[A big change from the early days when some W0KIE programmers were uplinked
via their 30ft dish out in front in the shopping center parking lot in
Knoxville.]
As Seen on TV
Inside a Media Company's Bid To Make Home Shopping Chic
Scripps Tries Boutique Route Using Stars as Pitchmen And Food Network Tie-Ins
Emeril Drives a Hard Bargain
By JOE FLINT
Staff Reporter of THE WALL STREET JOURNAL
July 18, 2005; Page A1
NASHVILLE, Tenn. -- Nan Kelley, a former Miss Mississippi turned TV
pitchman, is extolling the virtues of high-end cookware from an elegantly
appointed studio designed to look like a kitchen. "Everyone needs an open
French skillet," she tells the audience of "Dream Home."
This is home shopping as it's rarely been seen before. Unlike the giants of
the business, who hawk zirconium rings and porcelain gnomes, E.W. Scripps
Co.'s tiny Shop at Home is trying to do something that has eluded
television pioneers for decades: Persuade affluent consumers, who have no
problem making big-ticket purchases online, to embrace shopping through
their TVs.
Scripps's shows, with names such as "Bling Fling," sell 40-inch,
high-definition TVs for $2,499 and leather club chairs for $639.95. The
programming is heavily promoted on the company's other upscale cable-TV
operations, including Food Network and Home and Garden Television, an
untried tactic in the industry. And instead of relying on anonymous hosts,
Scripps has recruited stars from its lifestyle channels, such as chef
Emeril Lagasse and country-music singer Naomi Judd.
"Our competitive advantage isn't so much to gain [market] share...but
create a new way of selling merchandise," says John Lansing, president of
Scripps Networks, which oversees the company's cable-TV business.
Scripps has a long way to go before it can call Shop at Home a success. The
channel lost $22 million last year and is expected to lose about $18
million this year. Cable subscribers who receive QVC, the leading
home-shopping operation, spent an average of $44 with the channel in 2004.
For Home Shopping Network, the second-largest, that number was $23. For
Shop at Home, it was $6.
It's also possible that viewers of Scripps's other channels -- according to
Mediamark Research Inc., about 25% of them have annual household incomes
greater than $100,000 -- won't like being pitched shopping shows. Some
stars, such as chef Mr. Lagasse, agreed to appear on the shopping channel
only reluctantly. Scripps officials say they take great care not to sully
their existing offerings with promotions that are too overt.
The roots of home shopping are actually in radio. In 1977, radio
entrepreneur Bud Paxson accepted 112 electric can openers from an
appliance-store owner who couldn't pay his advertising bill. Figuring they
were better than nothing, Mr. Paxson went on the air at 9 a.m. the next day
and started an auction. It took 15 minutes to sell them all. Next, Mr.
Paxson tried hairdryers and jewelry.
"The only market research we ever did was to offer something on the air,
and if it didn't sell, we never offered it again," Mr. Paxson wrote in his
autobiography, "Threading the Needle."
The success led Mr. Paxson and partner Roy Speer to launch Home Shopping
Network, or HSN, in 1981 as a local cable channel, which they took national
in 1985. It was an immediate success. One year later, a rival channel
arrived on the scene: QVC. Both used a simple formula and became extremely
profitable: Host displays a product; a phone number appears at the bottom
of the screen; people dial in and buy the product.
Today, both market leaders are part of larger conglomerates. John Malone's
Liberty Media Corp. owns QVC while Barry Diller's IAC/InterActiveCorp owns
HSN. Both have huge leads over smaller rivals, such as General Electric
Co.'s ShopNBC, and have registered a steady, if unspectacular, financial
performance in recent years. In 2004, QVC's sales rose 16% to $5.69
billion, compared with the year earlier, while operating profit slipped
slightly to $760 million. HSN, in the comparable periods, registered a 7%
jump in revenue to $2.38 billion and a 21% leap in operating income to
$179.6 million.
