--- title: "Home Shopping Network (HSN) – Business Model Case Study" url: "https://lumosbusiness.com/analyses/home-shopping-network-hsn-business-model-case-study/" date_published: "2023-08-06T04:26:12" date_modified: "2024-02-11T05:00:44" domain: "Commerce, retail & social selling" format: "analysis" author: "Joel Finningley" source: "https://lumosbusiness.com/home-shopping-network-hsn-business-model-case-study/" thesis: "the business model of the Home Shopping Network was a hybrid eCommerce-Live Shopping model" --- # Home Shopping Network (HSN) – Business Model Case Study **Thesis.** the business model of the Home Shopping Network was a hybrid eCommerce-Live Shopping model ## Key claims - The network turned a profit in 3 months and was national by 1985, at which point the name was officially changed to Home Shopping Network (HSN). - QVC ended up becoming the dominant player in the category that HSN created. - While growth remained strong in the 2000s for HSN, QVC had double the sales (market share) and 3X the profits (margins). - QVC bought HSN (via Liberty Media) for $2.1 Billion in stock. - digital sales accounted for 55% of HSN’s revenue and 46% for QVC --- With the advent of [social commerce](https://lumosbusiness.com/social-commerce-next-ecommerce/ "Is Social Commerce the next eCommerce?") – coupled with an explosion of ‘[live commerce](https://lumosbusiness.com/social-commerce-business-model-canvas/ "Social Commerce Business Model Canvas")‘ platforms – it seems apt to do a quick Business Model Case Study about the Home Shopping Network (HSN), the pioneer in live shopping during the Cable TV era. - [Home Shopping Network (HSN) Case Study](#aioseo-how-home-shopping-network-hsn-started) - [How Home Shopping Network (HSN) Scaled](#aioseo-how-home-shopping-network-hsn-scaled) - [HSN Goes Public](#aioseo-hsn-goes-public) - [Home Shopping Network (HSN) Business Model](#aioseo-home-shopping-network-hsn-business-model) - [Home Shopping Network (HSN) Competition](#aioseo-home-shopping-network-hsn-competition) - [Home Shopping Network (HSN) in the eCommerce Era](#aioseo-home-shopping-network-hsn-in-the-ecommerce-era) - [More Live Shopping Posts](#aioseo-more-live-shopping-posts) ![Home Shopping Network - entrepreneur story](/assets/2023/08/HSN_CanOpenersStory-1024x341.webp) # Home Shopping Network (HSN) Case Study The idea [originated in the 70s](https://www.referenceforbusiness.com/history2/90/Home-Shopping-Network-Inc.html "originated in the 70s") when the owner of an AM radio station in Florida was losing listeners to FM competitors. He experimented with a [new model](https://lumosbusiness.com/business-model-toolkit/ "Business Model Toolkit") where instead of listening to music, he started selling merchandise over the air in a show called The Bargaineers. Actually, the story is even more bizarre than that in some ways. It all started due to a dispute over an advertising bill with a local business. > The year was 1977, and I was working at one of my first jobs in radio, a talk show host at a small Clearwater AM station. One day, station owner Bud Paxton went to collect an advertising bill from an appliance company the station had been promoting for 13 weeks. **The store owner didn’t want to pay**, however, saying the commercials had done little if anything to boost his business. **Instead of money, he gave Paxton a case of 112 avocado-green can openers, take it or leave it.** He reluctantly accepted the deal and brought them back to the station. > > [Tampa Bay Tribune](https://www.tampabay.com/business/tvs-billion-dollar-man-started-by-opening-up-a-can-of-sales-success-20181120/ "Tampa Bay Tribune") The ‘ugly green can openers’ were sold in one day by Bob Circosta, the network’s first host and a legend in world of both sales and live shopping. **The Bargaineers** became the **International Suncoast Bargainers Club**, which then became the **Home Shopping Club (HSC)**, which would eventually become HSN. Revenue boomed so much on radio that the [idea was hatched](https://lumosbusiness.com/customer-validation/ "Customer Validation") to take it to television. The first episodes aired on live TV in 1982 after an injection of capital by lawyer and real-estate investor Ray Speer. Speer invested $500,000 for a 60 percent stake and set out to make sure that viewers would not be disappointed before