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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
advent of digital compression technologies and the adoption of digital cable has resulted in increased channel
capacity, which together with other changing laws, rules and regulations regarding cable television ownership,
impacts the ability of HSN to secure suitable channel placement. While increased channel capacity could provide
a means through which the HSN television networks could be more widely distributed, it could also adversely
affect our ability to attract television viewers to the television networks and a reduction in our growth rate to the
extent it results in:
• higher channel position placement for the HSN television networks;
• placement of the HSN television networks in digital programming tiers, which generally have lower
levels of television viewer penetration than basic or expanded basic programming tiers;
• more competitors entering the marketplace; or
• more programming options being available to the viewing public in the form of new television
networks and time-shifted viewing (e.g., personal video recorders, video-on-demand, interactive
television and streaming video over broadband internet connections).
If the HSN television networks are carried exclusively in a system on a digital programming tier, HSN will
experience a reduction in revenue to the extent that the digital programming tier has less television viewer
penetration than the basic or expanded basic programming tier. In addition, HSN may experience a further
reduction in revenue due to increased television viewing audience fragmentation and to the extent that not all
television sets within a digital cable home are equipped to receive television programming in a digital format.
Our future success will also depend, in part, on the ability of HSN to anticipate and adapt to technological
changes and to offer elements of the HSN television networks via new technologies in a cost-effective manner
that meet customer demands and evolving industry standards.
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