is the result of our film by film review ofthe film library based upon current projections for sales and internaluse. For the year ended December 31, 2005, amortization of film assetsincreased to $51.6 million from $28.9 million during the same periodof 2004, primarily due to increased usage of the film library on theHallmark Movie Channel and a recalculation of amortization related tothe impairment of our film assets. Subscriber acquisition fee expensewas $35.9 million for the year ended December 31, 2005, versus $26.0million in 2004. Other cost of services increased 96% from $11.0million to $21.6 million for the year ended December 31, 2005, due toan $8.8 million increase in bad debt expense and $1.1 million increasein amortization expense related to a capital lease placed into serviceduring the fourth quarter of 2004. Selling, general and administrativeexpenses increased to $55.2 million for the year ended December 31,2005, from $52.2 million in the year earlier. Marketing expensesincreased to $24.2 million for the year ended December 31, 2005, from$16.5 million in the year earlier primarily due to the 2005 MysteryMovie marketing campaign for Hallmark Channel.

Adjusted EBITDA loss of $1.5 million for the fourth quarter of2005 compared to an Adjusted EBITDA of $950,000 for the same periodlast year. Cash used in continuing operating activities totaled $23.1million for the fourth quarter of 2005 compared to cash provided bycontinuing operating activities of $6.4 million for the same periodlast year. The net loss for the quarter ended December 31, 2005,totaled $59.8 million, or $0.57 per share, compared to $129.0 million,or $1.23 per share, in the fourth quarter of 2004.

Adjusted EBITDA loss of $1.9 million for the year ended December31, 2005 compared to an Adjusted EBITDA loss of $56,000 for the sameperiod last year. Cash used in continuing operating activities totaled$121.9 million for the year ended December 31, 2005, compared to $15.2million for the same period last year. The net loss for the yearperiod ended December 31, 2005, totaled $232.8 million, or $2.22 pershare, compared to $316.8 million, or $3.03 per share, in the prioryear's period.

Conference Call and Webcast to be Held Wednesday, March 29th at3:00 p.m. ET

Crown Media Holdings' management will conduct a conference callthis afternoon at 3:00 p.m. Eastern Time to discuss the results of thefourth quarter and full year of 2005. Investors and interested partiesmay listen to the call via a live webcast accessible through theinvestor relations' section of the Company's web site atwww.hallmarkchannel.com, or by dialing (800) 688-0796 (Domestic) or(617) 614-4070 (International) and requesting the "Crown Media FourthQuarter Earnings" call. For those listeners accessing the call throughthe Company's website, please register and download audio software atthe site at least 15 minutes prior to the start time. The webcast willbe archived on the site, while a telephone replay of the call isavailable for 7 days beginning at 5:00 p.m. Eastern Time, March 29, at888-286-8010 or 617-801-6888 (international callers), usingreservation number 13706145.

About Crown Media Holdings

Crown Media Holdings, Inc. (NASDAQ: CRWN) owns and operates cabletelevision channels dedicated to high quality, broad appeal,entertainment programming. The Company currently operates anddistributes the Hallmark Channel in the U.S. to over 72 millionsubscribers. The program service is distributed through 5,200 cablesystems and communities as well as direct-to-home satellite servicesacross the country. In 2005, Crown launched its second 24-hour linearchannel, Hallmark Movie Channel. Through its subsidiary, Crown MediaDistribution, LLC, Crown also distributes titles in the U.S. from itsaward-winning collection of movies, mini-series and films forexhibition in a variety of television media including broadcast,cable, video-on-demand and high definition television. Significantinvestors in Crown Media Holdings include: Hallmark EntertainmentHoldings, Inc., a subsidiary of Hallmark Cards, Incorporated, LibertyMedia Corp., and J.P. Morgan Partners (BHCA), LP, each through theirinvestments in Hallmark Entertainment Investments Co.; VISN ManagementCorp., a for-profit subsidiary of the National Interfaith CableCoalition; and The DIRECTV Group, Inc.

