Long before Amazon and Alibaba, there were home shopping channels on television.

Today, in the modern age of digital commerce, those “home shopping” channels are hoping that a steady video stream of celebrity endorsers and effervescent hosts will save — and even grow — their niche in retail TV and online retailing.

While Amazon gobbles market share from online and big-box retailers of every shape and size, TV home-shopping channels have managed to maintain their hold on a multibillion-dollar share of the business, in part with new technology and digital strategies.

Related: Next-Generation TV Expected To Usher in New Era of T-Commerce

Last month, the industry got a bit of a boost with the pending merger of its two largest companies, QVC and HSN. That deal, expected to close in the fourth quarter, is either a testament to the power of TV home shopping or an attempt to buy a little more time for a struggling sector.

On the surface, the QVC and HSN deal, valued at about $2.6 billion, does a little of both. The combination would create a potential powerhouse with $14 billion in annual sales and annual cost savings of $75 million to $110 million per year. It will also pair the two giants in the space, with diverse product lines: QVC has focused on home and accessories products, while HSN has concentrated on young women’s fashions.

QVC is in more TV homes — 104 million versus HSN’s 84 million — but HSN has a stronger online and mobile presence. Forty-three percent of HSN’s $2 billion in online sales are mobile.

Bulking Up Against Amazon
The added heft could help insulate the companies from the looming threat of online retail behemoth Amazon, which is expected to report online retail sales of more than $107 billion this year.

“Everybody’s always worried about Amazon, just because of how big it’s gotten and generational shifts,” FBN Securities managing director, cable media and entertainment equity research Robert Routh said in an interview. “People in my generation may or may not have wives or girlfriends that watch QVC, while millennials, they don’t even watch television.”

The biggest question is whether companies still involved in the sector have enough exclusive products, personalities and other assets that will overshadow any losses on the TV side, Routh added. “At some point it could face material issues to its core viewership unless it can find a way to adapt,” he said. “But so far it has.”

While TV shopping may have passed its heyday — sales for both QVC and HSN have dipped over the past year — companies in the sector see video as one of the differentiating factors that won’t just keep TV shopping alive, but help it thrive.

“If anyone says they’re not concerned about Amazon, then they don’t have their eyes wide open,” Jewelry TV chief strategy officer Tim Engle said in an interview.

Engle said while the deal could affect other retailers that offer similar products, Jewelry TV made the decision in the early 2000s to focus exclusively on one product — jewelry.

“We feel like that niche and that focus really positions us well and defines who we are,” Engle said. “I’m not like the No. 3 person trying to compete with these two mega-giants. I’m the No. 1 person in my space.”

QVC and HSN have also made changes over the years, switching their product focus from electronics and watches several years ago to a concentration on home products for QVC and women’s fashions for HSN.

Both channels have a steady stream of celebrity endorsed offerings, from Lisa Rinna and Isaac Mizrahi fashions at QVC to Diane Gilman jeans and Keith Urban guitars at HSN.

And both have plunged headfirst into the information age with mobile and e-commerce capabilities. At QVC, e-commerce accounted for $4 billion of global revenue in 2016 and represented 9% of consolidated global revenues and 55% of U.S. revenues in the second quarter, with mobile making up 63% of global e-commerce orders and 62% of U.S. e-commerce orders.

According to HSN, about 43% of its $2 billion in annual digital sales are from mobile.

Both QVC and HSN have a strong presence on TV. QVC’s three pay TV channels are in 104 million homes and HSN’s two channels are in 91 million households. Both brands have a strong relationship with major cable operators such as Comcast, Charter Communications and Cox Communications, as well as with smaller systems throughout the country.

Both channels also have been active adopters of new technologies. HSN is available on Roku, Apple TV, Android TV, You Tube, Smart TVs and Amazon Fire TV, while QVC is on Facebook Live, Apple TV, YouTube and Roku.

While QVC and HSN grab most of the TV home-shopping headlines, smaller outlets such as Evine Live (formerly ShopHQ), Jewelry TV, Shop LC, America’s Auction Network, Gem Shopping Network and others have managed to weather the changes as the business has evolved.

