Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
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That means not only increasing production values, but also adding more entertainment. A recent hour-long program on the late Anthony Quinn, for example, spent 20 minutes on his early life and acting career before even mentioning that he also was an artist. The hour was half over before it introduced the merchandise-jewelry interpretations of Quinn’s artwork. Mueller says the shopping network is planning to re-fashion its prime-time programming into a similar format first, with its daytime programming to follow.
If the NBC brand is helping to bring the shopping network new retailers, the web is helping to bring it more customers. About 7.3% of the shopping network’s $386 million in sales last year originated on the web, either transacted directly online or ordered on the phone after being viewed on the web site. The company can distinguish web shoppers from TV shoppers because the two channels list different phone numbers. This year, web sales are projected to contribute $60 million-12.6%-to sales projected at $475 million. While the third quarter of 2001 was a tough one for retail across the board, web sales at ShopNBC soared 117% over Q3 of last year.
The web is critical to growing its retail business, says COO Richard Barnes, in part because even with its distribution in some 50 million cable and satellite TV homes, ShopNBC is still trailing shopping network competitors QVC and Home Shopping Network, which reach 75 million to 80 million homes. “We’ve been growing our cable distribution, but there’s sill a significant portion of the home shopping population that we’re not reaching with our cable programming,” he says. “So part of the appeal of our simulcast is that the Internet gives us the opportunity to reach those people and make them aware of us.”
The web is also altering the demographics of shoppers on the converged network. Traditionally, ShopNBC’s customer base, dating back to its earlier days as ValueVision, has been female and, seemingly at odds with the perception of TV home shopping in some quarters as a downscale medium, relatively affluent. Viewer household income averages $60,000 and above, says Kevin Hanson, chief technology officer. The network has attracted that audience with an emphasis on high-end jewelry offered at discount prices, a product category that’s accounted for about 70% of sales.
On the web, the customer base is about as well heeled or skews slightly lower, says Barnes. But in a major departure from the TV shopper base, it splits along gender lines almost 50/50. The network is using the web to reach customers accustomed to shopping remotely but either not inclined or too busy to shop TV; among them, male shoppers. The network is reaching out to male shoppers by increasing network-type show blocking. That clusters programming geared toward audience segments likely to be viewing or on the web at different times. The Bass Pro Shop hour, for example, is preceded and followed by other male-oriented programming to hold that audience longer.
Not only does that increase the likelihood of conversion, which already averages about 10%, according to Hanson, but it boosts brand awareness for the retailers. And that, in turn, can translate into shoppers. “Say you were on ShopNBC and saw the Bass Pro Shop hour. You didn’t see quite what you wanted on offer, but we did intrigue and entertain you. So you click through to the Bass Pro site, a site you may not even have been aware of before,” Hanson says.
Serving the slowpokes
ShopNBC isn’t the only shopping network to stream live TV on its site, but it’s the first to simulcast 24/7, and the only one operating under the umbrella of a major television power. Even so, the video feed as it appears on the web site looks a bit jerky on the dialup modems that still connect the ShopNBC web site with 80% of its audience. Hanson says that instead of fighting it, for now, he’s working with it. “Everyone knows that if you’re on a dialup modem, the picture is going to look jerky, so we don’t hide it,” he says. In fact, ShopNBC.com actually reduced the usual number of frames per second in streaming TV content on the site so as to deliver an image in which product detail is more clearly discernible to the eye. “It’s almost like changing stills,” Hanson says.
With stills alongside featured products and even on-demand one-minute videos on some products to supply further information, the video simulcast doesn’t actually have to carry the ball on presenting the product to the web viewer, but the simulcast is important as a point of differentiation and a branding element, says Baldwin. “There’s an advantage in that continuity,” she says. “Consumers are increasingly used to sampling retailers in multiple venues. The last thing you want to do is create a disconnect between what they see on TV and what they see online.”
ShopNBC faces the challenge of a makeover as it seeks to distance itself from a lowbrow image that’s the legacy of the industry’s early days. And there are the usual roadblocks that accompany the response to a new business model: ShopNBC’s opportunity for retailers spans the direct marketing, advertising, Internet and public relations departments of prospective partners, without fitting neatly into the budget of any single department.
ShopNBC’s plans are ambitious: to leverage the solid gold equity of the bigger TV network in a commercial environment, in a way that benefits all parties without backfiring on its media giant partner. “NBC has demonstrated its willingness to experiment,” Baldwin says. “They’ve played with a number of online initiatives over the past year. They’re willing to take the risk and see what happens.”