Comments on: HSN: A Future Bargain?

By: S

Thu, 09 Oct 2008 18:41:13 +0000

Davo or Max,
Any new thoughts on HSN / LINTA / VVTV? Have there been any changes in the marketplace or competitive landscape due to Carriage Costs etc?

By: FutureBlind Digest for November 21 | FutureBlind

FutureBlind Digest for November 21 | FutureBlind — Wed, 21 Nov 2007 04:36:50 +0000

[...] Malone, it’s an interesting read. Here’s a quote from Liberty’s CEO regarding the split up of IAC: “[the break-up] will allow us to begin a dialogue with IAC about how we are going to work [...]

By: Davo

Davo — Tue, 20 Nov 2007 21:48:21 +0000

Max,

VVTV’s Q3 call is worth a listen.

They did not provide 2008 guidance but I will predict here:

2008 EBITDA $32M on 7.5% sales growth
2009 EBITDA $100M on 7.5% sales growth (analog goes digital)

By: Max

Max — Sat, 17 Nov 2007 19:27:41 +0000

Davo,
ShopNBC’s site is impressive – much more so than HSN’s or QVC’s. I’m sure customers who shop on the internet vs. TV spend more, as it seems much easier and more user friendly. If I were VVTV, I would also provide even more incentive for customers to shop online (like lower S&H, etc.). Another thing to take into consideration is that VVTV’s consumers are more higher end than HSN/QVC, which provides advantages and disadvantages.

By: Davo

Davo — Sat, 17 Nov 2007 13:46:42 +0000

Check this out: http://money.cnn.com/news/newsfeeds/articles/prnewswire/AQF07316112007-1.htm

The ShopNBC.TV site is quite impressive: http://tv.shopnbc.com/

By: Davo

Davo — Fri, 16 Nov 2007 02:55:02 +0000

Max,

Watch for news from ShopNBC later this month and into December. They will be launching new .TV features/functionality including web casts that can be viewed whenever the viewer wants to view it. That means ‘live’ and not-so-live broadcasts to meet the schedules of current and prospective customers.

Also, if the FCC rules to slash leased access, VVTV’s shares could soar…reflecting future EBITDA in the $60M+ range near term.

Lastly, VVTV currently trades at less than $2/home. QVC as example was valued at $142/home in 2003 when Comcast sold its share to Liberty. ShopNBC sales are about 15% of QVC’s BUT ShopNBC’s distribution is 27% less than QVC’s. If that balances it out a bit, VV’s homes should be valued @$21/Home….that equates to about $40/s. If the FCC rules favorably….

I digress. All of the home shopnets are not well understood by the investor community. Diller & Malone both know the value inherent in H and Q respectively which is why they have been involved with them for so long; and I am convinced that both of them think there are better days ahead for the homeshopnets.

By: Max

Max — Thu, 15 Nov 2007 16:18:54 +0000

Davo,

Those are some interesting points about the home shopping companies. The internet side of the business is very interesting.

It’s hard to tell how many customers buy on the web but “shop” on TV (in other words, they watch HSN, and then go buy their products on the internet). I’d say only a small percentage of their internet sales are customers who ONLY shop online. But the good part about these customers is that they’re incremental revenue that doesn’t cost nearly as much as the TV side. The more people who are willing to shop with live internet video the better. As you said, its extremely cheap for them relative to the cost of broadcast licenses.

-Max

By: 15muses » HSN: A Future Bargain?

15muses » HSN: A Future Bargain? — Thu, 15 Nov 2007 11:55:57 +0000

[...] check the full story here [...]

By: Davo

Davo — Thu, 15 Nov 2007 04:19:09 +0000

Max,

Nice to see a post about the home shop nets. All of them are very neglected by the investor community for various legacy-related reasons (the taint of their infomercial past). What is not readily understood is that each of these TV Shop Nets have some very interesting strengths:
1) The high fixed cost operating expense is the result of the fact that they all pay the cable/satellite operators for thier carriage into homes. I estimate that QVC/HSN pay in the neighborhood of $175-$200M/year and ShopNBC $124M/year for that carriage. (ESPN, CNN etc do not pay for carriage; for those who complain about their cable/satellite bills…they should be thankful the Home Shop Nets are there or they would pay more)
2) These 3 home shop nets all derive 21%+ of their sales from the Internet. In fact they are all ranked in the top 100 of Internet Retails Top 500 ranking of Internet Retailers. (Amazon is #1; QVC #12; HSN #24; ShopNBC #64)
3) Once sales at the home shop nets reach scale to cover their fixed fee…the margins are large (as you note). QVC at 20 is more than 2x’s Amazon’s margin.
4) Internet Video is all the rage. High quality video production with salesmanship is exactly what these home shop nets have been doing since at least 1990 (Valuevision/ShopNBC). Many etailers would agree that high quality internet video is becoming a must-have. Who better to capitalize on that trend…and it costs them almost nothing vs the web only retailers who need to invest considerable $ and time to figure it out.
5) The FCC regulates the cable industry and is on the war path. It is possible that they could enact rules later this month that could allow for a 50% reduction in carriage fees paid by the home shop nets (specifically impacting Valuevision….which overnite could see EBITDA grow to $50-$60M on flat sales growth)
6) The barrier to entry is very high for any company to enter the home shop space vs a very low barrier to enter the etail space.

There are many other reasons to not overlook the homeshop nets; I look forward to your further review of Valuevision…particularly if the FCC rules are passed 11/27/2007.