Brands Shopping Network, Inc. (BSNK )
BRANDS SHOPPING NETWORK, INC.
INTERVIEW DATE: 7/12/02
CEO: I’m Gary Nash, and welcome to CEOcast. Joining me today is W. Thomas Oliver. Tom is the Chairman and Chief Executive Officer of Brands Shopping Network, a company that trades Over The Counter Bulletin Board under the ticker symbol BSNK. Also joining him today is Wendy Borow-Johnson. Wendy is the President of Brands Shopping Network. Welcome to CEOcast.
BOROW-JOHNSON: Thank you. Thanks for having us.
OLIVER: Thanks very much.
CEO: We’re glad to have you here today. Tom, why don’t we begin, with you giving us an overview of Brands Shopping. Tell us a bit about the company.
OLIVER: Gary, I’d be happy to. Brands Shopping Network, symbol BSNK, is a new media company, and our focus is on bringing national retailers and the name brand products that they sell to their huge numbers of customers to the consumer marketplace through television. And we’re going to use the vehicle of what we call transaction-based lifestyle television programming. It’s really programming that puts products in their natural context, gardening shows telling you how to use gardening tools and implements from Brookstone, one of our retailers we just signed, for example. When we’re going to attack, which has become a gigantic marketplace in the cable industry, the direct marketing through television, you know, TV shopping category which started in the mid ‘90s in the cable industry and has grown into a very healthy category in the $7 billion to $8 million range closing in on the same size as the entire movie theatrical box office, quite surprisingly. But we think that there’s some inherent shortcomings in the category that we can address, namely that the types of products that are sold over the early entrance into the business are pretty narrow. You know, everybody likes to make fun in a way of jewelry, jewelry, jewelry, but in point of fact, a huge and profitable business has been made by selling jewelry. And then really two other categories, computers and consumer electronics. We think that two things. One, we can expand the product mix very widely to reflect general merchandise sales in the marketplace, and two, we can do that by presenting branded products which aren’t generally sold on television today and do so through their natural bricks and mortar outlets, the branded retailers. So it’s a pretty simple notion and it’s huge. And retailer universe that we are talking to currently, and that’s about 100 some odd retailers, are all very familiar names. They’re all the familiar names that the average consumer would know, and I mentioned one like Brookstone. And they represent about $400 billion plus of annual revenues, and that is a very, very healthy marketplace for us to go after. The problem is that most of their products, and certainly the retailers themselves, have no access point through the television to consumers, and that’s exactly what we’re going to provide.
BOROW-JOHNSON: We’re actually, from a consumer perspective, we’re bringing the brand name stores with the brand name products that America knows and trusts, and now making those stores and products available to consumers sitting at home, right through their TV screen. And so if people just picture their favorite stores in malls across the country they will now have the opportunity to shop at those stores through their television screens. And the exciting thing is for retailers it gives them an opportunity to complete the relationship that they have with their customer. Many of the name brand retailers have their bricks and mortar stores, have had their Internet sites, may have done direct marketing and sales through catalogues, and now we’re allowing the retailer to complete the circle with their customer and be able to make their goods and services available through the TV.
CEO: But this is the question that will arise in many people’s minds when they’re looking at Brands Network. How is Brands different from let’s say a QVC or Home Shopping Network? What are some of the value propositions of your Company and offerings?
BOROW-JOHNSON: I think what Tom said earlier, Gary, is really important, that QVC, Home Shopping Network, ValueVision/ShopNBC have started and have proven that people will buy off television. But clearly what’s happened in the last two years and what we are taking advantage of is that the leading bricks and mortar retailers that we all know have spent a lot of money because of the Internet, building out their infrastructure and being more capable of responding to customers in one-off shopping and customer service. What we -- the proposition that we’re offering today probably would not have been possible two years ago, so what we are doing is we are leveraging the infrastructures that retailers have already put together, and just giving them another way to use that infrastructure to sell to customers. What will differentiate us again from the pioneers in the field, whether it’s Home Shopping Network, QVC, ValueVision/ShopNBC is that because we are not acting as the retailer, because we are actually going to be the low-cost provider. We don’t have the infrastructure, we’re not building huge call centers, we’re not building huge warehouses, we’re not buying all of these products. What we really are doing is becoming an enabler. We’re enabling the consumer to get the goods and services they want, and we’re enabling the retailer to reach out to that customer through TV. So what differentiates us will be the product mix, and the reason that we’re able to offer a much larger product mix is quite frankly we don’t have to go after certain product categories that tend to have bigger margins, because our cost is really going to be lower so therefore we can offer a wider range of products and services.
CEO: That’s a point. The company, is developing a model where cost is quite low. But then that raises the question, of, what exactly is Brand’s revenue model? How will you make your money?
