QVC has shipped a remarkable 890 million packages since its launch in 1986. For cable operators, that’s proof enough that there are countless TV junkies who’ll buy jewelry or cookware at all hours of the day or night. Home shopping networks now have a new sales pitch for operators: Make the investment to develop television-based commerce, also known as t-commerce.
With their stable of self-owned content, well-oiled back offices and proven ability to attract eyeballs, shopping nets are better equipped than most to usher in next-level interactive TV. The alphabet soup that threatens traditional ad-supported networks—DVR, VOD and DRM—are advantageous to shopping channels.
"We’ve been locked in the confines of a singular linear channel until now," says John McDevitt, VP of business development at HSN. "The plethora of broadband opportunities are really just great avenues for us."
Among shopping prospects for digital customers: highly targeted on-demand shows, mobile alerts and the holy grail of shopping applications—remote control shopping. The latter service, where customers can point and click their way through a sale in seconds, requires upgrades from operators and networks. Both are beginning to bite.
Long Islanders’ TV Mall
Top shopping net QVC offers remote shopping in the U.K. and Japan (where ITV infrastructure is more advanced), but competitor HSN was first out of the gate in the U.S. It launched Shop By Remote on Oceanic Time Warner in Hawaii in July. Cablevision began testing the service in Long Island and Westchester, N.Y. QVC and No. 3 shopping network ShopNBC reportedly are testing similar services. QVC and ShopNBC declined to provide details for this article.
Though Shop By Remote is the only soup-to-nuts interactive shopping service Cablevision offers, all of the MSO’s digital customers can access local real estate and automobile listings with their remote via the Optimum Homes and Optimum Autos service. Those applications are powered by Cablevision’s own technology.
"Cablevision’s fiber-rich network has the capacity to support a wide variety of interactive shopping and advertising services that redefine television and deliver value and convenience to our customers," says Dermot McCormack, Cablevision SVP of interactive advertising and development. "We are testing and developing a number of innovative applications that allow customers to interact with programming in ways that have never been possible."
The HSN system uses technology at both the set-top box and the cable head-end that Tandberg Television acquired when it bought GoldPocket Interactive last year. Tandberg’s ITV software delivers the application to the set-top and communicates, then confirms, orders from the set-top through the head-end, to HSN’s central system. The platform also could be used for additional operator offerings such as interactive advertising, ad telescoping and enhanced programming, but it requires upgrades at each head-end.
"This was not something we did overnight," says Scott Sanborn, HSN’s SVP of marketing. "All the cable systems are different and integration is different in every case. And all systems do not have the back-end systems to pass real-time inventory information on an ongoing basis."
So far, the service has been a hit, the network says, despite scant marketing beyond the on-screen icon that alerts customers to the opportunity. Customers must pre-register credit card information via phone or Web, and HSN is noting a measurable uptick in new registrants in the areas where Shop By Remote is available.
"We initially expected only people who were already into HSN to use it, but we are surprised how many new customers are coming in," McDevitt says. "There are people calling in to register, and when the salesperson says they can take the order by phone, [the customer] tells them they’d rather hang up and buy with the remote."
The capability of ordering via remote should easily translate into increased sales. When point-and-click VOD ordering supplanted calling in for traditional PPV, sales skyrocketed, says Adi Kishore, director of global media and entertainment at the Yankee Group. But Kishore notes that if MSOs are laying out money to facilitate the service, they’ll want some payback. "Operators will want some compensation for the additional capability—higher carriage fees, a bigger cut of the transaction. And based on history, either they get it, or they don’t do it," he says.
Adding a middleman like Tandberg also means a smaller slice of the pie for everyone. "If a customer spends $19.99 on a purchase, you have to look at how many parties are taking a cut of that money," Kishore says.
Still, the chance to make good on their ITV promises could be a powerful draw for MSOs. "They’ve invested tens of billions of dollars over the years to get two-way functionality, and this is one of the first applications that really takes advantage of it," McDevitt says. "They can point customers to something that’s available now. It’s like proof the system works."
For smaller systems, the proposition is a bit tougher. "It’s typically a chicken-and-egg problem" says Matt Polka, president of the American Cable Association. "Capital expenditures for new technology in smaller systems are difficult because of the smaller subscriber base. That’s where the partnership comes in. The shopping services will need to work with smaller and medium-size independent operators to help pay for the capital expenditures to acquire and install the new technology."