he gave the go-ahead in July 1982. [Reference For Business](https://www.referenceforbusiness.com/history2/90/Home-Shopping-Network-Inc.html "Reference For Business") The network turned a profit in 3 months and was national by 1985, at which point the name was officially changed to Home Shopping Network (HSN). This was proving to be a very [profitable ‘niche.](https://lumosbusiness.com/dominate-a-niche/ "Dominate A Niche")‘ ## How Home Shopping Network (HSN) Scaled What turned out to be a very successful concept – live 24/7 shopping on cable TV in the mid ’80s – was given rocket fuel between 1985 when it went national and [when it IPO’d](https://lumosbusiness.com/finance-spac-direct-listing-ipo/ "Finance – SPAC, Direct Listing, IPO") in 1986. Speer – who would eventually become HSN’s Chairman – created a computer system to respond immediately to customer’s needs, bought several phone lines, and hired customer service agents like crazy. **The goal was to create a great customer experience and a [loyal customer base](https://lumosbusiness.com/business-model-analytics-retention-customers/ "Business Model Analytics – Retention"), which they did.** The number of employees scaled from 300 to 1,200, very typical once a company has gone through Phases 1 – 3 in the Customer Development process and goes through Company Building phase. [![](/assets/2023/05/CustomerDev_Framework-1024x410.webp)](https://lumosbusiness.com/customer-development-framework-bm-validation/) ### HSN Goes Public **By 1986 they were ready for public markets,** with Merrill Lynch underwriting their IPO at $18 per share. The stock exploded on its first day of trading and went up 800% from its IPO price by early 1987. > The stock more than doubled — from $18 a share to $42 — on the first day it was traded in 1986, and jumped 77 percent in one three-day period last month before taking a spectacular $20-a-share plunge. **Even after the fall, however, original investors can still count a profit exceeding 800 percent.** The stock has split twice — 3-for-1 and then 2-for-1 — so an original $18 share now is six shares worth $28.25 each at Friday’s close, a total of $169.50. > > [Washington Post](https://www.washingtonpost.com/archive/business/1987/02/22/home-shopping-network-stock-up-800-in-year/4a6748ca-356b-4a01-9106-ffb3a1bf58f1/ "Washington Post") (1987) Even at those lofty prices, many analysts were still bullish on the stock as they were on pace to be doing a $billion dollar in sales in the not-too-distant future. **The company was growing at rates not seen in public markets previously.** > “To grow to $1 billion in sales in less than two years — no company in the history of the world has ever done that,” said Paul Kagan, head of Kagan Associates, a media analyst and money management firm. > > [Washington Post](https://www.washingtonpost.com/archive/business/1987/02/22/home-shopping-network-stock-up-800-in-year/4a6748ca-356b-4a01-9106-ffb3a1bf58f1/ "Washington Post") (1987) **Their strategy at this time was to acquire local cable networks** and control the distribution. There were limits imposed by the FCC (12 local stations), a rule that the company circumvented through LPs (Limited Partnerships). In that era they also [bought a bank](https://lumosbusiness.com/business-model-canvas-banking/ "Business Model Canvas – Banking"), the bankrupt Baltimore Federal Financial Savings and Loan, for $40 million. The company was becoming a juggernaut and was adding financial services to their product mix. > HSN now reaches 35 million households through its affiliated cable systems and nine UHF TV stations. It sells merchandise such as jewelry and collectibles to viewers who place orders by telephone. > > [Orlando Sentinel (1987)](https://www.orlandosentinel.com/1987/01/23/hsn-plans-finance-venture-shop-by-tv-company-says-it-will-buy-maryland-s/ "Orlando Sentinel (1987)") **The company was in 35 million households across the US**, and with a juiced-up stock price they were scaling like crazy. To top it off, they launched their own custom broadcasting space late in 1987 to expand their reach and preserve their market share against emerging competition. > By September the company had started using the UHF television stations it had been acquiring, and the network began broadcasting from its new 180,000 square-foot telecommunications