Forward-looking Statements

Statements contained in this press release may containforward-looking statements as contemplated by the 1995 PrivateSecurities Litigation Reform Act that are based on management'scurrent expectations, estimates and projections. Words such as"expects," "anticipates," "intends," "plans," "believes," "estimates,"variations of such words and similar expressions are intended toidentify such forward-looking statements. Forward-looking statementsare subject to risks and uncertainties, which could cause actualresults to differ materially from those projected or implied in theforward-looking statements. Such risks and uncertainties include:competition for distribution of channels, viewers, advertisers, andthe acquisition of programming; fluctuations in the availability ofprogramming; fluctuations in demand for the programming Crown Mediaairs on its channels; Crown Media's ability to address its liquidityneeds; Crown Media's incurrence of losses; and Crown Media'ssubstantial indebtedness affecting its financial condition andresults; and other risks detailed in the Company's filings with theSecurities and Exchange Commission, including the Risk Factors statedin the Company's 10-K Report for the year ended December 31, 2005.Crown Media Holdings is not undertaking any obligation to releasepublicly any updates to any forward looking statements to reflectevents or circumstances after the date of this release or to reflectthe occurrence of unanticipated events.

Use of Adjusted EBITDA

Crown Media evaluates operating performance based on severalfactors, including Adjusted EBITDA . We have revised our calculationof Adjusted EBITDA since our report on 2005 second quarter results sothat it follows the definition of EBITDA in our bank credit agreementas amended in March 2005. The revised calculation adds back to netloss impairment of film assets, other non-cash expenses and otheritems mentioned below.

Our measure of Adjusted EBITDA differs from the normal definitionof EBITDA (earnings before interest, taxes, depreciation andamortization) used by most companies. We define Adjusted EBITDA asearnings before interest, taxes, depreciation, amortization,subscriber acquisition fee amortization, amortization of film assets,impairment charges, other non-cash expenses and all cash and non-cashitems related to the sale of our international business in April 2005.For this purpose, restricted stock unit compensation and retentionprogram are treated as non-cash items, although they may result incash payments during subsequent periods. Our credit facility containsa covenant that uses this adjusted EBITDA measure. Our bank creditfacility is material because it is a significant part of our liquidityand liabilities, and compliance with the covenants is an importantpart of the requirements of our credit facility. This covenantrequires the Adjusted EBITDA for each consecutive rolling four quarterperiod be not less than a $5.0 million loss. See "Selected FourthQuarter Unaudited Financial Information" below for a reconciliation toGAAP net income. Consequently, management views Adjusted EBITDA as acritical measure of our operating performance to meet our debtcovenants and monitors this measure closely. We disclose AdjustedEBITDA so that our investors can have some of the same informationavailable to our management to evaluate their investment in ourCompany.

We also believe that an Adjusted EBITDA provides an indication ofthe Company's ability to generate cash flows from operating activitiessince our non-cash expenses are excluded from our calculation ofAdjusted EBITDA. A significant portion of the Company's cost structurerelates to the amortization of film assets and subscriber acquisitioncosts, which are significant non-cash charges. The Adjusted EBITDAcalculation allows the Company to assess how much is available to paydebt service and gives a further indication of how much remains tofund discretionary expenditures such as the acquisition of programmingor additional subscriber base. However, Adjusted EBITDA should beconsidered in addition to, not as a substitute for, historicaloperating income or loss, net loss, cash flow from operations andother measures of financial performance reported in accordance withaccounting principles generally accepted in the United States.

Adjusted EBITDA differs significantly from cash flows fromoperating activities reflected in the consolidated statement of cashflows. Cash flow from operating activities is net of interest andtaxes paid and is a more comprehensive determination of periodicincome on a cash basis, exclusive of non-cash items of income andexpenses such as depreciation, amortization, loss from discontinuedoperations and impairment of film assets. In contrast, Adjusted EBITDAis derived from accrual basis income and is not reduced for cashinvested in working capital. Consequently, Adjusted EBITDA is notaffected by the timing of receivable collections or when accruedexpenses are paid. We are not aware of any uniform standards fordetermining EBITDA or our Adjusted EBITDA and believe that ourcalculation of Adjusted EBITDA is probably calculated differently thanpresentations of EBITDA by other entities because our calculation isbased upon the definition in a bank credit agreement.

