Home Shopping Network 2013 Annual Report Download - page 12

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have expired. In addition, another 16% 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 the existing
cable and satellite households on acceptable terms could adversely affect our growth, sales revenue and earnings.
Our revenues and profit margin are negatively influenced by economic conditions that impact consumer spending.
If macroeconomic conditions do not continue to improve or if conditions worsen, our business could be adversely affected.
Retailers generally are particularly sensitive to adverse economic and business conditions, in particular to the extent
they result in a loss of consumer confidence, rising unemployment, increased taxes and decreases in consumer spending,
particularly discretionary spending. Our customers anticipate and respond to adverse changes in economic conditions. If
macroeconomic conditions do not continue to improve or if conditions worsen, our business could be adversely affected.
The failure to attract and retain television viewers and secure a suitable programming tier of carriage and channel
placement for the HSN television network programming could result in a decrease in revenue.
We are dependent, in part, upon the continued ability of HSN to compete effectively for television viewers. Effectively
competing for television viewers is dependent, in substantial part, on the ability of HSN to secure placement of the HSN
television networks within a suitable programming tier and to effectively compete against others for the leisure and
entertainment time of consumers. The advent of digital compression technologies and the adoption of digital cable has resulted
in increased channel capacity. In addition, there are now more programming options 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 as well as increased access to various media through wireless
devices). These have the potential to reduce the viewing of our content. New technologies have been and will continue to be
developed that increase the number of entertainment choices available and the manners in which they are delivered. Our
failure to effectively anticipate or adapt to emerging technologies or changes in consumer behavior could have an adverse
impact on our competitive position, business and results of operations.
A prolonged or permanent inability to broadcast the HSN television networks would result in lost customers and
lost sales.
Our success is dependent upon the continued ability of HSN to transmit the HSN television networks to broadcast and
pay television operators from its satellite uplink facilities, which transmission is subject to the Federal Communications
Commission (“FCC”) compliance. HSN has entered into two satellite transponder leases to provide 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. Although we believe that every reasonable measure is being taken to ensure continued
satellite transmission capability, termination or interruption of satellite transmissions may occur. Any such disruption could
have a material adverse effect on our competitive position, business and results of operations.
System interruption and the lack of integration and redundancy in our systems and infrastructures may adversely
affect our ability to operate websites, process and fulfill transactions, respond to customer inquiries and generally maintain
cost-efficient operations.
We use the internet, mobile devices, social networking and other online activities to connect with our customers. Our
success depends, in part, on our ability to maintain the integrity of our systems and infrastructures, including websites,
information and related systems, call centers and fulfillment facilities. We may experience occasional system interruptions,
including those caused by system conversions, that make some or all systems or data unavailable or prevent our businesses
from efficiently providing services or fulfilling orders. We also rely on affiliate and third-party computer systems, broadband
and other communications systems and service providers in connection with the provision of services generally, as well as to
facilitate, process and fulfill transactions. Any interruptions, outages or delays in our systems and infrastructures, our
businesses, our affiliates and/or third parties, or deterioration in the performance of these systems and infrastructures, could
impair our ability to provide services, fulfill orders and/or process transactions. Fire, flood, power loss, telecommunications
failure, hurricanes, tornadoes, earthquakes, acts of war or terrorism, acts of God and similar events or disruptions may damage
or interrupt computer, broadband or other communications systems and infrastructures at any time. In addition, we have
observed an increase in the number of cyber attacks that include gaining access to digital systems for purposes of corrupting
data or causing operational disruption. Any of these events could cause system interruption, delays and loss of critical data, and
could prevent us from providing services, fulfilling orders and/or processing transactions which could have an adverse impact
on our competitive position, business and results of operations. While we have backup systems for certain aspects of our
operations, these systems are not fully redundant and disaster recovery planning is not sufficient for all eventualities. In
addition, we may not have adequate insurance coverage to compensate for losses from a major interruption.