QVC Network Inc.

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QVC Network Inc.

Goshen Corporate Park
West Chester, Pennsylvania 19380
(215) 430-1000
Fax: (215) 431-6170

Public Company
Incorporated: 1986
Employees: 4,500
Sales: $1 billion
Stock Exchanges: NASDAQ
SICs: 5961 Catalog & Mail Order Houses

QVC Network, Inc. is the nations largest cable television shopping business, selling a wide variety of merchandise including clothing, jewelry, cosmetics, electronics, and sporting equipment. In 1993, the companys two channelsbroadcasting live all day everydayreached approximately 45 million cable-equipped homes and another three million satellite dish customers. QVC, which stands for Quality, Value, and Convenience, grew quickly into an industry powerhouse due to increases in cable subscription rates; consumers growing dependence on mail-order shopping; and advances in telecommunications, allowing the company, with its interactive approach, to integrate computers, television, cable, and telephone lines into an information superhighway.

QVC Network was founded in July 1986 by Joseph M. Segel, founder of the Franklin Mint Corp., perhaps best known as a mail-order marketer of commemorative coins. According to Venture Magazine, QVC Network achieved its rapid success through a combination of quick financing and the founders ability to seize a ripe moment in the nascent industry. During this time, Home Shopping Network, Inc., was the market leader. Founded in 1977 as a radio shopping program, HSN switched to cable television in 1985 and expanded its operations to three channels. Like countless others, according to Venture, Segel was watching closely as Home Shopping Network Inc. went public that May. Two months later Segel had organized a management team, formed his own company, and lined up the cable companies and satellite capacity needed to transmit QVCs programwhich didnt even exist yet. Among Segels early backers was Ralph Roberts, chairperson of Comcast Corp., the fourth largest cable operator in the country.

Roberts contributed seed money to QVC and was responsible for persuading other cable companies to carry the shopping channel in return for a stake in QVC.

The company began broadcasting in November, and the programs went on the air full-time in January 1987, transmitted from the companys unassuming headquarters in a West Chester, Pennsylvania, office park. By January 31, 1988, the end of the first full fiscal year, the company had achieved $112.3 million sales. QVC spent the next couple years strengthening its position in TV shopping through acquisitions. In late 1989, it bought out The Fashion Channel, followed by the 1990 purchase of competitor CVN and, in May of the following year, the J.C. Penney Shopping Channel. In this climate the television shopping field narrowed from 20 companies in 1987 to just two major players by late 1992: QVC and the Home Shopping Network.

As QVC gained financial strength, the company also garnered new respectability for its industry, which tended to have a reputation for marketing cheap merchandise. In contrast to the older networks fast-paced, hard-sell route, with heavy emphasis on price-cutting and savings, according to Womens Wear Daily, QVC took an intimate, soft-sell approach by using a talk-show format with hosts, placing emphasis on product information more than on price. This approach was enhanced by the networks growing cast of celebrity regulars, who sold their name brand products and took viewer calls. On QVC, daytime soap opera star Susan Lucci sold her hair care system, actress Victoria Jackson promoted her cosmetics, comedienne and talk show host Joan Rivers advertised a line of womens apparel, and Diane Von Furstenburg marketed her moderately-priced silk scarves and clothing. The Parfums International division of the Elizabeth Arden cosmetics company also publicized products on the station.

At the beginning of 1993 founder Joseph Segel retired, passing leadership on to Barry Diller, the former chair of Fox Inc. who, in late 1992, purchased a three percent stake in QVC for $25 million. Within one week, market analyst Peter J. Sirus remarked to Womens Wear Daily, control of an industry that had been treated largely as the butt of jokes [was] transferred from the original entrepreneurs to some of the smartest and most powerful executives in the media business. Diller, a California native who dropped out of college to pursue a career in show business, eventually rose to prominence as an agent at the William Morris talent agency and at the studios of ABC and Paramount. Diller was chair and chief executive officer of Paramount Pictures from 19741984, where he was highly regarded and successful. In the mid-1980s, Diller created Fox Broadcasting, which became a fourth television network to compete with CBS, NBC, and ABC, and quickly achieved a large viewership. Thus, when Diller retired from Fox in early 1992 and resurfaced ten months later as chairperson of QVC, the company became a showcase in the industry for the works of a man widely regarded as a media genius.

