QVC Inc. - Company Profile, Information, Business Description, History, Background Information on QVC Inc.

1200 Wilson Drive
West Chester, Pennsylvania 19380

Company Perspectives:

The QVC Difference is the set of values woven into the fabric of our culture, defining the attitude and conviction that unites everyone at QVC. These principles empower our employees with the initiative to develop new ideas and the accountability to see them through. More than a collection of ideals, The QVC Difference serves as a reminder of what made us so successful in the past and acts as a guidepost for the future. These values are customer focus, teamwork, pioneering spirit, commitment to excellence, respect and concern for each other, ethics and integrity, openness and trust, and having fun along the way.

History of QVC Inc.

QVC Inc. is the nation's largest electronic retailer, selling a wide variety of merchandise that includes clothing, jewelry, cosmetics, electronics, housewares, and toys. The company sells its products through cable and satellite television,, in outlet centers, and via a retail store in the Mall of America. In 2003, the company broadcasted live 24 hours a day, 364 days a year, to over 85 million homes across the United States, 11 million homes in the United Kingdom, 34 million homes in Germany, and over eight million homes in Japan. QVC, which stands for "Quality, Value, and Convenience," grew quickly into an industry powerhouse during the late 1980s and early 1990s due to increases in cable subscription rates, consumers' growing dependence on mail-order shopping, and advances in telecommunications, allowing the company, with its interactive approach, to integrate computers, television, cable, and telephone lines into an "information superhighway." In 2002, QVC handled over 150 million phone calls and shipped over 107 million items.

Early Growth: Late 1980s

QVC Network was founded in July 1986 by Joseph M. Segel, founder of the Franklin Mint Corporation, perhaps best known as a mail-order marketer of commemorative coins. According to Venture Magazine, QVC Network achieved its rapid success through a combination of quick financing and the founder's ability to seize a ripe moment in the nascent industry. During this time, Home Shopping Network, Inc. was the market leader. Founded in 1977 as a radio shopping program, HSN switched to cable television in 1985 and expanded its operations to three channels. "Like countless others," according to Venture, Segel "was watching closely as Home Shopping Network Inc. went public that May. Two months later Segel had organized a management team, formed his own company, and lined up the cable companies and satellite capacity needed to transmit QVC's program--which didn't even exist yet." Among Segel's early backers was Ralph Roberts, chairperson of Comcast Corporation, the fourth largest cable operator in the country at the time. Roberts contributed seed money to QVC and was responsible for persuading other cable companies to carry the shopping channel in return for a stake in QVC.

The company began broadcasting in November, and the programs went on the air full-time in January 1987, transmitted from the company's unassuming headquarters in a West Chester, Pennsylvania, office park. By January 31, 1988, the end of the first full fiscal year, the company had achieved $112.3 million in sales. QVC spent the next several years strengthening its position in TV shopping through acquisitions. In late 1989, it bought out The Fashion Channel, followed by the 1990 purchase of competitor CVN and, in May of the following year, the J.C. Penney Shopping Channel. In this climate, the television shopping field narrowed from 20 companies in 1987 to just two major players by late 1992: QVC and the Home Shopping Network.

As QVC gained financial strength, the company also garnered new respectability for its industry, which tended to have a reputation for marketing cheap merchandise. In contrast to the older networks' "fast-paced, hard-sell route, with heavy emphasis on price-cutting and savings," according to Women's Wear Daily, QVC took "an intimate, soft-sell approach by using a talk-show format with hosts, placing emphasis on product information more than on price." This approach was enhanced by the network's growing cast of celebrity regulars, who sold their name brand products and took viewer calls. On QVC, daytime soap opera star Susan Lucci sold her hair care system, actress Victoria Jackson promoted her cosmetics, comedienne and talk show host Joan Rivers advertised a line of women's apparel, and Diane Von Furstenburg marketed her moderately priced silk scarves and clothing. The Parfums International division of the Elizabeth Arden cosmetics company also publicized products on the station.

