Home Shopping Network 2012 Annual Report Download - page 7

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Table of Contents
HSN
Overview
HSN includes the HSN television networks; its related website, HSN.com; its mobile applications and a limited number of outlet stores.
The HSN television network broadcasts live, customer interactive home shopping programming 24 hours a day, seven days a week. HSN2,
which debuted in August 2010, is a network that primarily distributes taped programming on a limited distribution basis. HSN’s programming is
intended to promote sales and customer loyalty through a combination of product quality, value and selection, coupled with product information,
entertainment and interactive experiences. Programming is divided into separately televised segments, most of which has a host who presents
and conveys information regarding featured products, sometimes with the assistance of a representative from the product vendor or someone that
we retain to aid in the sale of the products. HSN also produces entertainment such as live concerts to entertain and engage with our customers as
well as promote certain products. HSN.com is a business-to-
consumer digital commerce site that sells all of the merchandise offered on the HSN
television networks, together with complementary products and select merchandise sold exclusively on HSN.com. HSN provides seamless
experiences across all digital platforms and optimizes each unique platform by delivering exclusive content both at HSN.com and on mobile
devices and tablets, including the iPad and Android. The HSN strategy is to create immersive experiences, offer differentiated products and
leverage technology to build relationships with its customers across all of its platforms.
Reach
HSN produces live programming for the HSN television network from its studios in St. Petersburg, Florida, and distributes this
programming by means of satellite uplink facilities, which it owns and operates, to two transponders (one for the high definition feed and the
other for the standard definition feed) on the same satellite. The satellite transponders are leased on a full-time basis; one satellite transponder is
leased through July 2013 and the other is leased through May 2019. Each satellite transponder lease provides for continued carriage of the HSN
television networks on a replacement transponder and/or replacement satellite, as applicable, in the event of a failure of the transponder and/or
satellite. HSN has also designed business continuity and disaster recovery plans intended to ensure its continued satellite transmission capability
on a temporary basis in the event of inclement weather or a natural or other disaster.
As of December 31, 2012 and 2011, the HSN television networks reached approximately 95.0 million and 95.5 million homes,
respectively, of the approximately 114.2 million and 114.6 million homes, respectively, in the United States with a television set. Television
households reached by the HSN television networks as of December 31, 2012 and 2011 primarily include approximately 64.0 million and 64.8
million households capable of receiving cable and/or broadcast transmissions, respectively, and approximately 31.0 million and 30.8 million
direct broadcast satellite system, or DBS, households, respectively.
Pay Television Distribution
HSN has entered into multi-
year distribution and affiliation agreements with cable television and DBS operators, collectively referred to in
this document as pay television operators, in the United States to carry the HSN television networks, as well as to promote the networks by
carrying related commercials and distributing related marketing materials to their respective subscriber bases. HSN currently has contracts with
many local and national pay television operators to distribute HSN television programming. Some of HSN’s larger pay television operators
include Comcast, DirecTV, Echostar/DISH and Time Warner.
In exchange for this carriage and related promotional and other efforts, HSN generally pays these pay television operators a fee consisting
of a per subscriber fee and some of which also receive commissions based on a percentage of the net merchandise sales to their subscriber bases.
In some cases, pay television operators receive additional compensation in the form of commission guarantees in exchange for their
commitments to deliver a specified number of subscribers, channel placement incentives and advertising insertion time on the HSN television
network.
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