Crown Media Holdings, Inc.
Selected Unaudited Fourth Quarter and Annual Financial Information
($ in thousands, except per share data)


Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
--------- ---------- ---------- ----------
Subscriber fees $ 5,389 $ 2,588 $ 18,746 $ 9,874
Advertising 39,537 30,775 143,780 104,481
Advertising by Hallmark
Cards 1,025 796 2,335 1,846
Film asset license fees 14,339 9,446 21,693 22,035
Other revenue 163 - 10,830 -
--------- ---------- ---------- ----------
Total revenue 60,453 43,605 197,384 138,236
Cost of services:
Affiliate programming 15,361 11,884 46,028 35,066
Non-affiliate programming 19,585 17,282 74,549 54,812
Amortization of film
assets 18,444 16,363 51,619 28,905
Impairment of film assets 2,603 2,682 25,542 22,003
Subscriber acquisition fee
amortization 9,037 7,664 35,928 26,020
Other cost of services 11,868 3,909 21,606 11,035
--------- ---------- ---------- ----------
Total cost of services 76,898 59,784 255,272 177,841
Selling, general &
administrative expenses 12,554 16,006 55,162 52,209
Marketing expense 5,078 5,229 24,160 16,477
Depreciation and
amortization 946 1,464 4,471 6,306
--------- ---------- ---------- ----------
Loss from continuing
operations before interest
expense (35,023) (38,878) (141,681) (114,597)
Interest expense (20,170) (16,428) (73,856) (60,179)
Income tax provision 10 - - -
--------- ---------- ---------- ----------
Loss from continuing
operations (55,183) (55,306) (215,537) (174,776)
Loss from discontinued
operations (17) (73,675) (10,683) (142,030)
Loss from sale of
discontinued operations (4,574) - (6,538) -
--------- ---------- ---------- ----------
Net loss $(59,774) $(128,981) $(232,758) $(316,806)
========= ========== ========== ==========
Net loss per share $ (0.57) $ (1.23) $ (2.22) $ (3.03)
========= ========== ========== ==========
Weighted average shares
outstanding 104,737 104,533 104,619 104,533



Crown Media Holdings, Inc.
Unaudited Consolidated Balance Sheet Data
(In thousands)

As of December 31,
------------------------
2005 2004
---------- ----------

ASSETS

Cash and cash equivalents $ 15,926 $ 12,102
Accounts receivable, less allowance for
doubtful accounts of $1,565 and
$6,695, respectively 65,935 75,459
Program license fees - affiliates 35,528 40,048
Program license fees - non-affiliates 73,670 78,823
Subtitling and dubbing - 1,143
Receivable from affiliate 1,815 16,644
Receivable from buyer of international
business 422 -
Prepaid and other assets 6,051 6,237
Prepaid program license fee assets 30,377 7,650
---------- ----------
Total current assets 229,724 238,106
Accounts receivable 9,101 6,798
Program license fees - affiliates 79,875 59,987
Program license fees - non-affiliates 148,022 135,372
Subtitling and dubbing - 1,583
Film assets, net 380,322 599,013
Subscriber acquisition fees, net 80,594 120,013
Property and equipment, net 18,560 32,829
Goodwill 314,033 314,033
Prepaid and other assets 13,595 5,034
---------- ----------
Total assets $1,273,826 $1,512,768
========== ==========



Crown Media Holdings, Inc.
Unaudited Consolidated Balance Sheet Data
(In thousands)

As of December 31,
------------------------
2005 2004
----------- -----------

LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)