Fortunately, the top shopping nets are well-positioned to invest. QVC’s net sales topped $6.5 billion in 2005, and its ’06 third-quarter revenue jumped 12% from the second quarter to $1.65 billion, according to Liberty Media. Liberty paid $482 million in October to purchase the stake in QVC it didn’t already own, and is now sole proprietor of the network. HSN remains the cornerstone of InterActiveCorp, contributing 54% of IAC revenue and 64% of its earnings in 2005, according to HSN filings. ShopNBC remains a force—its revenue jumped 5% from $617 million in 2004 to $649 million in 2005, according to the company—and niche network Jewelry Television is gathering steam. Jewelry scooped up a faltering Shop At Home from Scripps Networks this summer, and is re-launching as a male-oriented network hawking coins, watches and sports memorabilia.
"We go to a cable operator and they say, ‘We have enough shopping, we don’t need any more.’ But what they have are the three general department store networks," says Harris Bagley, Jewelry TV’s EVP, distribution. "We are unique; it’s really narrowcasting." Jewelry offers operators fixed percentages and fees, and has deals with Charter, Comcast and Cox where the network can sell to individual systems nationwide. The company hopes to get the same status for Shop At Home.
But Shop At Home will remain "on a very linear platform right now," says Andy Caldwell, the network’s VP of affiliate marketing. "Exploring interactive opportunities really depends on how and when the cable systems roll out that technology."
On demand also holds opportunities for shopping networks that could, say, program not just a general show hawking NFL memorabilia but VOD shows for each team. "Viewers tend to watch at times when there’s not a whole lot going on anyway, and the shows are slick and entertaining and can go very deep into a product," Kishore says. "It could work very well."
Networks will need to carefully assess their VOD offerings and focus more on in-stock specialty items than limited-quantity sales. Jewelry’s VOD trial with Comcast subscribers last year yielded less-than-dazzling results. "We found with VOD there’s no sense of urgency like when you’re watching a TV show and you only have five minutes left to buy," notes Bagley. "If it’s there for a week, what’s the rush?"
Home Shopping—Programmers Roundup
Launch date: June 1986
Ownership: Liberty Media
Distribution: 90.5 million homes
Management: Mike George, president/CEO; Darlene Daggett, president of U.S. commerce; William Costello, CFO/president of QVC International; Rob Cochran, CIO; Bob Ayd, EVP and chief merchandising officer; Randy Ronning, EVP and chief merchandising officer; Jeff Charney, SVP/chief marketing officer; Al Ulozas, SVP, affiliate sales and marketing
Top shows: PM Style, AM Style, In the Kitchen With Bob, For Race Fans Only
Home Shopping Network
Launch date: July 1985
Owner: InterActiveCorp (IAC)
Distribution: 89 million homes
Management: Mindy Grossman, CEO, IAC Retailing; Sara LaPorta, CSO, IAC Retailing; John Schaefer, president/CEO, Cornerstone Brands Inc.; Mark Ethier, COO, HSN-U.S.; John Watson, COO, HSN-U.S.; Steve Armstrong, EVP/general counsel, legal affairs; Rob Gruen, EVP, merchandising; William Lynch, EVP, HSN.com; Scott Sanborn, SVP, marketing; Peter Ruben, EVP, HSN affiliate relations group
Top shows: shows featuring Wolfgang Puck, skincare expert Wei East and inventor Joy Mangano
Launch date: 1990
Ownership: ValueVision Media
Distribution: 64 million homes
Management: William Lansing, president/CEO, ValueVision Media; Rick Ehrman, VP, business development
Top shows: programs selling jewelry and watches, beauty items, home goods and computers
Launch date: October 1993
Ownership: privately held
Distribution: 66 million households
Management: Charles Wagner, chairman & chief legal counsel; Robert F. Hall, CEO; William C. Kouns, president; Joe Fields, COO; Wayne Lambert, CIO; Crawford Wagner, CFO; Jerry Sisk, EVP; Harris Bagley, EVP, distribution
Top shows: The Red Carpet Collection, Bella Luce, Girlfriend Fridays
Shop At Home
Launch date: June 1986, bought by Jewelry Television 2006
Distribution: 70 million homes
Management: Joe Fields, CEO; Tim Engle, president; Andy Caldwell, VP of affiliate marketing
Top shows: The Watch Show, The Coin Vault, The Sports Room