facility, hoping to beat down its competitors with better reception. > > [Reference For Business](https://www.referenceforbusiness.com/history2/90/Home-Shopping-Network-Inc.html "Reference For Business ") ## Home Shopping Network (HSN) [Business Model](https://lumosbusiness.com/retail-business-model-outlook/ "Retail Business Model – 2023 Outlook") While the company was driving up towards a $Billion in sales, there were still some experiments happening with their business model. For all intensive purposes, they were running a [retail business model](https://lumosbusiness.com/retail-business-model-outlook/ "Retail Business Model – 2023 Outlook") without the storefront. There were two important distinctions within that business model classification: - some of their products were sold on effectively [a consignment basis](https://www.allbusiness.com/do-your-homework-before-selling-your-product-on-home-shopping-channels-15529815-1.html "a consignment basis") on behalf of 3rd parties where HSN would take a cut of the sale - the majority of their product mix was branded HSN merchandise where they effectively took a margin on each sale just like a retailer would > While some of the merchandise sold over Home Shopping came from closeouts, overstocks, or overruns, the company’s purchasing clout was evident in the fact that **at least 60 percent of the company’s sales in 1987 consisted of products made specifically for Home Shopping and sold to them for rock-bottom prices.** > > [Reference For Business](https://www.referenceforbusiness.com/history2/90/Home-Shopping-Network-Inc.html "Reference For Business ") There were some seeds of an early [eCommerce model](https://lumosbusiness.com/business-model-canvas-ecommerce-dtc/ "Business Model Canvas – eCommerce DTC"), with customers placing orders over the phone via credit card or cheque, and then receiving them in the mail. Shipment was guaranteed within 48 hours after an order was paid for. They also had a ‘money back guarantee’ if customers were not satisfied. HSN could move significant volume in segments that typically lasted between 5 – 15 mins, sometimes thousands of units. Their growth rates were so astronomical that there were many questions about whether or not growth was sustainable in the late ’80s. **Nonetheless, they [surpassed $1 Billion](https://www.referenceforbusiness.com/history2/90/Home-Shopping-Network-Inc.html "surpassed $1 Billion") in annual sales in 1990.** ## Home Shopping Network (HSN) Competition Inevitably, once a company reaches this level, they attract so much attention and competition that they typically begin to peak in terms of both growth rates and market sentiments. [Rule of 3s](https://lumosbusiness.com/strategy-big-ideas-win/ "Rule of Threes – Big Ideas Win") states that the top 3 companies in terms of market share will earn approximately 70 – 90% of the revenue share in a given vertical: - **Company 1** will earn something like **40 – 50% of the market share** - **Company 2** will earn something like **20 – 25% of the market share** - **Company 3** will earn something like **10 – 12.5% of the market share** The moves by HSN listed above – local cable network M&A, building its own space, etc – allowed HSN to preserve its market share and stay well ahead of the competition, **with the exception of one company – QVC.** In 1993, Liberty Media Corporation [increased its stake](https://variety.com/1993/biz/news/liberty-is-taken-with-hsn-stock-107110/ "increased its stake") in the company to 41.5% at a time when HSN was having legal problems due to civil matters. Liberty Media also owned 23% of rival QVC. In 1993, rival QVC proposed a merger between the two firms: > In a stock swap worth an estimated $ 1.3 billion, QVC Network Inc. would consolidate its hold on the $2.5 billion home shopping industry and possibly set the stage for a fifth broadcasting network. > > [Variety – 1993](https://variety.com/1993/tv/news/qvc-seeks-hsn-merger-108659/ "Variety - 1993") At this time, the home shopping industry was **estimated to be worth $2.5 Billion** and HSN + QVC were the two dominant players. > But it’s their tremendous reach that will have the cable industry watching. QVC is viewed in 44 million homes, while HSN is seen in 28 million. > > [Variety – 1993](https://variety.com/1993/tv/news/qvc-seeks-hsn-merger-108659/ "Variety - 1993") **The deal, however, never came to pass.