LIABILITIES
Accounts payable and accrued liabilities $ 29,876 $ 40,228
Accrued restricted stock units 9,299 13,649
Subscriber acquisition fees payable 12,238 35,223
License fees payable to affiliates 25,433 -
License fees payable to non-affiliates 27,757 79,815
Payables to affiliates 12,826 13,512
Payable to buyer of international business 10,050 -
Interest payable 169 479
Capital lease obligations 612 2,276
Deferred revenue 1,149 612
Deferred credit from transition services
agreement 1,323 -
----------- -----------
Total current liabilities 130,732 185,794
Accrued liabilities 24,427 21,617
Subscriber acquisition fees payable - 678
License fees payable to affiliates 586 151,980
License fees payable to non-affiliates 186,268 111,761
Line of credit and interest payable to HC
Crown 86,309 81,067
Payable to Hallmark Entertainment
affiliates 70,000 100,000
Payable to buyer of international business 8,395 -
Senior unsecured note to HC Crown,
including accrued interest 509,386 460,930
Credit facility 210,000 310,000
Note and interest payable to Hallmark
Entertainment Distribution 135,187 -
Capital lease obligations 16,170 22,817
Company obligated mandatorily redeemable
preferred interest 14,537 11,488
Deferred credit from transition services
agreement 5,018 -
----------- -----------
Total liabilities 1,397,015 1,458,132
Commitments and contingencies
STOCKHOLDERS' EQUITY (DEFICIT)
Class A common stock, $.01 par value;
200,000,000 shares authorized;
74,117,654 and 73,863,037 shares issued
and outstanding as of December 31, 2005
and 2004 741 739
Class B common stock, $.01 par value;
120,000,000 shares authorized;
30,670,422 shares issued and
outstanding as of December 31, 2005
and 2004 307 307
Paid-in capital 1,423,815 1,365,450
Accumulated other comprehensive income - 3,434
Accumulated deficit (1,548,052) (1,315,294)
----------- -----------
Total stockholders' equity (deficit) (123,189) 54,636
----------- -----------
Total liabilities and stockholders'
equity (deficit) $ 1,273,826 $ 1,512,768
=========== ===========



Crown Media Holdings, Inc.
Selected Unaudited Fourth Quarter and Annual Financial Information
($ in thousands)


Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
-------- --------- --------- ---------

Net loss $(59,774) $(128,981) $(232,758) $(316,806)
Loss from discontinued
operations 17 73,675 10,683 142,030
Loss on sale of
discontinued operations 4,574 - 6,538 -
Amortization of film
assets 18,444 16,363 51,619 28,905
Impairment of film
assets 2,603 2,682 25,542 22,003
Subscriber acquisition
fee amortization
expense 11,038 10,634 47,982 37,958
Depreciation and
amortization 1,236 1,560 5,629 6,402
Interest expense 20,170 16,428 73,856 60,179
Restricted stock unit
compensation 189 3,163 8,454 11,483
Retention program - 5,426 - 7,790
Amortization of certain
program license fees - - 514 -
Income tax provision (10) - - -
-------- --------- --------- ---------
Adjusted earnings before
interest, taxes,
depreciation amortization
and discontinued
operations $ (1,513) $ 950 $ (1,941) $ (56)
-------- --------- --------- ---------

Programming and other
amortization 34,719 30,772 120,335 92,743
Provision for allowance
for doubtful account 7,970 1,002 8,972 171
Changes in operating
assets and liabilities:
Additions to program
license fees (75,626) (101,699) (189,607) (160,593)
Additions to
subscriber
acquisition fees (1,367) (21,970) (8,554) (45,070)
Change in subscriber
acquisition fees
payable 211 16,997 (23,662) 25,908
Interest paid (3,643) (4,168) (15,311) (14,621)
Changes in other
operating assets and
liabilities, net of
adjustments above 16,105 84,530 (12,158) 86,320
-------- --------- --------- ---------
Net cash provided by (used
in) continuing operating
activities $(23,144) $ 6,414 $(121,926) $ (15,198)
======== ========= ========= =========



Crown Media Holdings, Inc.
Selected Unaudited Fourth Quarter and Annual Financial Information
($ in thousands)


Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
--------- -------- ---------- ---------

Net cash provide by (used in)
continuing operating
activities $(23,144) $6,414 $(121,926) $(15,198)
Net cash provided by (used in)
investing activities (609) (288) 213,142 (878)
Net cash provided by (used in)
financing activities 30,314 17,100 (72,329) 66,565
Net cash used in discontinued
operations - (18,693) (15,063) (42,693)
--------- -------- ---------- ---------
Net (decrease) increase in cash
and cash equivalents 6,561 4,533 3,824 7,796
Cash equivalents, beginning of
period 9,365 7,569 12,102 4,306
--------- -------- ---------- ---------
Cash equivalents, end of period $15,926 $12,102 $15,926 $12,102
--------- -------- ---------- ---------