Rolling With the Changes
Some have managed the changes better than others.

Privately held Jewelry TV has had double-digit sales growth in the past two years; it grew by 14% in 2016 and by 15.7% in 2015, far outpacing overall retail industry growth rates of about 3.4%, according to the National Retail Federation.

Compared to Amazon, Jewelry TV and TV home shopping in general is tiny. But Engle sees that as an advantage, too.

“People still want some humanity in their retail,” Engle said. “I think there is a place for Amazon, I think there is a place for Macy’s, I think there is a place for all the retailers, but I also think there is a viable place for selling on video. Video is where the industry is moving anyway; we’ve just been doing it for 25 years.”

While every shopping channel has an eye on Amazon, Routh of FBN Securities said, there is room for the e-retailer and the channels to survive. “There is still a huge percentage of the population that stays at home and tends to watch channels like QVC and HSN as they’re doing other things,” Routh said.

Amazon made its name in books, movies and music, but has been steadily encroaching on other industries as it strives to dominate the retail sector. Last year, it became the largest online seller of clothing, racking up $16.3 billion in apparel sales in 2015, according to Internet Retailer. And the online giant is closing the gap between itself and big-box retailers like Walmart, with $24 billion of total sales in 2015, and Macy’s, with $21 billion, Internet Retailer reported.

Amazon has reportedly investigated launching its own shopping channel, a “QVC Killer,” according to tech site Geek Wire, which would allow purchases right from the screen. Amazon already has incorporated e-commerce features to its Amazon Fire Stick, allowing customers to purchase some items. And HSN signed a deal in 2016 to incorporate its Shop By Remote app on the Fire Stick and the app also is available on Android TV.

“We bring an experiential aspect and an engaging aspect, where I can sell a chrome dioxide ring and explain why chrome is so unique, what’s the story behind chrome, where in Russia is it mined, why is it so unique and why it is better to buy this than maybe an emerald,” Engle said. “You can’t get that behind the counter at a Zales or a Macy’s and you certainly are never going to get it from Amazon. That’s not where Amazon plays.”

Still, there’s little dispute that the TV home-shopping business is under pressure. QVC, long the sector’s undisputed king, saw its U.S. revenue dip 3.2% in 2016 to $6.3 billion, while overall sales stayed flat at $8.7 billion. In the second quarter, sales fell 4% to $1.97 billion from $2.1 billion in the previous year.

“It is a tough environment; we’re not here to suggest that the environment is going to suddenly get easier,” QVC CEO Mike George said on a July conference call announcing the deal. “And so, certainly the sales headwinds are a reality for retailers.”

At HSN, net sales fell 2.7% in 2016 to $3.6 billion, and the slide continued in the first half of 2017, with overall revenue declining 5.9% to $1.6 billion.

“[I]t has been a tough period; we’re not happy with the performance,” HSN CEO Rod Little said on the July call. “It’s part of why we’re here today, I guess.”

HSN expects the market to begin turning around in the second quarter, when efforts to cut costs and the divestiture of some smaller apparel lines kicks in.

“And then it’s all about leveraging the capabilities; digital, social, some of the platform e-commerce elements that QVC has and taking the best of both mindsets, what they’re good at, what we’re good at, and getting after some of those very quickly,” Little said.

Home shopping networks have largely stayed out of the battles between pay TV programmers and distributors for good reason. The channels are offered for free and distributors also get a cut of sales generated in their markets. At HSN, that has meant that pay TV providers have received a 10% slice of their nearly $4 billion in annual sales, while QVC shares up to 5% of its $6.5 billion in U.S. revenue. Those percentages will be modified after the deal closes in the fourth quarter, but isn’t expected to be a dramatic reduction in the overall pie.

Some operators have said the deal will force a re-evaluation of the QVC and HSN networks, which include QVC2, Beauty iQ and HSN2, in addition to the main QVC and HSN channels.

“They do pay us, but it’s not a huge amount of money,” said one midsize distributor who asked not to be named, adding that the merger could be an opportunity to reduce the number of QVC-HSN channels carried, which could then be used for broadband or for other content.