Shop at Home's 2004 sales were $293 million, a 23% improvement from the
year-earlier period. Scripps expects the channel to break even by the
fourth quarter of 2006. In total, U.S. TV retailing clocked $7 billion in
revenue last year.
But despite its success, the home-shopping concept faces some long-term
problems. The two biggest channels can now be seen by virtually every U.S.
cable subscriber, reducing their growth potential. About 12% of the U.S.
population watches home shopping, a figure that hasn't changed in over a
decade, according to a 2003 report by Morgan Stanley & Co. The channels
also face robust competition from Web retailers.
Moreover, home shopping has long been mocked as unglamorous and tacky. A
1990s comedy show, "In Living Color," ran a recurring skit called "The
Homeboys Shopping Network" in which its hosts promoted stolen goods.
Seeking a Niche
That's where Shop at Home sees its advantage. By trying to convince the 50
million households that receive Shop at Home to buy fancier items, Scripps
is hoping to secure a niche audience as yet untapped by its bigger rivals.
Scripps President and Chief Executive Kenneth W. Lowe has no illusions
about challenging QVC, which he calls a juggernaut. Both QVC and HSN are
also trying to sell higher-grade products. But QVC, says Mr. Lowe, is more
of a "department store," while Shop at Home is "more boutique."
For Scripps, which owns 21 newspapers, 15 television stations and four
cable networks, a struggling shopping channel wouldn't seem to be a big
priority. But Scripps sees Shop at Home as a key to its future. The
Cincinnati-based company has thrived over the past decade as it diversified
away from its core newspaper business and into cable TV. While other
newspaper stocks have languished, Scripps shares, which have split, are
almost five times as high as they were 10 years ago.
But as the cable industry has evolved, Scripps has found itself squeezed by
bigger rivals. It's overshadowed by companies such as Viacom Inc., Time
Warner Inc. and Walt Disney Co., which have leverage over independent
programmers like Scripps by virtue of the cable and broadcast networks they
own. In addition, huge cable operators such as Comcast Corp. are getting
into programming, often in Scripps's own backyard. Comcast, for example,
owns the Style Network.
Scripps, which first bought a chunk of Shop at Home in 2002, is betting
shopping can provide a new revenue stream to help protect it against these
behemoths. "To get bigger, we've had to think smaller," says CEO Mr. Lowe.
(Scripps collaborates with Dow Jones & Co., publisher of The Wall Street
Journal, on a Weekend Journal television program airing on Scripps's Fine
Living Network.)
Shop at Home, founded in 1986, was acquired by Scripps in two stages. When
the company took complete control in 2003, it inherited a network that Mr.
Lowe described at an investor conference last year as "truly broken." The
channel's sets were dimly lit, making it hard to see the products. The
studios were too close to the phone banks, creating distracting background
noise.
One of the company's first moves was hiring Steve Bryant, a former QVC
host, as vice president of talent. After tackling bad hairdos -- and in one
case, a bad wig -- he banned hosts from using the word "unbelievable,"
because it made their pitches seem, well, unbelievable. Mr. Bryant also
noticed hosts had a tendency to yell. "Many equated energy to volume; they
were almost shouting at the customer," he recalls.
Scripps created new sets with better lighting. Behind the scenes, it built
a new warehouse and call center to more speedily dispatch orders. The
channel also overhauled its promotions. "Jewelry Day" became "Bling Fling"
and "Everything Electronics" is now "Manly Man Weekend."
Those fixes were made relatively easily compared to the next step: changing
the product mix. Jewelry and collectible coins accounted for more than half
of Shop at Home's 2003 sales. Beside not fitting Scripps's upscale image,
jewelry is ever-present on other shopping channels. It has high margins,
because it's cheap to ship, but also has a high return rate.
Since taking over the network, Scripps has added cookware, home
furnishings, scrapbooking, electronics and fitness categories. In the first
quarter of 2005, Scripps said its coin and jewelry sales had shrunk to 37%
of sales.