** Thus, in the face of stiff competition, lawsuits, and market headwinds, HSN continued on its growth path and [business model evolution](https://lumosbusiness.com/business-model-toolkit/ "Business Model Toolkit"). They expanded internationally into markets like Japan in the mid ’90s. They grew their domestic subscriber base through a deal with the cable networks. While their competitors started airing Ads during [live shopping](https://lumosbusiness.com/ugc-videos-live-shopping/ "UGC Videos + Live Shopping") segments, creating a new revenue stream, HSN opted for “infomercials.” **In the mid ’90s, however, the company was losing money.** In response, they [transformed](https://lumosbusiness.com/strategy-change-management/ "Strategy – Change Management") a lot of their key strategy tactics and replaced their Chairman with Barry Diller from QVC. As a result, the company’s shares once again [changed hand](https://money.cnn.com/1996/08/26/deals/silver_hsn/ "changed hand")s from Liberty Media to Silver King Communications and the company began to show signs of profitability. They began acquiring companies like [Ticketmaster](https://www.referenceforbusiness.com/history2/90/Home-Shopping-Network-Inc.html "Ticketmaster") that they saw as “distribution assets.” Various other M&A transactions occurred in the late ’90s as the company sought to revamp its global growth path. > While not quite catching up with QVC, Home Shopping Network in the late 1990s was a solid money maker. *Broadcasting & Cable* (April 3, 2000) reported that over 1999, **HSN made on average $2,500 per minute, 24 hours a day, seven days a week**. The network improved the quality of its offerings, and by 2000 **the largest percentage of its sales was in electronics exclusively made for HSN.** > > [Encyclopedia.com](https://www.encyclopedia.com/books/politics-and-business-magazines/hsn "Encyclopedia.com") We can see that by the late ’90s, the company was very much back to its roots and printing money through sale of exclusively-made goods such as electronics. **Yet QVC ended up becoming the dominant player in the category that HSN created.** Interestingly, the new “conglomerate” created by Barry Diller was ‘confusing’ to investors, having acquired Ticketmaster, Expedia, Hotels.com, etc. in the prelude to the Dot Com crash in 2000. Remarkably, the old-fashioned Home Shopping Network was the asset that was driving the majority of revenues, leading to the parent company looking to offload the asset. While growth remained strong in the 2000s for HSN, **QVC had double the sales (market share) and 3X the profits (margins).** > McInerney questioned why QVC consistently did better than HSN and ultimately told *Fortune* in the article cited above that the rival had “better execution,” meaning QVC simply sold better goods and offered better service. By 2003, HSN had half the sales and a third of the profits of QVC > > [Encyclopedia.com](https://www.encyclopedia.com/books/politics-and-business-magazines/hsn "Encyclopedia.com") Yet HSN itself set a single-day sales record of $30 Million in December 2003. The company continued to innovate through exclusive product offering, and focused on improving both customer service and fulfillment through partnerships. ## Home Shopping Network (HSN) in the [eCommerce](https://lumosbusiness.com/business-model-canvas-ecommerce-dtc/ "Business Model Canvas – eCommerce DTC") Era As the eCommerce era started to gain steam in the 2010s, what happened to companies like HSN and QVC? The entities, individually, were struggling due to the onslaught in the industry created by Amazon. As a result, In July 2017, **QVC bought HSN (via Liberty Media) for $2.1 Billion in stock.