Home Shopping Network 2013 Annual Report Download - page 5

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HSNi is committed to providing customers with an evolving variety of quality products at reasonable prices and from
brands that resonate with its customers. Products offered through HSN include jewelry, fashion (apparel & accessories),
beauty & health, and home & other (including household, home design, electronics, culinary and other). Featured products
include proprietary label products and third party-branded products, some of which are produced exclusively for HSN, as well
as merchandise generally available through other retailers. Cornerstone primarily offers home and outdoor furnishings, in
addition to women and children's apparel with the majority produced exclusively for its Cornerstone brands.
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 have hosts who present and convey information
regarding featured products, sometimes with the assistance of a celebrity, industry expert, representative from the product
vendor or someone retained to aid in the sale of the products. HSN also produces entertainment such as live concerts to
entertain and engage with customers and 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 phones and tablets, including the iPad,
iPhone and Android and Windows devices. The HSN strategy is to create immersive experiences, offer differentiated products
and leverage technology to build seamless relationships with its customers across all of its platforms. HSN fosters social
communities as part of the HSN experience to encourage customers to share their product finds, thoughts and reviews with
their friends via Facebook, Twitter, Pinterest and Instagram.
Reach
HSN produces live programming for the HSN television network primarily 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 HSN high definition feed along with HSN2 and the other for the HSN standard definition feed) on the same satellite. The
satellite transponders are leased on a full-time basis; one satellite transponder is leased through January 2015 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, 2013 and 2012, the HSN television networks reached approximately 95.0 million homes of the
approximately 115.6 million and 114.2 million homes, respectively, in the United States with a television set. Television
households reached by the HSN television networks as of December 31, 2013 and 2012 primarily include approximately 64.1
million and 64.0 million households capable of receiving cable and/or telephone company ("Telco") transmissions, respectively,
and approximately 30.9 million and 31.0 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, Telco 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.
HSN’s larger pay television operators include Comcast, DirecTV, Echostar/DISH and Time Warner Cable.
In exchange for this carriage and related promotional and other efforts, HSN generally pays these pay television operators
a fee consisting of commissions based on a percentage of the net merchandise sales to their subscriber bases and/or a per
subscriber fee. 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.