Shopping Channel Fights to Enter Italy
"Our development in Germany has been impressive since our launch in October 1995 and we are close to break even so it is only natural that we would look for larger markets," H.O.T. spokeswoman Annette Holzapfel said.
Italy is the company's first target outside the German language area. H.O.T. Italia has applied for a license to broadcast a 24-hour home shopping channel over the terrestrial frequency of Retemia, a local Italian station.
The Italian Ministry of Communications will issue eight TV licenses to private companies by July 31. So far, 13 enterprises have applied. Three other licenses have been reserved for RAI, the Italian state TV network.
H.O.T. is confident it will get the license, though its lawyers concede the company faces a ruling barring non-European companies from more than 20-percent ownership in Italian media properties.
The ruling was handed down at the end of May by the Authority for Guarantees in Communications, a government watchdog agency that supervises ownership of Italian media properties.
Florida-based HSN owns 41.9 percent of H.O.T., a fact Italian interests are using to block H.O.T.'s license application. But the German company's lawyers argue that HSN only holds a 4-percent share in the Italian firm, well under the legal limit.
H.O.T. holds 51 percent and its partner, SBS, a European broadcaster with broadcast properties in seven Middle and Eastern European countries has 45 percent.
Nando di Fillipo, a former HSN executive out to block H.O.T.'s Italian plans, argues that the 20-percent limit has been breached because HSN's stake in the parent company is far larger than that allowed by Italian law.
Holzapfel acknowledged that the Authority's ruling came as a surprise, but said it changes nothing in the company's determination to push the project to completion and in accordance with Italian law.
Know-how and other support will be overwhelmingly German, coming from H.O.T. and from two German partners - the ProSieben TV network and Quelle, Europe's largest mail-order house - rather than from HSN.
"We're going ahead with plans to make this a going operation with complete fulfillment services - logistics, warehouse, production, call center and administration," Holzapfel said.
"We're optimistic that we will receive a license at the end of the month, given the persuasive nature of our project and the abilities of our management team."
H.O.T. overcame major challenges from other German TV stations that sought to block its start in 1995. Indeed, H.O.T.'s success paved the way for QVC to enter the German market a year later.
The shopping channel has steadily expanded its reach within the lucrative German market through cable and satellite penetration. Sales last year rose 144 percent to 200 million German marks ($111.1 million). QVC earned DM 91 million in 1998.
H.O.T. plans to double sales this year. In the first four months of 1999 it racked up sales of DM 131 million ($72.7 million). It is on the air 24 hours a day and has 16 hours of live programming daily.
Italy is a lucrative if erratic TV market. Only 1.7 million out of 22 million households are reached by cable and satellite, making terrestrial TV the way to go.
If partner Retemia's license is renewed and the company becomes H.O.T. Italia, it will reach 15 million households, about 75 percent of the Italian market.
Long-range plans include a combination of electronic distribution channels - TV, teletext and the Internet - and to become "the leading multimedia trade house in Europe," CEO Dr. Andreas Buchelhofer said.