In a move that may further challenge Home Shopping Network Inc., arch-rival QVC Network Inc. will carry to the homes of 5-million cable subscribers the signal of a third competitor, the JCPenney Television Shopping Channel. The 5-million households represent an overlap of potential viewership created last October when West Chester, Pa.-based QVC bought the CVN Cos. of Minneapolis.
As as result of the merger, St. Petersburg-based Home Shopping, which originated the television retailing industry here, was surpassed as the sales leader. Some analysts said the move Tuesday may isolate Home Shopping.
"It further solidifies QVC's position in cable," said Larry Gerbrandt, who follows the entertainment business for Paul Kagan Associates Inc. in Carmel, Calif. "They're unified under one roof."
Gary Arlen, publisher of Electronic Shopping News, said, "Home Shopping has someone more formidable in the other camp (QVC) working against them."
But Home Shopping officials said QVC appears to be giving away the store. "Why anyone in our business would sell, lease or barter subscribers is beyond me," said chairman and chief executive Roy M. Speer.
QVC had been developing a second network with different programing on the overlapping channels, but announced last week it was scuttling those plans. The second network was to feature programs from upscale retail chains that don't have stores in smaller markets.
"Basically, the more we got into the second program, the more complex it got," said QVC president Michael C. Boyd. "It took more resources than we were willing to spend. We looked at a couple of alternatives. One happened: the JCPenney show."
QVC chairman Joseph M. Segel said, "This is a win-win solution for QVC, JCPenney, cable system operators and cable subscribers. QVC will eliminate the costs of producing a second shopping program while generating new sources of income."
Penney will sublet a satellite transponder that now beams the signal from the QVC transmitters to cable television companies. QVC has been in the process of blending its traditional programs with CVN. The transition is scheduled to be completed March 30.
Further terms of the deal between QVC and Penney were not disclosed. Although local cable operators receive a percentage of revenue from the shopping channels, neither QVC nor Penney would discuss whether they might split the payments.
Home Shopping's Speer said he does not understand how the deal could make sense. He noted that every household that a television retailer reaches counts for a potential sale. For example, QVC, with 32-million cable subscribers and consolidated sales for the fiscal year ended Jan. 31 of $860-million, averaged nearly $27 in revenue per household reached.
Home Shopping reaches subscribers through cable companies and on a network of its own UHF stations, as well as affiliates. The company reaches 21.4-million homes on cable TV and 40-million homes via broadcast, said Les R. Wandler, the network's chief financial officer.
Home Shopping reported sales in its last fiscal year ended Aug. 31 of $774-million.
With the deal, the JCPenney channel, an arm of the Dallas-based department store chain, nearly doubles its reach to more than 11-million homes. The parent company does not release sales for the unit.
QVC said its relationship with Sears, Roebuck & Co. of Chicago will not be affected by the deal with Sears rival Penney. Segel noted that Sears offerings now comprise 10 percent of program time, and there is plenty of room.
"It will become more like shopping at a mall," said Segel.