The small, highly interconnected world of Home Shopping Channels: QVC, HSN, ShopNBC (and Comcast)

Liberty Media, which announced quarterly results on Friday, also said it expects to complete its long planned split-offs of both Liberty Starz (the movie channels) and Liberty Capital (which includes the Atlanta Braves and most of Berwyn-based TruePosition, among other holdings) this summer. This follows a favorable ruling the week before last in Delaware Chancery Court against bondholders challenging the split-offs; a vote for shareholder approval is scheduled for May 23.


That will leave Liberty Media with what is now called Liberty Interactive, consisting largely of West Chester-based cable shopping channel giant QVC. Liberty Interactive will then become an asset-backed company, instead of a "tracking stock" like Interactive, Starz, and Liberty Capital are now. A tracking stock is a strange financial device (in my mind) that has mostly gone out of fashion in which the holder does not actually own a legal share of the underlying assets of the company, but rather a sort of virtual share that reflects its value.


This transition has several implications, but one of them is, in the view of many analysts, that it will be more likely that Liberty will try to acquire the other two thirds of HSN (parent of Home Shopping Network) that it does not already own and integrate it with QVC. Liberty Chairman John Malone and CEO Greg Maffei have both suggested in the past that this might be a logical outcome at the right price. HSN has annual revenue in the $3 billion range and a current market capitalization of about $2 billion (see Home Shopping Network On Comeback Trail) ; QVC's annual revenue is about $7 billion and Liberty Interactive's market cap is over $13 billion.


What are Comcast's interests in this market? It owned a majority of QVC from 1995 until 2003, when it sold out to Liberty Media. Now, through NBCU it controls about 13% of Minnesota-based ValueVision, which operates under the brand name ShopNBC through a license from NBC. ValueVision, which was struggling not too long ago, has been doing better recently and has become a sort of "QVC West" as it has imported much of its top management team from QVC (including CEO Keith Stewart). ValueVision is still a relative minnow, with under $1 billion in revenue and less than universal cable distribution. Comcast has not commented on what intentions it may have for ValueVision. Some speculate that Comcast may seek to increase its stake or even try to take control of ValueVision, so it has a hedge against the domination of a possible QVC/HSN combination in the category and a way to participate more directly in the emergence of interactive ecommerce applications delivered through Cable TV.



permalink