OLIVER: Let me address that. We have three lines of revenue. One is traditional -- actually, both are traditional but they have never before been tied together. The first is we take a percentage, a small percentage of every transaction driven through our channel that’s generated by a consumer watching our show, you know the Brookstone show, for example, seeing an item that they like, picking up their telephone or interactive system, equipped with interactivity, clicking on and going and buying the product. Or through telephone, picking up the phone, calling an 800 number which we’ll provide, and that 800 number plugs right directly into the existing Brookstone, for example, infrastructure. So the consumer from the minute they watch that show, all the way back through the phone call, is plugged into the Brookstone experience. That is an extremely important part of this equation. And we take a small fee for enabling that transaction to be undertaken. The second angle here is that the shows are designed on a broadcast format, and we will have eight minutes of advertising time in every half hour show. That media is going to be sold to our retail partners, who in turn will offer that media at highly discounted rates to their suppliers and vendors. And this is a wonderful opportunity for the cable industry or satellite industry, for example, to participate in the huge, gigantic pool of marketing funds that are already in place in the relationship between a retailer and his suppliers, generally under the umbrella called co-op marketing funds. We’re really enabling retailers for the first time to be able to go on television with a contextual sell… in their own branded programming presenting their products. Retailers traditionally have shied away from television advertising because it’s expensive and difficult to acquire in terms of the demographic groups they want to address. The third line of revenue for Brands is in the future which is that these shows will all be self-standing units, the Brookstone half-hour, for example. And operators for -- cable operators equipped with Video-on-Demand capability have already approached us about putting those shows on servers so that they can be available at the beck and call of a consumer to watch on their own schedule.
BOROW-JOHNSON: In essence, we’ll be creating a virtual shopping mall that will be available to consumers whenever they want it, 24 hours a day, seven days a week. And we’ll take the different Retailer’s programs that are each self-standing, as Tom says, and then be able to put categories together so that if someone is at home and looking for a present in the jewelry category we’ll put all our jewelry programs together. Or if they’re looking for something in the home improvement category. So really what we’re doing is giving a whole host of new shopping opportunities to consumers, and at the same time, a whole host of new branding and sales opportunities to our retail partners.
OLIVER: Well, the good news, Gary, is we’re not in any way assuming any complicated business formulas, we make money from each sale on the network and from the advertising spots in the programs -- in fact, we’ve projected virtually no revenue in the early years out of the on demand component, because we really move along at the pace of cable or satellite systems as they equip their own infrastructures with that capability, but we’re not dependent on it.
BOROW-JOHNSON: And again, I think that to reinforce that, even in the biggest picture, we’re not asking anyone to do anything new, we’re -- today if you turn on your television when Brands goes on the contextual kind of sale, the branding and lifestyle factors that retailers like to assign to their categories will be available in these shows, and the consumer will be able to purchase the products by dialing an 800 number. It’s only in the future as more and more of the interactivity or the promise of interactive television becomes available we’ll be able to expand that experience and repurpose the same content that we’re getting from the -- in these individual shows from retailers, and make it available in different interactive modes to consumers. Right now it’s really a simple proposition. We’re going to be making available basically the same kinds of stores that people see in their malls just available through TV. And the same type of name brand products -- I think one of the things we’re very excited about is that the programs themselves will feature the actual retail environment…the stores because shopping is an activity that everyone participates in, retail stores are great theaters, exciting environments, and the individual salespeople in those stores know the products, know how to present them to consumers, and we will just be making that available to consumers to make the purchases that they want and need in ways they couldn’t have before.
OLIVER: Wendy makes a really good and important point in the business model here. Much of our strength we feel is in what we don’t do. When that phone call is made into the branded retailer’s infrastructure we start not doing things. We don’t handle the call centers, we don’t handle the products, we don’t complete the credit card transactions, we don’t maintain inventory, we don’t pick, pack and ship, we don’t handle returns. That is all done within the branded experience the consumer is already familiar with to the tune of $400 billion in retail transaction value in these retailers we’re talking to. That is extremely important because all that side of the business falls under this loose term, infrastructure, but it’s painfully high-priced, high-cost items. As a result, we take a very small piece of the transaction value so the retailer, because he does do all this on behalf of the consumer -- our small take is not viewed as a major hurdle. And in fact, the retailer looks at us as a way for him to get access to television presentation time on a very low-cost basis. And in no way are we at Brands creating our own competitive retailing brands to his brand. And from that perspective in the distribution marketplace, we’re viewed as a complement and a line extension, if you will, of existing shopping on television activities, as opposed to a competitor. Frankly, if we were going to take the same approach as the existing shopping channels---who act as retailers do all of the tasks that require the large infrastructure and go in as the number four or five shopping channel, we’d have a much higher hurdle. But the fact of the matter is the distributor marketplace, understanding that the early entrants, as I like to call them, all of who, by the way, have done a fabulous job, QVC, HSN, ValueVision, which is known as ShopNBC, they have done a great job but they have a very narrow audience of participants and a very narrow slice of products that are offered. And those products that are offered for the most part do not carry brand names. We are going to expand that audience that shop on television, we’re going to do it by offering a wide range of general merchandising products offered with compelling offers and merchandising efforts done in conjunction with the branded retailers.
CEO: If I’m a retailer and I’m listening to this interview, two questions come to mind. Number one, are there any types of cost for me, as a retailer to participate in this type of programming? And then secondly, what type of distribution are we talking about?
