Posts Tagged ‘$2.1 billion acquisition’

What Does HSN’s Sale To QVC’s Parent Mean?

July 10, 2017

We’ve been busy at work, and in addition to that we wanted time to mull over Liberty Interactive Corp.’s purchase of HSN Inc. before we blogged in more detail about it.

For some reason we couldn’t find the conference call that Liberty and HSN honchos held on the deal last week, even though it was supposed to be archived on John Malone’s fiefdom’s website. But we did finally read through the slide-show presentation that went with the call.

http://files.shareholder.com/downloads/AMDA-GY7JI/4764467488x0x948623/652F4347-6F0B-48D9-9D4B-2EE0E92881D2/QVC_HSN_Investor_Presentation.pdf

First of all, the initial press release on QVC’s parent paying $2.1 billion for HSN was unclear, in that it did not spell out that there were no plans to merge the nation’s two largest home shopping networks. The investor slide presentation did bring clarity, saying that QVC and HSN will be maintained as distinct brands, which means five channels — QVC, QVC2, BeautyiQ, HSN and HSN2.

The goal is to preserve the “unique identities, cultures and customer following” for the networks.

But at the same time, according to the presentation, the plan is to “optimize five U.S.- based networks (QVC, QVC2, BeautyiQ, HSN, HSN2) and create complementary programming.”

Okey-dokey. Sounds a little contradictory to us.

The other goals are, straight from the presentation, to:

Collaborate on best-in-class digital platforms (mobile, personalization, social, marketing) and next-gen shopping innovations

Extend HSN’s Shop by Remote platform to QVC

Strengthen brand portfolios

Extend top HSN brands to QVC International and Zulily,

Leverage Zulily as brand feeder with younger customers, utilize QVC global development
capabilities

Explore cross-marketing opportunities to better engage existing and potential customers

Share best practices and tools, leverage top talent and create new professional-growth opportunities

Pursue integration opportunities to enable combined company to operate more efficiently,
fund innovation and enhance customer value, including:

Combining technology platforms where appropriate

Leveraging enhanced scale of supply chain and customer service networks

Eliminating redundant corporate and support services

Reducing costs through purchasing synergies

So we can expect to see HSN brands expand globally and pop up on QVC’s numerous international channels.

There were some very interesting additional facts in the presentation, as well. QVC has 8 million customers, and 6 million of them don’t shop at HSN today, according to Liberty. We find that hard to believe, since we shop at both nets and Evine as well, but that’s what they said. HSN has 5 million customers.

By cross-marketing, QVC can try to get some of HSN’s customers to shop with it.

QVC has 29 on-air hosts, while HSN has 24, just FYI.

And of course, whenever one company buys another one there is always talk of synergies, which basically means people are going to lose their jobs. In this acquisition, there’s a lot of places where QVC and HSN have overlap and where cost-cutting can happen. A lot of it may be behind the scenes, however.

For example, cable networks have what are called affiliates sales departments, the executives and sales reps who negotiate the contracts for QVC and HSN to get carried on your cable system or by your DBS provider, be it Comcast or DirecTV. You won’t need two affiliate sales departments to handle that function.

And with QVC and HSN under one roof, whoever survives in affiliate sales will now have a bundle of five networks it can bring to cable companies. Just like a Discovery Communications with its many networks or a Viacom, the QVC-HSN affiliate sales reps can tell a Comcast that if it carries smaller startup channels like BeautyIQ, it will get a better deal on the larger channels, QVC and HSN.

There are other “synergies.” Some vendors supply goods to several home shopping networks. One of our readers recently reported that she had ordered bedding from Paula Deen’s line on Evine, but when the order came it was Northern Lights, as we recall, which is sold by QVC. The point is that one manufacturer is making items for both channels.

Vendors who manufacture goods for QVC and HSN might get squeezed, with Liberty trying to negotiate much cheaper deals because it has leverage as a major customer of such companies.

The big advantage of this merger, as everyone and their mother has pointed out, is that this will increase QVC’s and HSN’s scale as digital players, putting them in a better position to compete against giant Amazon. The digital sales of both those home shopping channels have soared over the past few years, and with distribution centers and those of their sister companies, Zulily and Cornerstone, they gain traction against the big “A.”

HSN and its Cornerstone unit have warehouses in cities such as Piney Flats, Tenn., Fontana, Calif., Roanoke, Va., Monroe, Ohio, and Scottsdale, Ariz.

For QVC and Zulily, there are fulfillment centers Rocky Mount, N.C., Florence, S.C., Suffolk, Va., Ontario, Calif., Lancaster and Bethlehem, Penn., McCarran, Nev., and Lockborne, Ohio.

Liberty needs a lot of distribution points to beat Amazon at its own quick-delivery game, but are all the above too many? We’ll see.

Liberty crowed about HSN in its presentation, saying that it brings a “rich legacy of innovation” to the QVC Group.

Liberty cited HSN’s “highly engaging programming and events, including movie tie-
Ins” and “American Dreams entrepreneur search series.”

There was also a shout-out to HSN’s leading brands, including Joy Mangano’s
Ingenious Designs, Andrew Lessman’s ProCaps Laboratories, IMAN Global Chic, Jennifer Flavin Stallone’s Serious Skincare, Wolfgang Puck Kitchen, Diane Gilman
Fashion and the Concierge Collection.

QVC’s top honcho, Mike George, will ride herd over the new and larger QVC Group.
But what will happen with the top management at HSN?

Former CEO Mindy Grossman has flown the coop, already starting her new gig at Oprah Winfrey’s Weight Watchers. Bill Brand is a very talented HSN honcho, and we hope he’s in line for a promotion to fill Grossman’s high-heels.

Advertisements