Retail Networking : Advertising: Despite slower than expected growth in home shopping, Shop Television Network has high hopes for its J.C. Penney channel and “infomercials.”

Shop Television Network sells J.C. Penney Co. merchandise to television viewers and produces “infomercials,” or long-format commercials. That puts it in two troubled industries: Home shopping has fallen far short of growth expectations, and makers of infomercials are struggling to overcome chronic image problems.

But Michael E. Rosen, Shop Television’s chief executive, is undaunted.

After moving this month from rented studios in Hollywood to a permanent, $3.8-million facility in Burbank, Shop Television plans to expand the JCPenney Television Shopping Channel it operates and ultimately become one of the leading producers of infomercials, which Rosen sees as the advertising venue of the future.

Rosen has high hopes for the J.C. Penney channel because it’s not like the Home Shopping Network (HSN), the Clearwater, Fla.-based electronic retailer that dominates the industry with its quick-sell approach to everything from cubic zirconia jewelry to fancy electronic hardware.

The J.C. Penney channel, unlike the Home Shopping Network, devotes half an hour of air time to each line of merchandise and allows viewers to call in orders any time they like.

The channel is available to 15 million cable subscribers and about 2 million satellite viewers, Rosen said. It advertises merchandise not usually sold in J.C. Penney retail outlets, he said.

“We sell with dignity,” Rosen said. “There’s a lot of information and a lot of explanation.”

Perhaps, but Shop Television Network, which had estimated revenue of about $18 million for its fiscal year that ended Jan. 27, is still dwarfed by HSN, which reported record sales of more than $1 billion for its fiscal year that ended Aug. 31.

Shop Television ranks third behind HSN’s 60 million cable and network viewers and the estimated 38 million viewers reached by the QVC Network, a West Chester, Penn., electronic retailer.

Shop Television’s stock, meanwhile, trades for less than $1 a share and is listed on the Vancouver Stock Exchange, a haven for speculative penny stocks.

But Rosen said the move to Burbank will help Shop Television better compete by allowing the company to own its own facilities and equipment rather than paying rent. Once settled in, Shop Television plans to expand production of the J.C. Penney channel from eight hours a day, five days a week, to 16 hours a day, seven days a week. (When it’s not broadcasting live, Shop Television plays tapes of earlier shows.) That will put it closer in line with HSN and QVC, which both broadcast live, 24 hours a day, seven days a week.

Shop Television obtained the exclusive right to produce and market the J.C. Penney channel in February, 1989. From 1987 to 1989, J.C. Penney and Shop Television ran the network as a partnership, but J.C. Penney took over Shop Television’s share of the partnership by giving Shop Television a 10-year contract to produce the show, Rosen said. J.C. Penney also owns 9% of Shop Television’s stock.

Under the terms of the contract, J.C. Penney pays Shop Television the costs of producing and marketing the J.C. Penney channel, plus a profit equal to 10% of those costs. Shop Television also gets a 2% commission on sales generated through the channel. J.C. Penney is now responsible for nearly all of Shop Television’s revenues.

Neither Rosen nor J.C. Penney would disclose how much money the network generates for J.C. Penney. During the nine months that ended Oct. 27, Shop Television’s commissions totaled $920,000, so gross sales of J.C. Penney goods were about $46 million. Shop Television itself had net income of $1.09 million for the nine months on revenue of $14.9 million.

But Shop Television’s contribution to J.C. Penney’s overall sales is minuscule considering that the company’s catalogue operation alone had sales of $3.2 billion in 1989.

“It’s a very small operation as far as we’re concerned,” J.C. Penney spokesman Duncan Muir said. “It’s obviously something that we would see as a possibility of expanding, but that remains to be seen.”

Rosen, however, wants Shop Television to expand regardless of J.C. Penney’s plans, so he intends to devote 80% of his business to infomercials. “This is a very strong emphasis for us,” he said. “The Penney’s business is at some level put to bed. We have that contract and that business.”

Infomercials are usually associated with TV hucksters masquerading their programs as talk shows and news programs. But Rosen said infomercials are getting more respect these days as more upscale, name-brand companies turn to them for advertising. Rosen said he plans to produce infomercials for name-brand cosmetic companies, entertainment concerns and fashion designers.

Shop Television, however, is just getting started in the infomercial business. The company has produced several test broadcasts for an upcoming, half-hour infomercial for CBS Records featuring a line of so-called compilation albums that highlight a particular style of music, say soft rock or country music. Shop Television has already invested about $500,000 in the venture.

Why is Rosen so optimistic about infomercials? More and more mainstream networks are turning to infomercials because of a downturn in local advertising revenues caused partly by the recession. Big-name companies such as Time Warner Inc., Nike Inc. and General Motors Corp. have dabbled with infomercials in recent months.

Infomercials provided more than $250 million in advertising revenue for broadcast stations and cable networks in 1990, according to industry estimates, and that figure could climb by more than 20% this year. The National Assn. of Television Program Executives said a recent survey of 859 commercial television operators showed that infomercials bring in more than 5% of their revenues, and over half of the executives said they expected infomercials to bring in more money in the future.

“It’s a new advertising industry that’s being built, and it’s not the one-minute guys that really understand it,” said Rosen, who helped pioneer the infomercial format in the mid-1980s while he was senior vice president for marketing at Herbalife International Inc., an Inglewood-based marketer of vitamins and dietary products.

Also, infomercials are a growing industry whereas home shopping is tapering off. The home shopping industry generated an estimated $2 billion in sales last year, a disappointment for some analysts who had projected sales at more than $5 billion by now.

Consequently, dozens of smaller networks have gone out of business and the industry has seen rapid consolidation. Two big firms that used to track the industry, the accounting firm Deloitte & Touche in New York and the cable-TV research firm Paul Kagan Associates in Carmel, have stopped doing so on a regular basis.

But Rosen is still upbeat about home shopping. “This did not exist five years ago,” he said of Shop Television. “It’s in a $2-billion-a-year business and I believe penetration rates will grow very dramatically.”