The key to the success of the Home Shopping Network and its competitors, QVC and Value Vision, is that they are experts at selling materials to people, said Jack Kirby, president of HSNi (the interactive division of the Home Shopping Network). Josh Bemoff, a principal analyst at Forrester Research, says that the home shopping networks use hosts who are successful sales­ people, appealing and effective screen layouts, reasonable and accurate pricing, and techniques that are very effective at turning viewers into buyers.

A particular challenge for the television retailer is to convince a viewer to buy. Doug Rose, vice president of brand merchandising and development for QVC, says the real task is to create trust between the viewer, the host, and the network. The customer needs to be confident they will like the item once they receive it at home. Rose stresses that home shopping networks need to be advocates for consumers. Quality assurance processes, fact-checking items and torture-testing items to make sure they will stand up to their war­ ranties is absolutely vital to a home shopping industry. This means that creating a level of trust with the consumers can turn them into repeat customers. Of course, offering an interesting selection of goods and creative packaging is also important.

Home Shopping Network (HSN), QVC, and Value Vision are the three largest networks in home shopping. The sales figures for these three networks combined are approximately $5 billion, and they reach more than 250 million households worldwide.

HSN is a division of USA Networks Inc's Interac­tive Group. Barry Diller is USA Networks' Chairman and CEO. In 2001, HSN celebrated its 25th anniversary. Today, HSN is a multi-channel retailer with a thriving television, catalog, and web business (at www.hsn.com). The company's e-commerce website, launched in September 1999, became profitable within three months by giving consumers an incremental shopping platform to the already existing television and direct mail channels.

HSN has international networks in Spain, Germany, France, Italy, the Netherlands, and the United Kingdom.

HSN offers products in the following categories: home and entertainment, health and beauty, fashion and jewelry, and electronics. They have also formed partnerships and strategic alliances to offer customers a greater variety of goods. The alliances include: sports (NFL, NBA, NASCAR, PGA); entertainment (Nickelodeon, Universal); technology (Intel, IBM, Sharp1 Sony, Hewlett Packard); fashion (Marie Claire, Ran­ dolph Duke); and media services (Vica, MCI, Time, Inc).

The second home shopping network to appear on television was QVC, Inc. Joseph Segel, founder of the Franklin Mint, founded the company in 1986. QVC established a new record in American business history for first full year fiscal sales by a new public company, with revenues over $1 I 2 million. By 1993, QVC, based in West Chester, Pennsylvania, had become the number one televised shopping service in sales and profits in the United States by reaching over 80 percent of all U.S. cable homes and three million satellite dishes. By 2000, its turnover had reached more than $3.5 billion. QVC claims to be the world's largest elec­tronic retailer.

QVC is a virtual shopping mall, where customers can and do shop at any hour, at the rate of two customers per second. Themed programs are broadcast live 24 hours a day, seven days a week to 77 million households in the United States. Related channels in the group also broadcast to some 8.2 million households in the United Kingdom and the Republic of Ireland, and more than 27 million households in Germany.

QVC employs more than 100 buyers source new products from around the world-at least 250 new products are introduced on air each week. The chan­nels' categories include home and kitchen goods, consumer electronics, and jewelry-the latter category accounts for 32 percent of screen time, and has made QVC one of the largest retailers of gold and silver jew­elry in the world.

QVC's current customer base spans all socioeconomic groups, linked only by the fact that they have a cable service subscription. Because the audience for each QVC program is driven by product, demographics vary significantly from one hour to the next. The total customer base is about 20 million people in four countries.

Value Vision is currently the third-largest home shopping network, and is based in Minneapolis. In 1999 it recorded sales of $274.8 million, reaching £470 million in 200 I. In 1997, NBC bought a 36 per­ cent stake in the company, becoming Value Vision's negotiator with cable operators. Since Value Vision's reach is less than half of QVC's, the company relies on affiliating with a local broadcaster to take advantage of the must-carry provision of the 1992 Cable Act. The must-carry rules require cable operators to carry all stations within their community that meet certain required criteria, which includes historic car­riage of the station on the system, a station's local service to the cable community, carriage of other similar stations in the market, and evidence of viewership in the community.

Cable operators, which use analog systems with limited available space, argued that home shopping channels were not operating in the public interest. Because of this, they contended that these local broadcast stations, which for the most part had weak signals and small audiences, did not qualify for must-carry status. The FCC ruled that stations carrying home shopping channels-assuming they deliver the requisite signal strength and meet all the other requirements for must­ carry-were operating in the public's interest and were eligible for carriage.

In June 2001, Value Vision was renamed SHOPNBC. NBC announced a deal with Wink Communications, Inc. that gives viewers the option to buy merchandising by clicking their remote control any time of the day or night, activating a purchase using a pre-authorized credit card. SHOPNBC pays Wink a fee for each transition. It is up to Wink to determine how it shares that cut with its direct-broadcast satellite or cable-operator affiliates. This interactive-television partnership is currently available in more than 3 million homes, the majority of which are DirecTV Inc. subscribers. DirecTV does not presently handle commerce purchases in real time, so SHOPNBC does not make all of its items available for purchase via remote. 

The Enhanced Broadcast Technologies group at SHOPNBC has also produced interactive content for programs on the NBC broadcast network, including The Tonight Show and Will & Grace. NBC also produces blocks of programming for companies that want to sell products themselves, presumably going after existing NBC advertisers.

In 2002, SHOPNBC bought FanBuzz, which will move the network into sports-merchandise sales. Fan­ Buzz operated the website www.teamstore.com and the CustomFan service, allowing online sales of sports clothing. About 90 percent of the business was in fulfillment sales for other clients, including ESPN, CNN, Sports Illustrated and the Los Angeles Times.

When the World Wide Web emerged in the mid­ l 990s, home shopping channels were fearful that the television retailing business would decrease. However, the networks found that the television growth rate accelerated as a result of Internet sales, and both modes of selling have become profitable. The core of the business, however, remains television.

The largest expenses for the home shopping networks are the payments to cable operators and marketing expenses. In 2001, these networks paid an average of $4.1 million to cable operators, which increased to $35.9 million in 2002.