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television operator or a significant number of smaller pay television operators for a prolonged period of time could adversely affect our business,
financial condition and results of operations. While we believe that we will be able to continue to successfully manage the distribution process in
the future, certain changes in distribution levels, as well as increases in commission rates and/or other fees payable for carriage, could occur
notwithstanding these efforts.
We typically seek to enter into long-term distribution and affiliation agreements with these major pay television operators; however, in
some cases, renewals are not agreed upon prior to the expiration of a given agreement and the HSN television networks continue to be carried by
the relevant pay television operator without an effective agreement in place. We currently provide service to approximately 35.1% of our total
subscribers pursuant to month-to-
month contracts or contracts that have expired. In addition, another 21.3% of our subscribers are represented by
contracts that expire within one year. Renewal and negotiation processes with pay television operators are typically lengthy. No assurance can be
given that we will be successful in negotiating renewals with all these operators or that the financial and other terms of renewal will be on
acceptable terms. The failure to successfully renew or negotiate new distribution and affiliation agreements covering a material portion of these
existing cable and satellite households on acceptable terms could adversely affect our growth, sales revenue and earnings.
We depend on relationships with vendors, manufacturers and other third parties; any adverse changes in these relationships could
result in a failure to meet customer expectations which could result in lost sales.
We purchase merchandise from a wide variety of third party vendors, manufacturers and other sources pursuant to short- and long-term
contracts and purchase orders. Our ability to identify and establish relationships with these parties, as well as access quality merchandise in a
timely and efficient manner on acceptable terms and at acceptable costs, can be challenging. In particular, we purchase a significant amount of
merchandise from vendors and manufacturers abroad and have experienced (and expect to continue to experience) increased costs for goods
sourced in these markets. We depend on the ability of vendors and manufacturers in the U.S. and abroad to produce and deliver goods that meet
applicable quality standards, which is impacted by a number of factors not within the control of these parties, such as political or financial
instability, trade restrictions, tariffs, currency exchange rates and transport capacity and costs, among others. In particular, Cornerstone is
dependent, in significant part, upon independent, third party manufacturers to produce private label merchandise.
Our failure to identify new vendors and manufacturers, maintain relationships with a significant number of existing vendors and
manufacturers and/or access quality merchandise in a timely and efficient manner could cause us to miss customer delivery dates or delay
scheduled promotions, which would result in the failure to meet customer expectations and could cause customers to cancel orders or cause us to
be unable to source merchandise in sufficient quantities, which could result in lost sales.
The unanticipated loss of certain larger vendors could negatively impact our sales and profitability on a short term basis.
It is possible that one or more of our larger vendors could experience financial difficulties, including bankruptcy, or otherwise could elect
to cease doing business with us. While we have periodically experienced the loss of a major vendor, if a number of our current larger vendors
ceased doing business with us, this could materially and adversely impact our sales and profitability on a short term basis.
The failure to secure suitable channel placement for the HSN television network programming would adversely affect our ability to
attract and retain television viewers and could result in a decrease in revenue.
We are dependent upon the continued ability of HSN to compete for television viewers. Effectively competing for television viewers is
dependent, in substantial part, on the ability of HSN to secure suitable placement of the HSN television networks within a suitable programming
tier at a low channel position. The
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