News

Home Shoppers Turn to the Net

8/15/1999 8:00 PM Eastern

As television home shopping has developed over the years
into a cash cow, the key players in the industry are moving forward with the intent of
expanding their respective electronic-commerce prospects and developing new revenue
streams, with much of the focus on e-commerce.

Here are brief snapshots of where four major home shopping
operations are heading as we turn out the lights on the 20th century.

HOME SHOPPING NETWORK

When Barry Diller took over from Kay Koplovitz at USA
Networks Inc. last year, the former QVC Inc. chief decided that his new company's
eponymous Home Shopping Network could use a little leverage.

First he went out and bought Ticketmaster Group Inc. and paired it up with local
entertainment guide CitySearch Inc. Then he came
to the conclusion that his growing "e-tail" entourage needed a new engine to rev
it up -- specifically, a search engine.

Driven by his desire to enhance the value of all of his
Internet properties, Diller tried to scoop up portal Lycos
Inc.
as a means to drive traffic to his other sites.

Unfortunately, these ambitious plans were laid to waste in
May, when Lycos' shareholders voted to scotch the deal after Diller couldn't meet their
price. So for now, whatever growth comes from St. Petersburg, Fla.-based HSN will have to
happen organically. This includes plans to launch an online version later this year.

"There is a natural opportunity in the fourth quarter
for e-commerce online, and we will be taking advantage of that opportunity," HSN vice
president of public relations David Ender said. He added that HSN is developing a
voice-recognition system, which will add to customer convenience and speed processing of
on-air sales orders.

USA also owns Internet Shopping Network,
which was one of the first online retailers in the world when started in 1994. A few years
later, in 1997, ISN launched First-

Auction, an online auction site that has grown to feature
everything from computers to apparel drawn from HSN inventory.

QVC INC.

QVC, which generated some $2.4 billion in on-air revenue
last year, has successfully integrated iQVC into its
operations. The West Chester, Pa.-based service was recently patted on the back by online
shoppers, who rated its online counterpart as one of the top Web sites in the area of
overall customer satisfaction.

The inaugural Harris Interactive "ecommercePulse"
survey of 103,127 consumers who spend time online rated iQVC No. 1 in four of 11 product
categories: electronics, apparel, toys and health/beauty.

The study analyzed buying behavior by providing competitive
performance data and brand-awareness tracking. It also tallied site traffic;
buyer-conversion rates; online and offline spending; and customer satisfaction.

iQVC vice president Steve Hamlin recently confirmed plans
in the works that will hopefully drive the e-tail engine into the next gear. "We are
in the process of designing new initiatives on our Web site that deal with the integration
of our two mediums," he said.

Some of the tweaks will include using more video on the Web
site and a more dedicated effort to align the look of iQVC with that of its on-air
counterpart, he said.

QVC has the benefit of backing from majority owner Comcast
Corp., which has been instrumental in helping it achieve critical mass in cable carriage.

One blemish on the corporate front was the recent
class-action race discrimination suit filed by four minority former on-air hosts, who
claim that management -- led by president Doug Briggs -- did not promote minorities into
the coveted daytime and primetime slots.

VALUEVISION INTERNATIONAL INC.

ValueVision CEO Gene McCaffery has chosen to put the future
of his home shopping brand behind the formidable might of NBC.

Earlier this year, the "Peacock Network" took a
20 percent stake in the Eden Prairie, Minn.-based channel, assuming control over all
cable-affiliate relations.

NBC's clout paid dividends a few weeks ago, when Value-
Vision picked up nearly 8 million new subscribers through deals with satellite providers
DirecTV Inc. and EchoStar Communications Corp. Upon the announcement of that deal, NBC
exercised warrants and increased its stake in ValueVision to 39.9 percent.

"ValueVision will try to use the promotional power of
traditional media to drive traffic to both on-air and online," predicted Mark Riely,
president of Media Group Research in New York.

There has been much speculation that NBC will provide
ValueVision with an e-commerce presence on the Internet by linking it with portal Snap, which it co-owns.

NBC has not spelled out those plans to date, but sources
close to the situation have said the ValueVision brand will eventually be put out to
pasture in favor of the Snap name.

NBC Internet (NBCi) is expected to spend $100 million over
four years to promote the Snap name. It appears that the Peacock Network has dropped any
short-term plans of going after a larger portal -- it had previously shown interest in
Lycos.

As McCaffery waits to see how all of this shakes out, he
has moved ahead by setting up a wholly owned subsidiary that will invest in high-growth
Internet companies. He launched the unit by investing in Virtual Vineyards Inc. and WhatsHotNow.com.

SHOP AT HOME INC.

According to Shop at Home director of corporate
communications Dawn Woods, the Nashville, Tenn.-based home shopping company plans to
invest equally in both its core video business and its online properties.

The company was pulled out of the doldrums by private
investor J.D. Clinton in 1993, when he dropped a sizable amount of money into the
operation and brought in broadcast veteran Kent Lillie as CEO.

In the intervening years, the company has struggled to get
cable carriage for its on-air service, unlike QVC and ValueVision, which have the
respective wherewithal of Comcast and NBC behind them.

"Shop at Home definitely has fewer angles of making
the convergence angle work," Riely said.

In the past, Woods has said, "Certainly, an equity
partner would be considered if it would be in the best interest of shareholders."
Last week, Shop at Home retained Yagemann Advisors LLC, Banc of America Securities LLC and
Media Venture Partners to identify strategic alternatives that could lead to the sale of a
significant equity stake to an outside investor.

Shop at Home has relied on its stable of six fully owned
UHF TV stations it has purchased over the years, including its recent acquisition of
WBPT-TV in Bridgeport, Conn.

However, its newly retained slew of bankers will also look
into the possibility of selling some of its station holdings on the heels of the recent
changes to Federal Communications Commission ownership regulations, which make it possible
for one company to own more than one station in certain major markets.

The outfit recently completed a secondary public offering
in order to help pay for the Bridgeport station, as well as to fuel its launch of
Collectibles.com, an e-commerce site that will offer merchandise beginning this fall.

The company already has an e-commerce presence on the
Internet with its shopathomeonline.com site.

Want to read more stories like this?
Get our Free Newsletter Here!
October

VR 20/20

The Times Center, New York, NY