BOROW-JOHNSON: From the retail perspective one of the things that we’ve done is taken away the initial hurdle which most people feel is that initial production cost. We are assuming the television production cost of producing these lifestyle enhanced TV programs for the retailer. What we ask the retailer to do is we ask the retailer to, as Tom said earlier, to take the advertising or commercial inventory to buy those spots from us and they turn around and then sell them to their co-op marketing partners. We also ask the retailer to basically do something that they do every day, which is to market their brands. And the only twist is we want them to use their existing marketing materials in stores, coupons, print ads, catalogues, web sites to tell their customers that they’re doing these programs so that consumers can find them on Brands Shopping Channel. So we leave it up to the individual retailer how they do that, but whether it’s through their catalogue, through point-of-purchase cash register receipts, on their bags. We ask the retailers to drive consumers to their brand name TV shows. That is the piece that we’re asking them to become involved in with us. And from a distribution standpoint, we are going to be launching the network this 4th quarter in 30 million cable and satellite homes. That’s the minimum we’ve already been extremely successful in getting both satellite and cable operator distributors to want, as well as some independent broadcasters, to want to carry Brands Shopping Channel on their systems.
OLIVER: I don’t think that’s ever happened in the cable or satellite business. I don’t think anybody has launched with anything like 30 million. And we’re led to believe by our conversations with distributors is the reasons right here, it’s a natural line extension of a category that they’ve already built a huge business with. And it’s a gnawing hole in the proposition in that the product offering and the breadth of product offering and the lack of brand names is, the distributors feel, enormously diminishing the demographics and numbers of people who shop on television. So it’s a pretty compelling proposition. We’re not changing any fundamentals of consumer behavior, what we’re doing is we’re simply building on the increasing willingness of consumers to do what I call distance retailing, distance shopping more conveniently. They already go to malls, they already shop in these branded retailers, it’s a gigantic business. We’re simply making it easier, bringing it home, and using the best media display screen known to man to present products and to effect sales and branded promotions, merchandising, which is the TV.
BOROW-JOHNSON: And we’re -- and if you take it from a programming and production standpoint we’re basically doing what hours and hours of television does right now, whether you’re watching morning or afternoon or evening talk shows, more and more -- or news programs, more and more feature lifestyle segments, consumer reports, talking about whether it’s new styles, new products, how to cook, how to garden, all kinds of how-to tips. Now not only will our shows do that, but the things that you see within those shows you’ll be able to purchase and buy –and be urged to with television only offers and a sense of immediacy.
CEO: So, how are you positioning the company to the investment community? What is it that you want the investment community to know about Brands?
OLIVER: I would say it’s -- we’re tapping a huge marketplace. We’re borrowing the branded equity of extremely well established retail. We’re delivering basically a consumer convenience product, we’re doing it as a low-cost provider. We’re using relatively small amounts of capital to launch that, particularly in contrast to recent press coverage of the huge hundreds of millions of dollars for new channels getting off the ground, and we’re not changing any consumer behavior. And as a result, and as a public company, we feel that we are a terrific opportunity for the investor to participate in this very solid long-term media explosion that’s taken place through cable and satellite.
CEO: And what would you consider the short-term challenge for the company, prior to its launch, because the company has been quite successful in attracting various "brands"?
OLIVER: I guess I would say that one word, launch. Prepare and launch late fourth quarter, early first quarter next year. And what’s involved in launch is raising some capital, finishing off putting our operating team in place, expanding our current 15 or 16 signed retailers to the approximately 25 that we hope to launch with, and then moving out and beginning to shoot the shows. For the most part we’re going to shoot in retailers’ stores on their store floors because obviously a retailers floor is his stage set for presenting products. Another twist to this will be, in many cases, using terrific sales staff as talent, if you will, because, as we all know, when you go into stores, certain salespeople have tremendous finesse and product knowledge and are just superb at presenting the benefits of a product to a consumer. We’re going to try to tap that pool of talent and then stitch shows together with our own Brands Hosts who will create the immediacy of the sale and reinforce the value to consumers.
CEO: If I wanted to find out more about Brands Shopping where would I go, who would I talk to?
BOROW-JOHNSON: The best thing would be to go to our web site, www.bsc.tv, bsc.tv, and really gives people a good sense of what we’re doing, has most of our current news updated, as new retailers join we list them, and gives a pretty good overview of what we feel is the attributes and the differentiators of Brands Shopping Network, Inc. and Brands Shopping Channel which we feel we’re really just capturing a brand new way for consumers to shop at the stores that they are familiar with in their own communities.
CEO: Tom, Wendy, I want to thank you for joining me on CEOcast. We look forward to learning more about the company and to the company’s launch that’s going to occur later this year.
BOROW-JOHNSON: Thanks for having us, Gary.
OLIVER: Thanks, Gary.
CEO: I’ve been speaking with W. Thomas Oliver and Wendy Borow-Johnson. Tom is the Chairman and Chief Executive Officer and Wendy is the President of Brands Shopping Network, a company that trades Over The Counter Bulletin Board under the ticker symbol BSNK. Until next time this has been Gary Nash for CEOcast, where Wall Street listens.
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