Shop at Home's concentration on a limited range of kitchenware and other
lifestyle-oriented goods remains one of its main challenges. "If you're
going to take off a $300 piece of jewelry and replace it with a $39
mandoline slicer, you've got to sell a lot more of them to come off even,"
acknowledges Shop at Home President Judy Girard.
To lure more viewers, Scripps is relying on its other channels. Earlier
this year, it launched the Food Network Store, a Shop at Home show pitching
products used on the cooking and food channel. The show will be promoted on
the Food Network. Scripps has launched another Shop at Home show based on
HGTV. Both will run between five and nine hours a week.
Scripps says it is especially careful to ensure that shopping-show
promotions on the lifestyle channels don't look like product placement, for
fear of alienating audiences. Hosts of Food Network shows, for example,
don't make specific references to products sold on Shop at Home. Animated
graphics, however, often appear on the screen. For example, during "Paula's
Home Cooking," starring chef Paula Deen, graphics pop up pitching her books
and DVDs available at Shop at Home.
"We're giving people a way to find things they want to buy and we're doing
it in the open," says Ed Spray, a former Scripps president who is now a
consultant to the company. "This is better than product placement; there
are no shenanigans going on."
Country Cooking
To help pitch products, Shop at Home is signing up personalities from
Scripps's other networks. Naomi Judd, a host of Food Network specials such
as "Naomi Judd's Family Table," and a country-music star, is now pushing
kitchen products on Shop at Home. Country star Buddy Jewell, a regular
presence on Scripps's recently acquired music channel, Great American
Country, popped up recently to promote his new CD.
Others have proven a tougher sell. The deal to land Mr. Lagasse took months
to close. The chef didn't want too heavy a workload, while Scripps wanted
him on as often as possible. According to a person close to the talks, he
was also wary about promoting cookware other than his own brand.
In the end, Mr. Lagasse agreed to star in three specials and a weekly
series bearing his name. He won't be selling products directly and retains
the right to decide which chefs will appear on the program. He'll also get
a cut of the sales, the person close to the talks said.
Scripps will heavily promote Mr. Lagasse's appearances through commercials
on the Food Network. In one spot, his whisk is compared to Babe Ruth's bat
and Jimi Hendrix's guitar.
Mimi Rice, a spokeswoman for Mr. Lagasse, declined to comment on financial
arrangements between Mr. Lagasse and Shop at Home.
Scripps can already claim some modest successes. "Scrapbooking," a program
on the DIY network -- which stands for do it yourself -- has become a
popular show on Shop at Home. DIY runs promos telling viewers to go to Shop
at Home for glue, paper, machines and other materials for the wannabe
scrapbooker. Sales per minute jumped 145% after the first promotion and
sales for the two-year-old show now average $500,000 a month, Scripps says.
"So far, the numbers indicate something is working," says Ed Atorino, an
analyst who follows Scripps for independent research firm Fulcrum Global
Partners. He says the channel is a good way for Scripps to use its existing
talent in different ways, although "it takes time and money to do that and
they're not there yet," he says.
Meanwhile, Shop at Home continues to tinker with its shows. Sitting in her
office, Shop at Home President Ms. Girard plays the tape of a recent "Dream
Home" show. Ms. Kelley, the former Miss Mississippi, finishes her cookware
demonstration. Moving into the bedroom, she pulls out a set of scales from
under the bed and launches into a speech about America's obesity rates. Ms.
Girard winces.
"They nailed us on this scale," Ms. Girard says of the audience's negative
reaction to the pitch. Reminding viewers to watch their weight may not have
been the best approach to selling products. "It was too forced," she
explains. "They wanted to buy bedding."
================================
George Antunes, Political Science Dept
University of Houston; Houston, TX 77204
Voice: 713-743-3923 Fax: 713-743-3927
antunes at uh dot edu
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