Profile: HSN, Inc. (HSNI.O)

HSN, Inc. (HSNi), incorporated in May 2008, owns and operates, through its subsidiaries, HSN, a retailer and interactive lifestyle network offering an assortment of products through television home shopping programming on the HSN television network and HSN.com. HSNi also owns and operates, through its subsidiaries, the Cornerstone Brands portfolio of catalogs and related Websites, including Frontgate, Ballard Designs, Garnet Hill, Smith+Noble, The Territory Ahead, TravelSmith and Improvements, as well as a limited number of retail stores (Cornerstone). HSNi has two operating segments: HSN and Cornerstone. In August 2008, IAC InterActiveCorp announced that it completed the spin-off of HSN, Inc. (HSNi).

HSN

HSN includes the HSN television network and its related Website, HSN.com. The HSN television network broadcasts live, customer interactive television home shopping programming around the week. Programming is divided into separately televised segments, each of which has a host who presents and conveys information regarding featured products, sometimes with the assistance of a representative from the product vendor. HSN produces live programming for the HSN television network from its studios in St. Petersburg, Florida and distributes this programming by means of satellite uplink facilities, which it owns and operates, to a satellite transponder leased by HSN on a full-time basis through May 2019. HSN has entered into a long-term satellite transponder lease to provide for continued carriage of the HSN television network on a replacement transponder and/or replacement satellite, as applicable, in the event of a failure of the transponder and/or satellite carrying the HSN television network.

As of December 31, 2008, the HSN television network reached approximately 91.9 million, of the approximately 114.5 million homes in the United States with a television set, respectively. Television households reached by the HSN television network as of December 31, 2008 primarily include approximately 63.3 million households capable of receiving cable and/or broadcast transmissions and approximately and 28.6 million direct broadcast satellite system (DBS) households. HSN has entered into multi-year distribution and affiliation agreements with cable television and DBS operators, collectively referred to as pay television operators, in the United States to carry the HSN television network, as well as to promote the network by carrying related commercials and distributing related marketing materials to their respective subscriber bases.

HSN has contracts with many local and national pay television operators to distribute HSN television programming. Some of HSN’s pay television operators include Comcast, Time Warner, DirecTV and Echostar/DISH. During 2008, HSN television network sales from customers residing in households that subscribed to these pay television operators accounted for approximately 30% of HSNi’s annual revenue. In exchange for this carriage and related promotional and other efforts, HSN generally pays these pay television operators a fee, which consists of a per subscriber fee plus commissions, which are based on a percentage of the net merchandise sales to their subscriber bases. In some cases, pay television operators receive additional compensation in the form of advertising insertion time on the HSN television network and commission guarantees in exchange for their commitments to deliver a specified number of subscribers. As of December 31, 2008, HSN had affiliation agreements with 77 low power broadcast television stations for leased carriage of the HSN television network with terms ranging from several weeks to several years. In exchange for this carriage, HSN pays the broadcast television stations hourly or monthly fixed rates. IAC’s subsidiary, Ventana Television, Inc. (Ventana) owns 27 of the 77 low power broadcast television stations that carry the HSN network on a full-time basis.

HSN includes HSN.com, a transactional e-commerce site that sells merchandise offered on the HSN television network, as well as select merchandise sold on HSN.com. HSN.com provides customers with additional content to support and enhance HSN television programming. HSN.com provides users with an online program guide, value-added video of product demonstrations, live streaming video of the HSN television network, customer-generated product reviews and additional information about HSN show hosts and guest personalities.

Cornerstone

Cornerstone consists of a number of branded catalogs and related Websites, the primary of which are Frontgate, Ballard Designs, Garnet Hill, Smith+Noble, The Territory Ahead, TravelSmith and Improvements, and 26 retail and outlet stores. Frontgate features bed, bath and kitchen accessories, as well as outdoor, patio, garden and pool furnishings and accessories. Ballard Designs features European-inspired bed, bath, dining and office furnishings and accessories, as well as rugs, shelving and architectural accents for the home. Garnet Hill offers bed and bath furnishings and soft goods, as well as apparel and accessories for women and children, and Smith+Noble offers custom home furnishings and window treatments. The Territory Ahead offers casual apparel for men and women and TravelSmith offers travel wear for men and women and related accessories. Improvements features thousands of innovative home, patio and outdoor products.

Branded catalogs are designed and produced in house, which enables each individual brand to control the production process and reduces the amount of lead time required to produce a given catalog. New editions of full-color catalogs are mailed to customers several times each year, with a total annual circulation in 2008 of approximately 334 million catalogs. Cornerstone also operates Frontgate.com, BallardDesigns.com, GarnetHill.com, SmithandNoble.com, TheTerritoryAhead.com, TravelSmith.com and Improvements.com, among other branded Websites. These Websites serve as additional, alternative storefronts for products featured in corresponding print catalogs, as well as provide customers with additional content to support and enhance their shopping experience.