Related Party Transactions	6 Months Ended
Jun. 30, 2013
Related Party Transactions
Related Party Transactions	5. Related Party Transactions *Tax Sharing Agreements* Under a federal tax sharing agreement dated March 11, 2003, the Company was included in Hallmark Cards’ consolidated federal tax group. However, on October 31, 2012, the percentage of the Company’s common stock collectively owned by members of Hallmark Cards’ consolidated federal tax group decreased to less than 80%, the minimum threshold required for inclusion in a consolidated federal income tax return. Therefore, effective November 1, 2012, the Company became a separate-company taxpayer for federal income tax reporting purposes and is no longer included in the Hallmark Card’s federal consolidated tax return. For each of the periods in which the Company was a member of Hallmark Cards’ consolidated federal tax group, the Company either (i) received from Hallmark Cards the incremental tax benefit related to the loss it contributed to the consolidated return or (ii) paid Hallmark Cards the incremental tax associated with the taxable income it contributed to the consolidated return. Payments received from Hallmark Cards or credited against amounts owed by the Company to any other member of Hallmark Cards’ consolidated federal tax group have been recorded as additions to paid-in capital. Amounts owed or payments made to Hallmark Cards or to any member of Hallmark Cards’ consolidated group in excess of current tax expense have been recorded as reductions of paid-in capital. The amount owed and reimbursed to Hallmark Cards pursuant to the federal tax sharing agreement in connection with the Company’s taxable income for the three months ended March 31, 2012 was $4.3 million, net of a prior year overpayment of $1.0 million, which was reimbursed in May 2012. The Company owed Hallmark Cards $6.2 million under the federal tax sharing agreement for 2012 as of June 30, 2012, which was reimbursed in July 2012. Since May 9, 2000, the Company has been included in certain combined state income tax returns of Hallmark Cards or Hallmark Entertainment Holdings (“HEH”). In connection therewith, HEH and the Company entered into a state tax sharing agreement. Under the state tax sharing agreement, Hallmark Cards (as successor to HEH) and the Company file consolidated, combined or unitary state tax returns in some states. The Company makes tax-sharing payments to (or receives payments from) Hallmark Cards equal to the taxes (or tax refunds) that the Company would pay (or receive) if it filed on a stand-alone basis. Such payments are computed based on the Company’s taxable income (loss) and other tax items beginning the day following the May 9, 2000 reorganization. Notwithstanding that the Company is no longer a member of the Hallmark federal tax group, the Company will continue to be included in Hallmark Cards’ consolidated or combined returns for certain states. During 2012, the Company reimbursed Hallmark Cards approximately $495,000 with respect to the state tax sharing agreement for the 2011 tax year. For the year ended December 31, 2012, it is estimated that the Company will owe Hallmark Cards approximately $334,000 with respect to the state tax sharing agreement, which will be paid during 2013. For the six months ended June 30, 2013, it is estimated that the Company will owe Hallmark Cards approximately $236,000 with respect to the state tax sharing agreement, which is payable two days prior to the due date of the state tax returns. *Services Agreement with Hallmark Cards* Hallmark Cards provides Crown Media Holdings with tax, risk management, health safety, environmental, insurance, legal, treasury, human resources, cash management, real estate consulting services and other services as requested by the Company. In exchange, the Company is obligated to pay Hallmark Cards a fee, plus out-of-pocket expenses and third party fees, in arrears on the last business day of each quarter. Fees for Hallmark Cards’ services were $457,000 for 2012 and are expected to be approximately $347,000 for 2013. At December 31, 2012 and June 30, 2013, the Company’s payables to Hallmark Cards affiliates on the accompanying condensed consolidated balance sheets were $1.2 million and $760,000, respectively. The December 31, 2012, balance was comprised of $188,000 of invoices paid on the Company’s behalf, $431,000 of taxes and $620,000 of assigned license payments. The June 30, 2013 balance was comprised of $691,000 of taxes and $69,000 of assigned license payments. *“Hallmark Hall of Fame” Programming License Agreement* In 2008, Crown Media United States entered into an agreement with Hallmark Hall of Fame Productions, LLC for the exclusive television license of 58 “Hallmark Hall of Fame” movies, consisting of 16 contemporary Hallmark Hall of Fame titles (i.e., produced from 2003 to 2008) and 42 older titles, for exhibition on Hallmark Channel and Hallmark Movie Channel. These titles are licensed for ten year windows, which commenced at various times between 2007 and 2010. The total license fee for these movies is $17.2 million and is payable in equal monthly installments over the various ten-year exhibition windows. In 2011, Crown Media United States entered into an additional agreement with Hallmark Hall of Fame Productions, LLC for the exclusive television license of 16 “Hallmark Hall of Fame” movies produced from 2009 through 2014, for exhibition on Hallmark Channel and Hallmark Movie Channel. These titles are licensed for ten-year windows, with windows commencing at various times between 2011 and 2014, depending on availability. The total license fee for these movies is $10.0 million and is payable in equal monthly installments over the various ten-year exhibition windows. On July 6, 2011, the Company and Hallmark Cards entered into an agreement whereby Hallmark Cards provided the Company one-week, limited play licenses for each of six new “Hallmark Hall of Fame” two-hour movies produced by Hallmark Cards over the two-year contract term. In addition to providing the program licenses, Hallmark Cards has paid the Company $3.4 million of cash ratably as the individual licenses open, all in exchange for approximately two-thirds of the advertising units otherwise available during each airing of the movies. The Company has estimated the fair value of the program licenses to be approximately $1.0 million. The Company recognized total advertising revenue of approximately $4.4 million as it fulfilled its advertising obligation to Hallmark Cards. As of June 30, 2013, all of such movies have aired on Hallmark Channel. *Trademark Agreement with Hallmark Cards* Crown Media United States has a trademark license agreement with Hallmark Licensing, LLC, an affiliate of Hallmark Cards, for use of the “Hallmark” mark for use on Hallmark Channel and for Hallmark Movie Channel. In connection with the 2011 Refinancing, Hallmark Licensing, LLC extended these existing trademark licenses for an additional period terminating the earlier of (i) July 14, 2019 and (ii) the later of (x) the expiration or termination of the Amended Credit Agreement and (y) the redemption of all of the Notes, subject to any earlier termination of such license agreements pursuant to the respective terms of such license agreements. The Company is not required to pay any royalty fees under the trademark license agreements. Accordingly, no amounts have been reflected in the condensed consolidated balance sheets or condensed consolidated statements of operations for these licenses. Under the trademark license agreement, the Company would be in default if the Company (i) fails to make any payment due under any loan agreement within five days of its due date or (ii) receives an opinion from our auditors that expresses their doubt with respect to our ability to continue as a going concern.

