By  on July 5, 1994

NEW YORK -- The future of Q2 and On-Q, the new channels at QVC that are still being developed, could be jeopardized by the home shopping giant's proposed merger with CBS.

Industry experts agreed that QVC's core business -- the QVC shopping channel -- will continue selling its mainstream fare around the clock with little disruption, if the deal with CBS becomes a reality.

But On-Q and Q2 -- QVC's much hyped concepts designed to upgrade the home shopping format with lifestyle elements and higher priced merchandise -- will likely become less of a priority for QVC chairman Barry Diller. Diller has been actively involved in the development of both projects.

"Nothing will happen to QVC," said James M. Meyer, a securities analyst with Janney, Montgomery, Scott in Philadelphia. "It is a billion-plus, very profitable home shopping channel and no one has any interest in throwing that away. Nothing is going to negatively impact its leadership position. What happens to On-Q and Q2? Who knows? At this point it's a very raw product that has fairly limited appeal."

"The merger raises the question of whether Diller will focus all his energies on CBS and slow down on home shopping or take his eye off the ball," said Steven Kernkraut, a managing director of Bear Stearns. "If he does slow his energies it helps the home shopping networks of the world, such as Fingerhut and Catalog 1."

"[Diller's] not going to be able to spend the time on QVC," said one industry observer. "The basic QVC business is not an issue. I think Q2 is going to have to be reevaluated anyway. It's going to be tough to make it work with a limited number of products and production values three to five times that of QVC."

At a time when diminished cable capacity has been a stumbling block to channels trying to increase their distribution -- QVC, Home Shopping Network and ValueVision all recently paid cable systems operators for subscribers -- a CBS-QVC merger, valued at $7.2 billion, could potentially give QVC access to CBS's 94 million homes.

"We really don't know what the ramifications of the merger are going to be," said Gordon Cooke, president of Time Warner Interactive Merchandising. Time Warner is a partner with Spiegel in Catalog 1, a home shopping channel.

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