** > Today, everyone’s business model is under threat, and retailers want to go to the battle with as strong an army as possible. > > [JCKOnline](https://www.jckonline.com/editorial-article/qvc-hsn-team-up-to-save-their-business-model/ "JCKOnline") – 2017 At that moment in history, digital sales accounted for 55% of HSN’s revenue and 46% for QVC. **The combined entity represented the 3rd largest eCommerce revenues** behind only Amazon and Walmart in 2017. Thus the [business model](https://lumosbusiness.com/business-model-toolkit/ "Business Model Toolkit") of the Home Shopping Network was a hybrid eCommerce-Live Shopping model. The problem for these entities was that Cable TV was in decline and the majority of their customers were over 50. Thus the new entity was forced to start innovating in order to survive. In many ways, these companies were [like the Avon](https://lumosbusiness.com/avon-business-model-social-selling/ "Avon Business Model + Social Selling") of the shopping world, outdated, yet still relevant. And yet, the pandemic years reignited growth in so many categories, including [live shopping](https://lumosbusiness.com/social-commerce-business-model-canvas/ "Social Commerce Business Model Canvas"). > QVC and its sister channel HSN, which now reach into 380 million homes worldwide and **continue to find a massive audience** for its hokey sales pitches that push everything from mattresses and mops to cooking supplies and jewelry. > > [Forbes](https://www.forbes.com/sites/laurendebter/2021/03/29/where-qvc-is-still-way-ahead-of-amazon/?sh=740f33093819 "Forbes") – 2021 Hokey or not, the business + brand continued to shine even into the 2020s. > Last year, the two channels—plus a handful of smaller clothing and home décor brands—delivered revenue of $14.2 billion for publicly-traded Qurate Retail. QVC has been around for 35 years but has suddenly become the company to beat in the industry’s new fervor for live shopping > > [Forbes](https://www.forbes.com/sites/laurendebter/2021/03/29/where-qvc-is-still-way-ahead-of-amazon/?sh=740f33093819 "Forbes") – 2021 From there, however, it has been a massive decline. The [next-gen video networks](https://lumosbusiness.com/video-ads-business-model-vision/ "Video Ads Business Model") have caught them. Amazon is as dominant as ever. The retail business model has been hammered. And now, a new host of [live-shopping platforms](https://lumosbusiness.com/social-commerce-business-model-canvas/ "Social Commerce Business Model Canvas") are hitting the market. **The company has been [delisted](https://fortune.com/2023/06/05/david-rawlinson-qurate-retail-ceo-interview-fortune-500-qvc-hsn-streaming-video-commerce/ "delisted ") from the Nasdaq in May 2023 for trading below $1 per share.** But the game isn’t over. Social Commerce is expected to go into hypergrowth mode globally in the next 5 – 7 years. [![](/assets/2023/06/social_commerce_growth.webp)](https://lumosbusiness.com/social-commerce-next-ecommerce/) Source: Statista And Qurate Retail (HSN, QVC, other brands) still wants to get a piece of the action. > Qurate might seem like a relic from the peak of cable TV, but it arguably has been doing a version of live shopping for decades, and has all the right core competencies: state-of-the-art production studios, minute-by-minute sales data, and plenty of camera-ready talent. > > [Fortune](https://fortune.com/2023/06/05/david-rawlinson-qurate-retail-ceo-interview-fortune-500-qvc-hsn-streaming-video-commerce/ "Fortune ") – 2023 The company still has a large, loyal customer base: > At the moment, 89% of the shipped sales from QVC U.S. and HSN, Qurate’s largest division, come from just 54% of their customers, **who on average purchase 29 items a year totaling about $1,500, according to Qurate**. That’s a level of customer loyalty many retail businesses would envy, but it belongs to a segment of the population that is getting smaller, not larger. > > [Fortune](https://fortune.com/2023/06/05/david-rawlinson-qurate-retail-ceo-interview-fortune-500-qvc-hsn-streaming-video-commerce/) – 2023 The demographic shift is what stands in the way of a Home Shopping Network comeback, the question going forward is can they build on past successes to reinvent themselves for the future? [![What is social commerce?](/assets/2023/08/SocialCommerceDefinition-1024x341.webp)](https://lumosbusiness.com/introduction-to-social-commerce/) ## More Live Shopping Posts [Is Social Commerce the Next eCommerce?](https://lumosbusiness.com/social-commerce-next-ecommerce/ "Is Social Commerce the next eCommerce?") [Retail Business Model Outlook](https://lumosbusiness.com/retail-business-model-outlook/ "Retail Business Model – 2023 Outlook") [Social Commerce Business Model Canvas](https://lumosbusiness.com/social-commerce-business-model-canvas/ "Social Commerce Business Model Canvas") [**Live Shopping + UGC Video**](https://lumosbusiness.com/ugc-videos-live-shopping/ "UGC Videos + Live Shopping")