Question-and-Answer Session
Operator
Your first question comes from the line of Alan Gould - Natexis Bleichroeder.
Alan Gould - Natexis Bleichroeder
Thank you. Henry, congratulations on getting all these subscriber deals redone. If I look at the affiliate fee per sub per month it looks like it’s about $0.058 per sub per month this quarter. Is that a good number, Brian, going forward for the full year?
How should we look at that number increasing in the out years? Are these contracts structured in aggregate, so they increase every year or are they’re flat for a couple of years first and then they start increasing ? how should we look at that?
Brian Stewart
Yes, Alan, a good question. As I mentioned, the first quarter of 2008 is a pretty good proxy for the subscriber revenue for the balance of the year. There are contractual rate increases in our distribution agreements. They vary by contract. Also we expect the number of paying subscribers to increase over time.
Over time that number will continue to grow, obviously at a much diminished rate in going forward years versus the increase we have had in 2008. But there are rate increases in all the deals, marginal rate increases, and we do expect our paid subscribers to grow over time.
Alan Gould - Natexis Bleichroeder
Okay. And second question is, you’ve clearly got the ratings in great shape. You’ve got the sub-fees or sub-contracts with the distribution renegotiated. I would think one of the next things would be to try and work on the capital structure. What is your strategy to try and reduce the debt now that you’re showing this nice positive free cash flow or adjusted EBITDA?
Brian Stewart
As we’ve talked, Alan, the strategy for 2008 was to put in place terms and conditions that gave us the breathing room that we needed. And we’ve got that in the form of the restructured JPMorgan facility. Again, we think we will able to continue to pay that facility down through the course of the year. And that will be the use of most of our free cash flow in 2008.
As we get to very late 2009 and the beginning of 2009, certain of the Hallmark notes turn cash pay and we expect to be able to service those notes.
The expectation is that as we get to early 2009, maybe as soon as late 2008, with a potential rebound of the credit markets, we may be in a situation where we can restructure some of that Hallmark debt into a more traditional third-party debt, but again, that will be subject to some improvement in the credit market.
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