FINGERHUT CUTS PLANS FOR SHOPPING NET

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Fingerhut Cos.' decision last week to abandon its ambitious new home-shopping network casts a shadow over the promise of new upscale TV retailing.

The Minnetonka, Minn.-based catalog marketer pulled the plug on S The Shopping Network less than two weeks before a planned Dec. 1 start-up. Fingerhut said a deal to sell 75% of the network to an investor group led by Montgomery Securities fell apart, and the company was unwilling to shoulder the financial burden on its own.

Fingerhut had earlier failed to line up strategic investors in the cable TV industry, prompting the search for a financial partner.

The company is taking a $16 million write-off from its fourth-quarter investment in the aborted shopping service and won't recover earlier investments. Fingerhut is laying off 30 of its 36 staffers in electronic retailing and "substantially reducing" its flagging USA Direct infomercial unit.

"There wasn't a good enough certainty of finding available [cable TV] distribution at an acceptable price," said John Ellingboe, senior VP-business development.

Like other recent or planned start-ups, the S channel aimed at a more desirable audience than QVC or Home Shopping Network.

Fingerhut had planned to eschew jewelry and fashions and instead focus on brand-name, big-ticket electronics, appliances and housewares. In a large booth at last month's NIMA International conference, S showcased a format heavy on product shots and information.

QVC, meanwhile, has had its own problems with Q2 and OnQ, two upscale-targeted spinoff channels that last month were consolidated into a single, 24-hour operation.

But some analysts say the rollbacks are more a function of timing-and the uncertain cable environment-than disenchantment with the medium as a selling tool.

"You have to get on the air to let people find out who you are," said Steven Kernkraut, an analyst at Bear, Stearns & Co. "They couldn't afford to pay the price that was being extracted by some of these [cable] guys."

"I don't believe the investors huddled over the weekend to decide that upscale electronic retailing was not a viable business," said Bishop Cheen, an analyst at Paul Kagan Associates, Carmel, Calif. "It's all about timing and all about shelf space."

Unlike HSN and QVC, both majority-owned by cable operators that can guarantee distribution, Fingerhut was going it alone. The company had commitments to reach just four million households, although 10 million is considered a minimum threshold.

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