5. Related Party Transactions

Tax Sharing Agreements

Under a federal tax sharing agreement dated March 11, 2003, the Company was included in Hallmark Cards’ consolidated federal tax group. However, on October 31, 2012, the percentage of the Company’s common stock collectively owned by members of Hallmark Cards’ consolidated federal tax group decreased to less than 80%, the minimum threshold required for inclusion in a consolidated federal income tax return. Therefore, effective November 1, 2012, the Company became a separate-company taxpayer for federal income tax reporting purposes and is no longer included in the Hallmark Card’s federal consolidated tax return.

For each of the periods in which the Company was a member of Hallmark Cards’ consolidated federal tax group, the Company either (i) received from Hallmark Cards the incremental tax benefit related to the loss it contributed to the consolidated return or (ii) paid Hallmark Cards the incremental tax associated with the taxable income it contributed to the consolidated return. Payments received from Hallmark Cards or credited against amounts owed by the Company to any other member of Hallmark Cards’ consolidated federal tax group have been recorded as additions to paid-in capital. Amounts owed or payments made to Hallmark Cards or to any member of Hallmark Cards’ consolidated group in excess of current tax expense have been recorded as reductions of paid-in capital.

The amount owed and reimbursed to Hallmark Cards pursuant to the federal tax sharing agreement in connection with the Company’s taxable income for the three months ended March 31, 2012 was $4.3 million, net of a prior year overpayment of $1.0 million, which was reimbursed in May 2012. The Company owed Hallmark Cards $6.2 million under the federal tax sharing agreement for 2012 as of June 30, 2012, which was reimbursed in July 2012.

Since May 9, 2000, the Company has been included in certain combined state income tax returns of Hallmark Cards or Hallmark Entertainment Holdings (“HEH”). In connection therewith, HEH and the Company entered into a state tax sharing agreement. Under the state tax sharing agreement, Hallmark Cards (as successor to HEH) and the Company file consolidated, combined or unitary state tax returns in some states. The Company makes tax-sharing payments to (or receives payments from) Hallmark Cards equal to the taxes (or tax refunds) that the Company would pay (or receive) if it filed on a stand-alone basis. Such payments are computed based on the Company’s taxable income (loss) and other tax items beginning the day following the May 9, 2000 reorganization.