Growth under Barry Diller's Leadership 1993-95

At the beginning of 1993, founder Joseph Segel retired, passing leadership on to Barry Diller, the former chair of Fox Inc. who, in late 1992, purchased a 3 percent stake in QVC for $25 million. "Within one week," market analyst Peter J. Sirus remarked to Women's Wear Daily, "control of an industry that had been treated largely as the butt of jokes [was] transferred from the original entrepreneurs to some of the smartest and most powerful executives in the media business." Diller, a California native who dropped out of college to pursue a career in show business, eventually rose to prominence as an agent at the William Morris talent agency and at the studios of ABC and Paramount." Diller was chair and chief executive officer of Paramount Pictures from 1974 to 1984, where he was highly regarded and successful. In the mid-1980s, Diller created Fox Broadcasting, which became a fourth television network to compete with CBS, NBC, and ABC, and quickly achieved a large viewership. Thus, when Diller retired from Fox in early 1992 and resurfaced ten months later as chairperson of QVC, the company became a showcase in the industry for the works of a man widely regarded as a media genius.

Prior to taking over the business, Diller remarked to Women's Wear Daily: "There have been a whole series of biases against TV shopping, as there are in the early days of any medium. The challenge is to grow in spite of, or out of, those biases. Every day you have to prove the naysayers an inch wrong, and eventually people will start to say, 'Hey, that's interesting,' and see the applications it could have for them." In his first year at QVC, Diller put his words to the test in several areas. First, he raised the awareness of mainstream retailers to the sales possibilities the network could hold for them as a natural extension of in-store and catalogue merchandising. For example, in March 1993, the company signed an agreement with Saks Fifth Avenue to carry the upscale retailer's moderately priced "Real Clothes" house brand. Women's Wear Daily observed at the time that the move could be mutually beneficial because it gave QVC "a quick jolt of upscale credibility, and it puts Saks on the front lines of what some observers see as the distribution wave of the future: electronic selling." According to the company, gross orders for the Real Clothes line exceeded $570,000 in the first three months. In addition, in a mid-1993 move that further strengthened the company's fashion sales, QVC introduced a second channel, The QVC Fashion Channel, which, at the end of the year reached over seven million cable-equipped homes.

Concurrently, Diller was working to expand the reach of the company's programming. In April 1993, QVC made its first excursion into broadcasting outside the United States. The company agreed upon plans with Grupo Televisa, S.A., the largest media company in Mexico, to expand QVC's style of electronic retailing throughout the Spanish and Portuguese-speaking world. Grupo Televisa was a sixty-year-old company with interests in television production and broadcasting, international distribution of television programming, cable television, radio production and broadcasting, music recording, publishing, professional sports promotion, and several other areas. The agreement between QVC and Grupo Televisa was designed to form an electronic retailing program service and related support systems that would serve Mexico, Spain, and Latin America in Spanish, as well as Brazil and Portugal in Portuguese.

Diller's deal with Grupo Televisa prompted a similar agreement in Europe. QVC and British Sky Broadcasting (BSkyB) made plans to form a 24-hour electronic retailing service to be broadcast out of London. BSkyB, according to QVC, was one of the largest pay television services in Europe. The six channel service, launched in February 1989, served about four million homes and was 50 percent owned by Rupert Murdoch's News Corporation Ltd. The joint venture channel would serve the United Kingdom, Ireland, and Europe, with the exception of the Iberian Peninsula.

In July 1993, the company announced that it would launch yet a third shopping channel, called Q2, to go on line in the spring of 1994. The new channel, according to company literature, was "designed to reach a contemporary audience that hasn't yet become involved with home shopping because they feel it doesn't meet their needs." To bring in the new audience, the station intended to address specific consumer issues by featuring segments such as "finding the computer that's right for you," "buying and using a mountain bike," "products for life on the road," "baby-proofing made easy," "creating a bachelor's kitchen," and "50 ways to work a little black dress." To manage the new channel's development, Diller tapped as president Candice M. Carpenter, a graduate of Stanford University and Harvard Business School and the former head of Time Life Television and vice-president for consumer marketing at American Express.

