Q2, the failed upscale version of QVC, is going out with
Style.
On Oct. 1, Q2 will convert to Style, the fashion network
that is being launched that day by E! Entertainment Television. Style will take over Q2's
transponder space, ending the home shopping network's troubled four-year run as Barry
Diller's attempt to lure Yuppies to electronic retailing.
When it replaces Q2, Style will immediately pick up the
shopping channel's 2 million Comcast Corp. subscribers. Comcast which owns 57
percent of QVC and Q2, as well as a major stake in E! has already committed those
subscribers.
But Style faces the daunting task of competing with other
programmers in September to try to retain Q2's remaining 6 million subscribers. Style must
court the soon-defunct shopping service's other affiliates, which include Cablevision
Systems Corp., Tele-Communications Inc., Time Warner Cable, MediaOne and Cox
Communications Inc., among others. Non-Comcast systems account for three-quarters of Q2's
8 million subscribers a veritable gold mine of analog homes.
News that 6 million Q2 subscribers are up for grabs is
bound to spark a bidding war among the many programmers that are looking for analog space
and that are already paying their own cash launch fees to get it.
"It's going to be difficult a hard sell,"
said Debra Green, E's senior vice president of affiliate relations. "But we're
absolutely ready for the challenge. We have a track record."
E! will use "aggressive launch" incentives,
including upfront-cash launch fees and periods of free carriage, to entice Q2's affiliates
to make the switch-out effective Oct. 1 and carry Style.
Green maintained that Style's deal to operators, its large
portion of original programming on fashion and design and its huge local-ad-sales
potential will convince Q2's affiliates to pick it up.
But operators have had mixed reactions to network
conversions. Several years ago, they went along with NBC when it used America's Talking's
distribution base as a platform to launch MSNBC. But earlier this year, MSOs balked at
Discovery Communications Inc.'s proposed plan to buy Courtroom Television Network and
replace with one of its digital channels or with The Travel Channel.
TCI owns 43 percent of QVC and Q2, and Green said a
preliminary rough count indicated that 1 million TCI subscribers get Q2. A TCI spokeswoman
said individual TCI systems will have to decide if they want to convert to Style or use
the scarce bandwidth for another service.
Comcast has a 50.1 percent stake in E!, while The Walt
Disney Co. owns 49.9 percent. TCI and MediaOne each own 10.4 percent of the entertainment
network.
Green, saying E! will be flexible in its deals for Style
with operators, wouldn't discuss exactly how much in cash incentives the new network will
shell out. But she did say that Style's rate card starts at nine cents per
subscriber, per month, beginning in 1999, increasing by one penny per year after that.
"All of the big MSOs have seen the pitch," she
said. "No one has seen the deal."
Comcast corporate officials couldn't be reached for
comment, but a QVC spokeswoman said jobs had been found for Q2's staffers.
As of two years ago, Q2 had lost an estimated $50 million,
at which point QVC Inc. changed its format and scaled down its operation. Its upscale
programming was replaced by a faster-paced version, using taped segments from QVC hawking
its best-selling products. Q2 was launched under Diller's brief reign at QVC, and it
reportedly lost 2 million subscribers during the past two years.
Officials at the MSO Comcast said Style offers "an
improved programming concept" when compared with Q2, and the new network will have
special appeal to the underserved female audience the same demographic that Q2
reached.
"The programming quality is high, and the incentive
arrangement is attractive," said Tom Hurley, senior vice president of programming for
Comcast Cable Communications Inc. "The overall concept is very attractive, primarily
for women, and that is very desirable for a cable company."
In the future, Style will add a home shopping element,
which hasn't been determined yet, Green said.
Jedd Palmer, MediaOne's senior vice president of
programming, sits on E!'s board. He said he was in favor of Style replacing Q2.
"Q2 wasn't doing too much out there," he said.
"Certainly, Style isn't grandfathered [into] Q2's channel position [on systems]. But
I'm optimistic that Debra Green can retain a lot of the distribution. Style is a good
concept, and it can be a good channel."
Cablevision carries Q2 in roughly 1 million homes, Green
said. A Cablevision spokesman said the MSO hadn't been formally notified of the switch-out
to Style, declining to comment further.
But Cablevision already switched out Q2 in one of its large
systems in Morris County, N.J., in July, replacing it with America's Health Network. An
industry observer predicted that it was unlikely that the MSO would pick up Style when it
launched in October, and another MSO official expressed similar sentiments.
Time Warner, a major Q2 affiliate, couldn't be reached for
comment.
"QVC, in general, has been a smash success, and it had
a great first half of the year," said Fred Moran, an analyst at ING Baring Furman
Selz LLC. "But Q2 was not as necessary a vehicle. The market was already saturated
with home shopping networks."
Green said Style will be accepting digital carriage, as
well as analog carriage, although the incentive package won't be as attractive for
digital.
