Despite a slump in the German economy, which has hit television advertising hard, Georg Kofler, head of the Munich-based Hot Networks AG, is confident that teleshopping is one of television's future growth industries.
But at the recent Film Days in Munich, the Goldmedia Consulting and Research Co predicted that growth in home TV shopping would reach the saturation point after peaking at DM2 billion over the next five years, double the figure posted last year.
Turnover would then begin to wane, dropping to DM1.28 billion in 2006, Goldmedia said.
But undaunted by any doom and gloom forecasts, Kofler's Hot Networks has just opened a new channel in Britain. The addition of the channel forms the next phase of the Munich-based company's 250-million-euro investment expansion program.
Besides Britain, Hot Networks already operates channels in Germany, France, Italy, Belgium and Holland, all of which air goods in local languages under the name Home Shopping Europe.
As a clear sign of growth potential, Kofler stressed that the company's five European channels have a potential reach of 120 million TV households, a figure expected to rise with the addition of Britain.
Positive trend
Judging by trends in the US, where revenues rose from US$47 million in 1995 to US$134 million last year, with projections ranging up to US$354 million by 2005, the trend will continue in Europe.
The board chairman and shareholder said that by year's end, Hot Networks will have posted 330 million euros up 52 percent from last year.
He predicted that by 2005, revenues will reach 1,100 million euros.
But because of losses incurred by newly started enterprises, Hot Networks foresees a negative EBITDA (earnings before taxes, interest and writeoffs) this year of about 90 million euros.
For next year and 2003, Kofler projects a 40 to 50 percent growth, with 750 million euros in revenues and profits of some 30 million euros targeted for 2003.
Kofler is particularly optimistic about the company's recently-started home shopping travel service, whose turnover totalled 18 million euros in the first two quarters of this year and are projected to hit 30 million euros by the end of the year, Kofler said.
Stimulating the imagination
The many travel programs aired on German television act as advertising for teleshopping, as they stimulate the imagination of viewers and their zeal to visit foreign countries.
In outlining his group's powerful expansion this year, the 44 year-old Kofler said that "we have launched four new channels and five new companies for Internet shopping under the logo Home Shopping Europe.
In addition, we have taken over the broadcaster TM3 and repositioned the channel as Neun Live.
"And we have introduced travel shopping in Germany under the format `Sonnenklar' and laid the groundwork for a round-the-clock service by 2002. And despite the falloff in advertising, Hot Networks AG will firmly continue on its expansion course," he added.
Hot Network channels offer a mixed bag of wares, including jewellery and accessories, cosmetics, health and sports items, household wares, entertainment electronics, fashion and gifts.
The channels offer 13,000 new items annually throughout Europe; all are subject to inspection by the control organization TueV, which is certified in Europe's five biggest markets.
As further evidence of the group's buildup, during the first part of this year, 640,000 new customers bought a product for the first time, a 76 percent increase compared with the previous year.
A present, the number of active customers, based on at least one order during the year, has surpassed the two million mark. And Hot Networks staff took calls of more than six million, a plus of 90 percent. More than 2.7 million packages were despatched throughout Europe, a rise of 35 percent compared with the same period last year.
Kofler also plans to extend the travel channel Sonnenklar, which already reaches 28 million TV households in Germany, to other stations. Launch of a 24 hour travel teleservice on satellite and cable is in preparation for next year.
The Neun Live channel is a new kind of television in which viewers can call the station making direct contact during live broadcasts, enabling a rapid and flexible change in line with the reaction of the public.
Global strategy
"This pioneer of interactive TV is the first channel in Germany that can speak spontaneously with the public, 24 hours a day,'' Kofler stressed.
Initially, the channel has received five to six million calls per month, but the figure is expected to increase to 100 to 150 million in over the next two years. With inception of the Interactive Voice Response Systems next year, the station will be able handle 300 to 500 hundred callers simultaneously.
The US Home Shopping Network holds a 41.99 percent stake in Hot Networks AG, followed by Thomas Kirch, son of media magnate Leo Kirch with 33 percent, and the Kofler family with 10.01 percent. The partnership with the American company is part of a global strategy, which could see the company to expand to markets in Latin America.
Eventually Hot Networks plans to go public depending on economic developments, but Kofler said chances for a launch next year appeared to be slight.
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