Attention Tv Shoppers

By THOMAS McCARROLL

& Home shopping, the ultimate in couch-potato marketing, seemed, at its cable- TV debut a decade ago, to be the natural successor to the shopping mall. But years of selling such schlock as silver bracelets and cubic-zirconia rings, plus a series of scandals, mired the medium at the low end of the retail business, even as it grew to gross about $2.2 billion a year. Recently, though, home shopping has spiffed up its image, thanks in part to media mogul Barry Diller. Since joining QVC as chairman six months ago, Diller has buffed the industry's reputation by luring Saks Fifth Avenue and famous designers like Diane von Furstenberg to sell goods on television. And in a move that could further help clean up and expand the business, he proposed last week a $1.2 billion merger between QVC, the nation's largest video retailer, and the No. 2 operator, troubled Home Shopping Network.

If completed, the deal will create a video-retailing powerhouse accounting for about 99% of the industry's current total revenues. Together, the two networks reach more than 60 million cable subscribers nationwide. Their merger is also designed to facilitate a settlement of charges stemming from alleged kickbacks, blackmail and bribery at HSN, which is under investigation by the Internal Revenue Service and the Securities and Exchange Commission.

For Diller, the transaction will provide QVC with the financial strength to withstand an onslaught of new competition from big department stores like R.H. Macy and Nordstrom, all of which have announced plans to enter the home- shopping business. Combined, QVC and HSN will generate about $147 million in annual cash flow, which would come in handy to finance Diller's dream of taking TV shopping to its next evolutionary stage: making it interactive. An advanced interactive system would let viewers browse through a sort of "video catalog" of a store's merchandise and place orders on-line and on-screen. Says Diller: "This will allow us to bring the future closer and faster."

The most talked-about prospect for the QVC-HSN merger is the creation of a fifth network on a par with ABC, CBS, NBC and Fox. A portion of the transaction gives QVC -- which is partly owned by cable-TV visionary John Malone of Tele-Communications Inc. -- the option to buy a controlling interest in HSN's TV spin-off, Silver King Communications, which owns 12 UHF stations, enough to form the core of a network.

Many analysts speculate that the man who built Fox-TV will use such a + network to combine shopping and entertainment. They envision the channel, dubbed Best TV by company executives, running, say, an hour of country-music videos featuring C.-and-W. stars like Clint Black and Garth Brooks, followed by a segment devoted to selling cowboy boots and other Western-style apparel. But Diller is not yet totally convinced that such synergy exists. "You won't see dancing and singing toasters."

Still, TV retailers have recently turned over their studios to celebrities and fashion designers with surprising success. Talk-show host Joan Rivers, for instance, generated $30 million in sales when she appeared on QVC peddling her line of jewelry, while HSN brought in game-show star Vanna White to push her "Little Miss Vanna" cosmetic line.

The prospect of a QVC-HSN merger appeals to many suppliers. Greg Renker, president of Guthy-Renker Corp., which sells some 20 products through home- shopping channels, says the deal "will double our window of opportunity." Before, Renker could sell items ranging from vitamins to sunglasses through either QVC or HSN, but not both. However, Kurt Barnard, publisher of Barnard's Retail Marketing Report, says, "This merger will reduce competition. Instead of two channels, there will be only one, and suppliers will no longer be able to play one channel against the other to negotiate a better price."

The lack of competition may be only temporary. If the industry succeeds in shedding its snake-oil image, more upscale entrepreneurs are likely to rush in and take advantage by starting new channels. TV retailing won't make department stores obsolete just yet, but it might make a dent in the mall business.