ACT 2 FOR Q2: WILL IT SURVIVE?

Byline: Sharon Edelson

NEW YORK--Now that QVC is merging two of its home shopping services, Q2 and On-Q, the question is, what will the finished product be like and how good are its chances of survival?
Q2, the upscale lifestyle service conceived by QVC chairman Barry Diller, failed in the volume department. One industry analyst said Q2 did under $10 per home, well below the industry average. On-Q, however, was said to be marginally successful.
Now, with Diller moving on--he will leave QVC when the company is sold to Comcast Corp. and Liberty Media--Q2 will lose its creator and biggest advocate.
While QVC holds up the merger as a vote of confidence in Q2, analysts still wonder whether Diller's concept of raising TV home shopping from its tacky origins is feasible.
"The problem was that Q2 forced the viewer to adapt to the service's schedule, rather than the service adapting to the viewer as an interactive one would," said R. Fulton Macdonald, president of International Business Development. "That pretty much guaranteed its failure in the beginning."
But Q2 executives said the new service will be strong enough to survive the treacherous cable waters so it can acquire additional cable homes.
In the wake of the merger, some 20 Q2 staffers, including Harlan Bratcher, senior vice president of merchandising; Cynthia Basciani, general merchandise manager, and Patrick Gates, divisional merchandise manager, were laid-off. Candice Carpenter, Q2's president, also left the company.
Douglas Briggs, president of QVC Inc., said the decision was a financial one that could save the company $10 million. With Q2 headquartered in New York and On-Q based in West Chester, Pa., there were inefficiencies and duplications, he said.
The new service--called Q2--will occupy the original Q2 offices and studios in Long Island City, N.Y. Executives said the new Q2 will retain elements of both On-Q, the youth-oriented fashion service, and the original Q2.
It will air seven days a week, gaining more exposure. The previously fragmented lineup had Q2 and On-Q sharing a channel, with On-Q running Monday through Wednesday and Q2 airing Friday through Sunday.
Executives acknowledged that this scheduling arrangement was confusing.
"There was a lot of confusion about what Q2 was and who it was for," said Mark Bozek, senior vice president of programming for Q2. "Having Q2's format be seven days a week will help us. People will be able to find us. You'll know it's Q2 and not a variety of different services and messages. Now we have a very clear shot."
"We originally envisioned having three, four or five different services by now," Briggs said. "We stopped the development when it looked like [cable] channel capacity was going to be this tight. It made sense to go with our best idea, which is Q2, and consolidate with one service and reduce our costs."
Bozek will run the new Q2 with Caryn Lerner, who was named senior vice president of Q2 merchandising. She was vice president of On-Q. They report to Briggs.
Q2, with its ambitious programming centered around seven product categories, was hosted by experts in each field. It struggled to find an audience and sales.
"Sales have been somewhat below the original plan," Briggs acknowledged. "Who could say what it was going to do? We saw enough potential to support the concept."
Bozek was short on details on Thursday.
"Our goal is to create a unique service so that when you're channel surfing you'll stop," Bozek said. "We want to create a fun, exciting environment. I'm not talking about something that will be sophisticated or necessarily upscale."
"The vendors will be pretty much the same and hopefully we'll get more," Bozek said. "Q2 has been on the air since August and there continue to be a number of deals in development."
Bozek said Q2's seven product categories seem to have worked and will carry over to the new Q2. On-Q's mixture of fashion reportage and selling will be used. He also said a Q2 music program, Q2 Tunes, was successful and might be revived for the new Q2.
Bozek said consolidations led to the lay-offs. "When two parts of an organization are merged together some really hard decisions have to be made going forward," Bozek said. "Sometimes those decisions are purely economical, and include having to lay off people. Their contribution to Q2 has been nothing but exemplary."
Carpenter, who was reached at home, said, "I think QVC's management was smart enough to get into the new market early. I think it will be a big advantage. The companies, cable operators and vendors that have the patience to stay with it could have a very big payback."
Carpenter would not divulge her plans.
Analysts said Q2 was hampered by the lack of advertising and marketing support it received from QVC. Viewers were basically left to find it by chance.
Bozek said there won't be any major advertising or marketing efforts until "we create a service and it works." He added, "Then, certainly QVC would want to market it in a very aggressive manner. But not until we reach that point."

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