David Elstein: New boss of Hallmark strikes gold

At 60, he's well known as a broadcasting executive, but now, as chairman of Hallmark, David Elstein can finally spread his wings, writes Raymond Snoddy
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The Independent Online

At the age of 60, David Elstein, one of the best known and most experienced executives in British broadcasting, has finally entered his prime.

After a voluble and often controversial career in which he never quite got the very top jobs, Elstein is spreading his wings again as chairman of Hallmark International, the television business he bought earlier this year for £127m with venture capital backing.

Once, Elstein would have loved to have run Channel 4, but he had just been appointed director of television at Thames when Jeremy Isaacs stood down, and the chance never came again. He did become chief executive of Channel Five, but then the owners RTL decided to buy out his contract so that they could hold on to the services of Dawn Airey. "Dawn wanted the job, and I had annoyed them [RTL] by asking for more money for programmes and telling them that they must hand over The Bill and Neighbours. Dawn was a lot more expensive than me. I think her expense account ran higher than my salary," says Elstein.

Then he applied to be director general of the BBC, but Greg Dyke was chosen. "Oddly, when Greg was offered the job I thought he would make a better fist of it. He tried and he was popular, but his grasp of all the different parts of the BBC was not strong. I have seen Greg at work and I think, in the end, he is a small-organisation person," says Elstein, conceding that he may be, too.

With the help of David Hulbert, now his chief executive at Hallmark, Elstein tried to take over ITV by attempting to persuade the financial institutions that ditching Michael Green of Carlton and Charles Allen of Granada would add greatly to the value of the merging companies. It was Hallmark that put up the £250,000 for research into the merger. It showed, according to Elstein, that the coming together of the two largest commercial broadcasters would solve some, but not all, of ITV's problems.

More than 20 institutions asked for presentations but, to Elstein's chagrin, they didn't seem at all interested in forcing through a change of management. They just wanted to make money - to be better informed about when to buy and sell ITV shares. "It was actually rather a surprise to me when they got together and fired Michael Green. I later discovered that they came within one vote of firing Charles Allen, too," says Elstein, who believes that his ITV moment has also passed. It is very unlikely that venture capital funds would mount what would have to be a hostile takeover for ITV. Such a thing, he insists, is not on the agenda of Hallmark International.

What is firmly on his agenda, however, is building up Hallmark, a channel specialising in middle-of-the-road drama that is available in more than 150 countries, into a more significant broadcasting business. And this time, his destiny is firmly in his own hands and that of his partner, Hulbert, who conveniently became available just as the deal was being finalised after his own job as head of Disney International disappeared.

"There is no rubbish. There is no reality. There is no comedy. It's all drama, and its the only top-10 stand-alone channel in the top-10 multi-channel universe. In fact, it's a top-10 channel in every territory we are in, which is really extraordinary," says Elstein.

He has been temping as acting UK managing director of the business, reporting to chief executive Hulbert, who then in turn reports to Elstein as chairman. The two Cambridge-educated executives are remarkably complementary. Elstein, who studied history, is the master of the grand sweep, while Hulbert, the pure mathematician, is a strong strategic thinker who worries away at the financial and operational details of a business to make it better. "Coming from different directions adds a lot more colour and structure to the way we decide things. I try to dig deep to find out what is really happening," says Hulbert, a former McKinsey consultant and passionate poker player.

For the £127m, they have got a company that was only modestly profitable last year but that includes the rights to the Hallmark Channel outside the US, a television and film library that includes movies such as Gulliver's Travels, Moby Dick and Merlin, and a channel playout centre in Colorado. They believe that the profitablility of the main channel can be increased through a series of small improvements, and that both the library and the playout centre can be developed.

The next big step will almost certainly be to add another channel, and also to move into home shopping. Sometimes, as many as 65 per cent of Hallmark's viewers are women, and they are very loyal. "The average Hallmark viewer spends over 80 minutes a week watching the channel, which is right up there with BBC1 and ITV," says Elstein.

The other David is busy applying himself to the ticklish problem of how best to increase the audience. Should the channel be trying to broaden its reach? Or concentrating on persuading more women to watch?

"Despite its fame, a substantial majority of 35-plus females have never watched us," says Hulbert, a clear indication of the way he proposes to jump.

Another decision that needs to be taken fairly soon is whether Hallmark should join Freeview, the fastest-growing digital platform in the UK. Most people assume that it will. Hulbert's analysis is taking him in the opposite direction. With the backing of the BBC, ITV and the Government, the Hallmark chief executive reasons that Freeview is becoming much more powerful and is threatening to push Sky and the cable companies "back a bit". Hulbert believes that not all the advertising-funded channels now piling into Freeview will be viable, and that it makes more commercial sense for Hallmark to continue to support, and be an increasingly important part of, pay-TV.

The two Davids insist that, even without acquisitions, the existing Hallmark business will make serious money for both themselves and their venture- capital backers, 3i and Providence Equity Partners. Yet, for such investors, the sums of money involved are small. The near certainty is that they have backed the experience and broadcasting management skills of Elstein and Hulbert to build up a much larger international business. "The good thing is, we're not seen as a threat. We're not John Malone [of Liberty], and we're not Rupert Murdoch. We're not any of the big bad wolves, and we don't carry any baggage," says Elstein.

When a permanent UK managing director is found, he will go back to being merely chairman of Hallmark International, dividing his time between that and a host of other non-executive chairmanships. They range from the boxing promoter Frank Warren's Sports Network - Elstein was under-16 boxing champion at school - and the Commercial Radio Companies, to the consultancy group Screen Digest and the British Screen Advisory Council.

And there is still plenty of time left over for strong opinions on almost everything. He is still adamant, as a former BBC employee, that all BBC production should be sold to create genuine competition for programme ideas in the market, and that the corporation needs "a post-licence fee funding mechanism".

Right now, however, he is more interested in the ratings of House, the medical drama starring Hugh Laurie as a brilliant doctor who is seriously lacking in emotional intelligence. Hallmark has the right to show it first in the UK, but Elstein's old friends at Five have been giving him a leg-up by broadcasting it on terrestrial television. "Five is more written about because it has more distribution, so we'll trade off the visibility that Five will give us," says Elstein.

Hallmark has taken to showing eight episodes of House over a single weekend - with another such stunt planned for later this month. It should help to reach even more of those women aged 35 and over - and, in the process, help to boost the fortunes of Davids Hulbert and Elstein.

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