Q2: AN ENDANGERED SPECIES

Byline: Sharon Edelson

NEW YORK--When QVC chairman Barry Diller announced his plans for an upscale lifestyle concept called Q2 last year, he promised that it would revolutionize television home shopping.
Now Q2 is in danger of being canceled.
Industry experts said Diller's anticipated departure--he will leave the network when its proposed sale to Comcast Corp. and Liberty Media is completed--has created uncertainty over the project because he was its biggest booster. Diller might have tolerated slow sales and nurtured Q2 along, but QVC's buyers might not be as patient.
While rumors began circulating in August--when QVC's board accepted the $46-a-share offer from Comcast and Liberty--they intensified this week.
On Monday, Q2's management reportedly told employees that they would receive word on whether the service would be shut down or merged with On-Q, a youth-oriented fashion service based in West Chester, Pa. But as of Thursday, Q2 employees in Long Island City had received no word.
"[Q2] is not in jeopardy of shutting down," a QVC spokeswoman said Thursday. "There is absolutely no truth to that."
"There are a lot of rumors," said Candice Carpenter, president of Q2. "A lot of different options are being considered with relation to Q2 and On-Q. I know it's always possible for any new owner to pull the plug or change direction or invest more heavily."
On Monday, Karyn Lerner, vice president of On-Q, said she knew nothing about merging the two services.
A Comcast spokeswoman said Thursday that the company in not involved in QVC operations. Comcast is still in regulatory discussions with the FTC. The tender offer is scheduled to expire on Oct. 21.
"At this point, QVC is really doing the evaluation," Carpenter said. "They are taking a look at all these investments. As a result of the acquisition you just stop and take a look at everything. Everything but the core business is up for grabs."
Q2 had a soft launch last summer with distribution in eight million homes. Q2 was to climb to 16 million homes by the end of the year, but distribution so far has not expanded.
Q2's startup costs were estimated by industry analysts to be $25 million for the current fiscal year. It's structure may not be very cost-efficient. For example, Q2 uses four camera people for a studio shoot, while QVC uses only one.
One industry analyst said that Q2 does below $10 per home.
Carpenter declined to discuss specific numbers, but said sales have doubled in the last five weeks.
"Multiplying the numbers by 10 wouldn't be good," said an analyst. "These numbers were hellacious."
But without advertising, Q2 may not have been given a fair chance. "This has affected some things," Carpenter said, referring to the acquisition. "We have slowed down things like marketing and promotion--any kind of major investment. We've been operating on a shoestring. With this whole concept of bringing in a new audience, you have to market."
One Q2 staffer said Carpenter was prone to giving pep talks to the staff, but hasn't lately. "A while ago she said, 'If you pull out of this now you're a wuss,"' he said. "Everybody is sending out résumés now."
"Anything you heard is a possibility at this point," Carpenter said. "But absolutely nothing has been decided."

To Read the Full Article
SUBSCRIBE NOW

Tap into our Global Network

Of Industry Leaders and Designers

load comments
blog comments powered by Disqus