How HSN and QVC Are Joining Forces to Battle Amazon

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Mike George

While the two networks originally found success by pitching products like the Miracle Mop on TV, e-commerce is roughly half their business nowadays, which puts them in the crosshairs of the internet behemoth.

In a move that Wall Street has been awaiting for roughly a decade, QVC and HSN have merged to take on the internet giant of shopping at home.

The deal, announced July 6, has Liberty Interactive-owned QVC using stock to acquire the 62 percent of HSN it didn't already own. IAC-owned HSN will become a subsidiary of QVC Group, which is a tracking stock in the process of becoming an equity-based stock. The combined entity, including e-commerce firm Zulily, will be run by QVC president-CEO Mike George. The acquisition values HSN at roughly $2.6 billion (including debt) and represents about a 29 percent premium to where HSN shares were trading.

While HSN and QVC have made their bones by pitching products like the Miracle Mop on their respective TV networks, e-commerce is roughly half their business nowadays, which puts them in the crosshairs of Amazon, one of the largest companies in the world with its massive $476 billion market cap.

FBR Capital Markets analyst Barton Crockett says a combined HSN-QVC will create "a category killer in TV shopping," boasting 11 million unique customers and $14 billion in annual revenue — still a far cry from Amazon's $136 billion in sales. "But we see TV shopping as well positioned to co-exist with Amazon," he adds. And while executives say the merger will result in up to $110 million in cost savings within five years, Crockett thinks it could reach $330 million.

"Amazon really disrupted this space," says CFRA Research's Tuna Amobi. "The playbook's been written: You need to deliver goods quickly and be a fierce competitor on cost. HSN and QVC needed to come together to compete with Amazon."

This story first appeared in the July 12 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.

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