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HSN Anticipates 1,500-Channel World

Industry Leaders Still Working to Innovate Their Offerings

New York — The eventuality of viewers/shoppers having 1,500 channels to choose from on their satellite-fed television sets will reshape the competitive landscape for companies like HSN and QVC.

HSN CEO Thomas McInerney said that while the explosion of channels will provide more real estate for competitors, it will also make that real estate “a little less valuable.”

He also noted the difficulties of attracting shoppers to a new service that, for example, fell on channel 232. “How do you drive people to channel 232?” he asked.

McInerney said channels like HSN would have an advantage over any newly launched competitors, as established networks would be able to drive traffic to any secondary offering through a portal-type arrangement.

HSN, he said, is working to innovate at all times. For example, he noted that the company is currently testing the ability for viewers to make purchases with their television remote controls, rather than having to pick up the phone and place an order. Also, HSN, he said, would like to get better at offering customers different ways to view information on the Internet. For example, he said that it would be valuable to offer consumers shorter, bullet-type presentations as an alternative to full-length product demos.

The company, McInerney said, is on the lookout for acquisitions that fit its needs. However, he stressed that HSN is a patient company, having made only one acquisition in the past two years.

HSN, he continued, is a true retail operation and should not be confused with an entertainment company. This being the case, McInerney said that while broadcasting people are needed to keep things running, the backbone skill is merchandising. “We need great merchants because we have a finite amount of shelf space on television,” he said. “We are on 24 hours a day and 365 days a year, and we can't get any more time than that.”

A finite amount of time means each product must either be exclusive or offered at a great value. If not, customers will just pick it up at a store on their way home from work, he said.

Deciding which products will go on air, McInerney said, is more an art than a science. “It comes down to good old-fashioned merchandising. We will use a six- to eight-minute presentation for most things or a 20-minute presentation for something more technical, but there is no way to predict how it will sell.”

Vendors, he said, don't usually purchase the airtime but rather HSN buys inventory that it must then move out the door just like any other retailer. He did say, however, that for a highly technical product making its debut, “We will work out an arrangement with the vendor where we share the risk.”

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