“Their second and third channels really don’t have the same value,” the midsize distributor said. “[The merger] makes it a little easier to push back.”

George, who will manage both companies when the deal is closed, said on the conference call that he understands that the combined companies’ five channels have varying degrees of distributor interest, with different channel positions, carriage structures and even some still broadcasting in standard definition.

“We’ve always believed in that, as a core principle at QVC, that our distributors should win when we’re winning,” George said on the call. “And so, we want to engage with them on what would that look like and what would make sense for all parties.”

“Timing is finally right,” Liberty Interactive CEO Greg Maffei said before ticking off the reasons for having QVC join forces with home-shopping channel rival HSN in a deal for $2.1 billion in stock.

The reasons mostly had to do with HSNi’s stock price falling to the point where it made sense for Liberty Interactive — which already owned 38.2% of HSNi — to buy out the rest of HSNi.

At points over the last couple of years, HSNi’s share price had been nearly 3 times that of QVC Group, Maffei said, but had slid to about 1.3 times. Measured by multiples of cash flow, QVC actually moved ahead of HSN, he said. “It seems like finally the market had come to our point of view.”

For the cable companies carrying QVC and HSN, the impact will take longer to measure, because those contracts are for relatively long terms. But the message from QVC CEO Mike George on a call with analysts on July 6 was: “Our distributors should win when we’re winning.”

Maffei, George and Rod Little, the chief financial officer at HSNi, told analysts on the conference call that after the transaction closes they will begin talks with distributors that carry the companies’ five channels: QVC, in 104 million homes; QVC2, in 60 million; BeautyiQ, in 40 million; HSN, in 91 million homes; and HSN2, in 48 million.

Barton Crockett, of FBR Capital, asked about differences in what QVC and HSN pay TV distributors. HSNi, he said, pays about 10% of revenue back to U.S. distributors while QVC pays out more like 4% of revenue in deals that have differing structures.

George said differences in deals, but also in channel positions and high-definition versus standard-definition carriage, will all be discussed to find out “what configuration would best optimize viewership for the customers and drive growth and then help restructure arrangements where our distributors benefit from the growth.”

A projected Q4 closing of the HSNi deal won’t be tied to Liberty Interactive’s pending purchase of Alaska cable operator General Communication Inc. (see cover story). Liberty Interactive plans to spin GCI into Liberty Ventures after that transaction closes.

QVC Group CEO Michael George will be able to buy a lot more baubles, bangles and beads from the home shopping conglomerate he runs, raking in a total of $19.7 million in total compensation in 2015, according to a proxy statement filed with the Securities and Exchange Commission Friday. 

QVC is part of Liberty Interactive, one of several companies that have spawned from cable legend John Malone Liberty Media. QVC is the largest holding of Liberty Interactive, which also includes online retailer Zulily and Liberty Ventures, which holds online companies Bodybuilding.com, CommerceHub, Evite and Right Start and minority interests in Time Warner Inc. and other companies.

George’s 2015 compensation increase was mainly due to $17.5 million in stock option awards the CEO received in 2015. George received no option awards in 2014. His total 2014 compensation was about $1.99 million.

The option awards are tied to a new five-year employment deal George reached with the company in September. As part of that agreement, he was eligible to receive a one-time grant of 1.7 million options to purchase QVC shares at a strike price of $26 per share. Half of those options vest on Dec. 31, 2019 and the rest on Dec. 31, 2020.    

In contrast, Liberty Interactive president and CEO Greg Maffei took a pay cut in 2015, reaping a total of $14.87 million in total compensation, compared to the $32.5 million he received in 2014. Option awards were the difference for Maffei as well – he received $3.6 million in option awards in 2015 compared to $28.6 million in 2014.

Options also played a big role in compensation gains for several other executives. Chief financial officer Christopher Shean received $7.7 million in total compensation in 2015 (up from $893,368 in 2014), including $6.3 million in option awards. Senior vice president Albert Rosenthaler saw his total compensation rise to $7.6 million in 2015 from $828,111 in 2014, mainly on the basis of a $6.3 million option award.