Prior to taking over the business, Diller remarked to Womens Wear Daily: There have been a whole series of biases against TV shopping, as there are in the early days of any medium. The challenge is to grow in spite of, or out of, those biases. Every day you have to prove the naysayers an inch wrong, and eventually people will start to say, Hey, thats interesting, and see the applications it could have for them. In his first year at QVC, Diller put his words to the test in several areas. First, he raised the awareness of mainstream retailers to the sales possibilities the network could hold for them as a natural extension of in-store and catalogue merchandising. For example, in March 1993, the company signed an agreement with Saks Fifth Avenue to carry the upscale retailers moderately-priced Real Clothes house brand. Womens Wear Daily observed at the time that the move could be mutually beneficial because it gave QVC a quick jolt of upscale credibility, and it puts Saks on the front lines of what some observers see as the distribution wave of the future: electronic selling. According to the company, gross orders for the Real Clothes line exceeded $570,000 in the first three months. In addition, in a mid-1993 move that further strengthened the companys fashion sales, QVC introduced a second channel, The QVC Fashion Channel, which, at the end of the year reached over seven million cable-equipped homes.

Concurrently, Diller was working to expand the reach of the companys programming. In April 1993, QVC made its first excursion into broadcasting outside the United States. The company agreed upon plans with Grupo Televisa, S.A., the largest media company in Mexico, to expand QVCs style of electronic retailing throughout the Spanish and Portuguese-speaking world. Grupo Televisa was a sixty year old company with interests in television production and broadcasting, international distribution of television programming, cable television, radio production and broadcasting, music recording, publishing, professional sports promotion, and several other areas. The agreement between QVC and Grupo Televisa was designed to form an electronic retailing program service and related support systems that would serve Mexico, Spain, and Latin America in Spanish, as well as Brazil and Portugal in Portuguese.

Dillers deal with Grupo Televisa prompted a similar agreement in Europe. QVC and British Sky Broadcasting (BSkyB) made plans to form a 24-hour electronic retailing service to be broadcast out of London. BSkyB, according to QVC, was one of the largest pay television services in Europe. The six channel service, launched in February 1989, served about four million homes and was 50 percent owned by Rupert Murdochs News Corporation Ltd. The joint venture channel would serve the United Kingdom, Ireland, and Europe, with the exception of the Iberian Peninsula.

In July 1993, the company announced that it would launch yet a third shopping channel, called Q2, to go on line in the spring of 1994. The new channel, according to company literature, was designed to reach a contemporary audience that hasnt yet become involved with home shopping because they feel it doesnt meet their needs. To bring in the new audience, the station intended to address specific consumer issues by featuring segments such as finding the computer thats right for you; buying and using a mountain bike; products for life on the road; baby-proofing made easy; creating a bachelors kitchen; and 50 ways to work a little black dress. To manage the new channels development, Diller tapped as president Candice M. Carpenter, a graduate of Stanford University and Harvard Business School, and the former head of Time Life Television and vice-president for consumer marketing at American Express.

In late September 1993, QVC became front page news when it entered into a bidding war with Viacom Inc. for the purchase of Paramount Communications Inc., Barry Dillers former employer and owner of film, television, publishing, and sports franchise concerns. Because of the changing nature of televisions capabilities, and the three companies prominence in television, the hostile bid was viewed as perhaps among the most significant in industry history. While the results of the proposed deal were not resolved by the end of the year, the proposal and the stir it caused signaled more ambitious years ahead for Barry Diller and QVC.

Further Reading

Betts, Katherine, Show and Sell, Vogue, February 1993.

Fabrikant, Geraldine, QVCs Other Bid May Get Less Priority, New York Times, September 22, 1993.

____. TV Shopping Concern Makes Bid as a Battle for Paramount Begins, New York Times, September 21 1993.

Gordon, Maryellen, Shopping by TV: Fashions Future? Womens Wear Daily, January 6, 1993.

King, Larry, Shopping on the Interactive Highway, Advertising Age, May 17, 1993.

Roberts, Johnnie L., Comcast President Paved Way for Bold Bid by QVC Network, Wall Street Journal, September 22, 1993.

Saks-QVC Plan: Sixty Minutes and $400,000, Womens Wear Daily, March 19, 1993.

Smith, Randall, Paramount Bidders Shoot at Each Others Stock, Wall Street Journal, September 29, 1993.

____. Wall Street Hopes it Hears the Roar of the 80s, Wall Street Journal, September 22, 1993.

Tapellini, Donna, Coming at You Live, Venture, April 1989. Weintraub, Bernard, Whats Driving Diller to Play for Paramount? New York Times, September 22, 1993.

Martha Schoolman