Shop Television Network, a Burbank producer of home-shopping programs, said it laid off 110 of its 120 employees after J. C. Penney pulled the plug on a cable-shopping channel produced by Shop Television.
The layoffs became effective Friday, a day after QVC Network Inc., the nation's second-largest home-shopping service with 40 million viewers, announced that it had taken over service to about 12 million subscribers of the J.C. Penney-owned show, called JCPenney Television Shopping Channel.
Under a licensing agreement between QVC and J. C. Penney, QVC will broadcast its own shopping service, produced at its West Chester, Pa., headquarters. The JCPenney channel, which featured fashions and other Penney merchandise, went off the air at midnight Eastern time Sunday, and J. C. Penney has no plans for a new program devoted to selling its goods.
Terms of the agreement were not disclosed. QVC President Michael C. Boyd said QVC will pay J. C. Penney a fee in exchange for access to the cable channels that formerly carried the J. C. Penney show. J. C. Penney will continue to own the broadcast rights to those cable channels, he said.
With the Penney deal, QVC will pick up about 4 million cable subscribers who don't now receive QVC programming, Boyd said. Eight million homes that were receiving both QVC and the JCPenney channel will now receive QVC on both channels. The programs will be identical until July 1, when QVC plans to introduce a new program on one of the channels, Boyd said.
The agreement between QVC and JCPenney marks the latest step in a tangled series of disputes between Penney and Shop Television.
In March, Shop Television sued J. C. Penney and QVC in Los Angeles Superior Court after QVC offered to buy JCPenney's cable system affiliation agreements. QVC planned to pay for the purchase through royalties from future sales and the issuance of QVC common stock.
Superior Court Judge Ronald Sohigian granted Shop Television's request for a restraining order to stop the purchase, which Shop Television said violated its right of first refusal. Shop Television claimed in the lawsuit that Penney pursued the QVC offer after Shop Television agreed to match the offer.
Shop Television Chief Executive Michael E. Rosen claimed that J. C. Penney forced him to stop producing the JCPenney channel by withholding payments, clearing the way for Penney to hook up with QVC. He said J. C. Penney owes Shop Television about $2 million.
Rosen also said J. C. Penney violated its contract with Shop Television by allowing QVC to broadcast through JCPenney's cable affiliates. Rosen claimed that his company, not QVC, is entitled to the affiliations, which he said Shop Television obtained over the five years that it was associated with J.C. Penney.
J. C. Penney spokesman Duncan Muir declined to comment on the lawsuit. He said the Dallas-based retail chain pulled out of the home-shopping market because of lower-than-expected profits and a soft retail market.
Rosen said Shop Television plans to stay in business by leasing its new Burbank production studios and by producing infomercials, or long-format commercials.