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TV Viewers Tuning Out Home-Shopping Networks : Marketing Concept of Mall, Couch Potato Combination Falls Short of Expectations

December 30, 1987|MARK FRANKEL | Frankel is a Washington-based free-lance writer and contributing editor to Channels magazine. and

WASHINGTON — The television home-shopping industry has lost some of its luster in the past year.

Once hailed as having a future as bright as a genuine cubic zirconium ring, shopping networks and programmers have discovered that it's harder than they thought to make money by combining America's two favorite pastimes: couching out by the tube and prowling shopping malls.

Buyers have not flocked to the video flea markets at any rate approaching estimates of just a year ago. Sales for 1987 look like they may come in at about half the dollar volume of the experts' guesses. And industry insiders say a number of the home-shopping services are likely to hang out their "Going Out of Business Sale" banners in the coming months. One is shutting down on New Year's Eve.

"Expectations exceeded reality and everybody expected too much, too soon," said MCA Television President Shelley Schwab in an interview.

Earlier this month Schwab's studio quietly ended its agreement with Home Shopping Network Inc.--the Clearwater, Fla.-based company that trailblazed the video merchandising concept--to distribute Home Shopping Overnight Service to television stations. The service offered television broadcasters a late-night and early-morning version of Home Shopping's cable programming fare.

Since 1985, when Home Shopping introduced the concept of using cable television to market merchandise directly to millions of American homes and proved there was money to be made, other companies have rushed to enter the field.

The rush turned into a stampede after Home Shopping's remarkable debut on Wall Street last year. The firm's initial sale of stock to the public performed far better than even the company's own wildest expectations. Opening at about $18 a share, it closed its first day at $42 a share and eventually rose to more than $108 a share. Home Shopping's stock began to fall, however, long before October's stock crash and now sells for less than $10 a share.

Efforts to contact officials with Home Shopping were unsuccessful.

"They were the darling of the media and you couldn't pick up a trade paper or a magazine without finding a story about them," Schwab says.

But now cable and financial analysts say that the initial euphoric predictions made about the size of the home shopping marketplace were too optimistic, and that more companies face tough times.

According to Gary Arlen, publisher of Electronic Shopping News, an industry trade paper, at least 15 companies have tried and failed to cash in on the video shopping bonanza. The losing entries range from ABC's Bargain Hunters to Value Television, a joint venture between Lorimar Telepictures, retailers Horn & Hardart and Fox Television.

"There's no question that cable system operators cannot and will not support seven or 10 different (shopping) networks," Arlen says. "The shakeout will happen," probably sometime in the coming year, he believes.

The Big Three of home shopping--Home Shopping, Cable Value Network and QVC Network--are likely to survive the coming crunch, Arlen says, but many smaller, newer companies will not.

Houston-based Consumer Discount Network, which has been broadcast on 23 over-the-air UHF television stations across the country, is expected to go dark on New Year's Eve. The channel went off 68 cable-TV systems in November.

Despite the string of such failures and the threat of even more, some programmers remain at least theoretically bullish on the home shopping concept.

"There is obviously a business there," Schwab said of MCA's decision to drop out of the home-shopping business despite having made deals with stations covering 45% of the country.

"We feel it is a long-range building situation, and our priorities have changed," he said.

Home Shopping Overnight Service is MCA's second failure to adapt the home-shopping formula to the broadcast market. An earlier co-venture with Home Shopping, "The Home Shopping Game" show, was canceled this summer after only 13 weeks when it failed to meet its projected sales revenues or ratings.

Among its other woes, "Home Shopping Game" debuted at the same time as the televised congressional Iran-Contra hearings that gripped the nation all summer. The shopping show was preempted across the country, Schwab explained. "The timing was terrible," he said.

MCA isn't alone as it contemplates its broken hopes of entering the home-shopping field. In the heady early days of the industry--one year ago--some cable analysts predicted that total home-shopping sales could go as high as $2.25 billion in 1987.

A more realistic estimate of the 1987 market, says Doug Hosking, national director of electronic shopping for the Big Eight accounting firm of Touche-Ross, is $1.2 billion. That's still an impressive gain over the 1986 home-shopping sales of $400 million, but only a drop in the bucket compared to the $750-billion total U.S. retail market, Hosking notes.

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