In late September 1993, QVC became front page news when it entered into a bidding war with Viacom Inc. for the purchase of Paramount Communications Inc., Barry Diller's former employer and owner of film, television, publishing, and sports franchise concerns. Because of the changing nature of television's capabilities, and the three companies' prominence in television, the hostile bid was viewed as perhaps among the most significant in industry history. According to a 1994 New York Times article, Diller could have trumped Viacom's offer provided he agree to pay an extra $1 billion to Paramount shareholders if QVC's stock fell after the deal. In the end, however, Diller decided the financial risk of the merger was too great, making Viacom the top bidder for Paramount.

Comcast Gets Involved: 1995 and Beyond

Despite the failed attempt, Diller remained hot on the acquisition trail. His desire to head up a large media conglomerate became apparent in 1994 when he struck a deal to merge with CBS. Under the terms of the deal, QVC would fall under corporate umbrella of CBS, leaving Diller CEO of the company. Brian Roberts and his father Ralph, president and chairman of Comcast respectively, were reluctant to part ways with QVC. Eyeing the home shopping industry as incredibly lucrative, the Roberts thwarted Diller's plans by partnering with Tele-Communications Inc. (TCI) to make a $2.2 billion takeover bid for QVC. CBS withdrew its offer and Comcast's proposal was approved in February 1995 after a lengthy review by the Federal Trade Commission (FTC). Later that month Douglas S. Briggs was named president of QVC.

The company continued to prosper during the remainder of the 1990s under Comcast's leadership. IQVC, an Internet shopping site, was launched in 1996 and became an instant success. During December 1997, iQVC secured $5 million in sales and in November 1999, it had its first million dollar day. Along with its e-commerce efforts, the company continued to introduce new products, launch new shows, and move into new areas including the German market. By 1997, overall company revenues had surpassed $2 billion.

During 1998, QVC's Internet shopping was made available to customers in Canada and the United Kingdom. That year the company also launched record label Q Records, and QVC Publishing, a division dedicated to creating and marketing books. To bolster its e-commerce business, QVC began investing in The Knot, an online bridal registry service, in 1999.

QVC entered the new century secure in its position as the home shopping market leader and the second-largest television network in the United States based on revenues. The company's process of capturing new customers continued as the QVC@THE MALL concept made its debut in the Mall of America in Minneapolis in 2000. The retail facility was originally opened as a test location and allowed brick-and-mortar shoppers an opportunity to learn about and purchase QVC items through a traditional retail outlet. The store proved successful and was opened on a full-scale basis in 2001. QVC also began distributing its Diamonique branded jewelry at Target stores across the United States that year. International expansion continued with the launch of QVC Japan in April 2001.

Amid a bleak retailing environment, QVC prospered. In the fourth quarter of 2001, the company recorded its highest-ever single day sales total--over $80 million. By this time, the company was reaching over 80 million households, and it had shipped its 500 millionth package. In 2002, sales climbed to $4.3 billion.

The AT&T spin-off Liberty Media Corporation, owner of 42.5 percent of QVC, announced in March 2003 that it planned to exercise its exit rights in the ownership agreement it had with Comcast. (Liberty became a subsidiary of AT&T when TCI was purchased by the phone company in 1999.) This, in turn, put the future of QVC up in the air, leaving Comcast the right to acquire Liberty's interest in QVC. If Comcast turned down the opportunity, purchasing rights would fall back to Liberty. If neither company wished to purchased full ownership of QVC, a third party would be given the right to bid on the company. In the end, Comcast decided sell its interest in QVC to Liberty. In a company press release, president and CEO Brian Roberts stated that "this has been a very difficult decision for Comcast. QVC is an exceptional and unique business, but we took a very disciplined financial approach to our evaluation. The cable business continues to be our core focus. With the opportunity to sell at an attractive valuation in excess of $14 billion, we have the flexibility to improve our already strong financial position and to invest for future growth."

As such, Liberty set plans in motion to add QVC to its arsenal of media holdings. The FTC gave its approval in August 2003, and the deal was expected to be completed within the year. While QVC would no doubt experience change under its new parent, it looked to be on track for consistent growth into the future.

Principal Operating Units:; QDirect; Remote Productions; QVC@THE MALL.

Principal Divisions: Q Records; QVC Publishing.

Principal Competitors: InterActiveCorp; Summit America Television Inc.; ValueVision Media Inc.


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