Notwithstanding that the Company is no longer a member of the Hallmark federal tax group, the Company will continue to be included in Hallmark Cards’ consolidated or combined returns for certain states. During 2012, the Company reimbursed Hallmark Cards approximately $495,000 with respect to the state tax sharing agreement for the 2011 tax year. For the year ended December 31, 2012, it is estimated that the Company will owe Hallmark Cards approximately $334,000 with respect to the state tax sharing agreement, which will be paid during 2013. For the six months ended June 30, 2013, it is estimated that the Company will owe Hallmark Cards approximately $236,000 with respect to the state tax sharing agreement, which is payable two days prior to the due date of the state tax returns.

Services Agreement with Hallmark Cards

Hallmark Cards provides Crown Media Holdings with tax, risk management, health safety, environmental, insurance, legal, treasury, human resources, cash management, real estate consulting services and other services as requested by the Company. In exchange, the Company is obligated to pay Hallmark Cards a fee, plus out-of-pocket expenses and third party fees, in arrears on the last business day of each quarter. Fees for Hallmark Cards’ services were $457,000 for 2012 and are expected to be approximately $347,000 for 2013.

At December 31, 2012 and June 30, 2013, the Company’s payables to Hallmark Cards affiliates on the accompanying condensed consolidated balance sheets were $1.2 million and $760,000, respectively. The December 31, 2012, balance was comprised of $188,000 of invoices paid on the Company’s behalf, $431,000 of taxes and $620,000 of assigned license payments. The June 30, 2013 balance was comprised of $691,000 of taxes and $69,000 of assigned license payments.

“Hallmark Hall of Fame” Programming License Agreement

In 2008, Crown Media United States entered into an agreement with Hallmark Hall of Fame Productions, LLC for the exclusive television license of 58 “Hallmark Hall of Fame” movies, consisting of 16 contemporary Hallmark Hall of Fame titles (i.e., produced from 2003 to 2008) and 42 older titles, for exhibition on Hallmark Channel and Hallmark Movie Channel. These titles are licensed for ten year windows, which commenced at various times between 2007 and 2010. The total license fee for these movies is $17.2 million and is payable in equal monthly installments over the various ten-year exhibition windows.

In 2011, Crown Media United States entered into an additional agreement with Hallmark Hall of Fame Productions, LLC for the exclusive television license of 16 “Hallmark Hall of Fame” movies produced from 2009 through 2014, for exhibition on Hallmark Channel and Hallmark Movie Channel. These titles are licensed for ten-year windows, with windows commencing at various times between 2011 and 2014, depending on availability. The total license fee for these movies is $10.0 million and is payable in equal monthly installments over the various ten-year exhibition windows.

On July 6, 2011, the Company and Hallmark Cards entered into an agreement whereby Hallmark Cards provided the Company one-week, limited play licenses for each of six new “Hallmark Hall of Fame” two-hour movies produced by Hallmark Cards over the two-year contract term. In addition to providing the program licenses, Hallmark Cards has paid the Company $3.4 million of cash ratably as the individual licenses open, all in exchange for approximately two-thirds of the advertising units otherwise available during each airing of the movies. The Company has estimated the fair value of the program licenses to be approximately $1.0 million. The Company recognized total advertising revenue of approximately $4.4 million as it fulfilled its advertising obligation to Hallmark Cards. As of June 30, 2013, all of such movies have aired on Hallmark Channel.

Trademark Agreement with Hallmark Cards

Crown Media United States has a trademark license agreement with Hallmark Licensing, LLC, an affiliate of Hallmark Cards, for use of the “Hallmark” mark for use on Hallmark Channel and for Hallmark Movie Channel. In connection with the 2011 Refinancing, Hallmark Licensing, LLC extended these existing trademark licenses for an additional period terminating the earlier of (i) July 14, 2019 and (ii) the later of (x) the expiration or termination of the Amended Credit Agreement and (y) the redemption of all of the Notes, subject to any earlier termination of such license agreements pursuant to the respective terms of such license agreements.

The Company is not required to pay any royalty fees under the trademark license agreements. Accordingly, no amounts have been reflected in the condensed consolidated balance sheets or condensed consolidated statements of operations for these licenses.

Under the trademark license agreement, the Company would be in default if the Company (i) fails to make any payment due under any loan agreement within five days of its due date or (ii) receives an opinion from our auditors that expresses their doubt with respect to our ability to continue as a going concern.