Because vendors find themselves making less of a profit than they'd like, networks are rethinking the financial formula by which home shopping channels operate. Alternatives to the most common setup -- where the network serves as retailer by buying, marking up and reselling products -- are already evident, with the goal of bigger profits for the network as well as the vendor.
The latest was revealed last week, when Home Shopping Network announced it will launch Television Shopping Mall, which will sell air time and support services to retailers and catalogers, rather than taking a cut of sales.
Catalog 1, a joint venture between Spiegel Inc. and Time Warner, is taking a similar approach. Essentially a video mall, Catalog 1 allows participating catalogers such as Neiman Marcus and Eddie Bauer to use their own fulfillment and order-taking systems to cut costs.
RSTV, the Knoxville, Tenn.-based home shopping network, however, is perhaps the most experimental of all -- possibly because it is still relatively small. RSTV began last August by selling air time to catalogers such as Hanover, Lenox Collectibles and Royal Silk, who are responsible for their own fulfillment.
Now, RSTV is getting into the manufacturing and production business. Keith Halford, RSTV's chief executive, said the company is planning to develop apparel lines and marketing concepts for celebrities. The first, as reported, involves a large-size clothing collection from Roseanne Arnold.
RSTV has more concepts on the way, including a jewelry and accessories show and a line of hair care products. It is also opening a TV studio in New York to facilitate involvement by SA. The programs produced in New York will be uplinked to ViaTV, one of RSTV's stations in Knoxville, via satellite and fiber optic lines.
"SA is the source of most of the product so far, so we will take the mountain to Muhammad instead of waiting for Muhammad to come to the mountain," said Halford.
Halford declined to discuss volume, saying, "We're in a quiet period. We're in consideration of being reviewed by the Securities and Exchange Commission for an initial public offering." However, according to sources, RSTV is expected to do $100 million in the first 15 months. Stanley Warner, the president of 77 World Design, which licenses Ted Lapidus, Adrienne Papel and Adolfo for men, is working with RSTV through a new company he created called CelebSales, which licenses the Roseanne and Tom Arnold names. Warner is also acting as the conduit for RSTV's other New York programming.The half-hour programs that Warner and Halford develop will air on ViaTV, and other cable networks. In addition, Halford is at this week's National Association of Television Programming Executives convention, trying to sell the concept to syndication.
Another step in RSTV's marketing approach is the development of a catalog for the Roseanne Arnold products and other programs, Halford said. The catalog will be used as a package insert and in two-minute commercials that will air on broadcast and cable networks.
"What we were initially developing as a single line of products with a single celebrity has developed into a business of celebrity-endorsed products," Halford said. "We are talking to other celebrities. We're trying to marry the right celebrity with the right product.
"We are approaching this business somewhat differently," Halford explained. "We are bringing together manufacturers and celebrity endorsees. It makes for more cost-effective business plans. There are less people sharing the pie because we are cutting out the middleman. In this case, the network and the manufacturer are dealing together to do more cost effective TV and celebrity endorsement work."
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