Speer, Roy M.

(1932-)
Home Shopping Network
(HSN)

Overview

Billionaire Roy Speer, along with partner Bud Paxton, formed the first–of–its–kind telemarketing Home Shopping Network (HSN) in 1983. A novel marketing entity, it allowed prospective shoppers to view merchandise on their television sets and order by telephone from their homes. Within a few short years, sales had topped $1 billion and HSN was reaching 60 million households. Speer then sold his interest in HSN and went on to start more than 100 other companies.

Personal Life

Born "dirt poor" in 1932, Roy Speer is a lawyer by training who left full–time practice for a more lucrative career in real estate investing and retail marketing. He considered his early poverty to be his biggest blessing because it forced him to roll up his sleeves and carve out his stake. He received his Bachelor of Arts degree from Southern Methodist University in 1956 and then graduated from Stetson University's law school with a J.D. degree in 1959.

Career Details

Speer practiced corporate law until the late 1960s, although his law practice coincided with other business ventures and real estate transactions. He and his wife (he has three children) established a second residence in the Bahamas and ventured into foreign real estate, including a Puerto Rican vegetable farm and an oil company. He eventually worked his way from a small law partnership in Clearwater, Florida, to the Assistant Attorney General's office for the State of Florida.

He then started building a name as a broadcasting executive, buying properties and setting up businesses, including Aloha Utilities in 1966. In 1978 Speer partnered with Lowell "Bud" Paxson to buy a local FM radio station in Clearwater. They began to buy up several other local radio stations in the Tampa/Clearwater area. After an advertiser on one of the radio stations gave Paxson several electric can openers as payment for the airtime advertisement, Paxson came up with the idea to sell the 112 can openers over the air. He sold them all, over the air, for $9.95 each by the next day. Thus, the Suncoast International Bargaineers Club, a radio shopping show, was born. It was so successful that he and Speer began plans to do the same on cable television.

In 1983 Speer and Paxson launched their Home Shopping Network on cable TV, first from a local cable channel in Clearwater. Speer became the chief executive officer (CEO) of the new company and Paxson its president. Three years later, Speer led HSN to its national broadcast TV debut five hours each day via satellite. In 1986 Home Shopping Network went public. Within months, HSN was labeled the fastest growing company in the United States. At his peak with HSN, Speer set a single–day sales record of 250,000 units of merchandise sold. HSN was distributing and marketing products and producing infomercials in 70 countries and had established name recognition rate of better than 94 percent in the United States.

In 1987 the Home Shopping Network filed a $1.5 billion lawsuit against GTE, its telephone company, alleging that technical problems within GTE made the Network lose telephone calls and, therefore, prospective sales. After two years of litigation and trial, a jury in 1989 denied Home Shopping Network's claims. Worse yet, the jury awarded $100 million to GTE in libel damages. The suit was later settled.

In 1991 Paxson retired as president of the Home Shopping Network and sold his interest to Speer. The following December 1992, Speer sold his controlling stake in HSN to TCI's Liberty Media Corporation (LMC) for $160 million in stock (which ultimately became Bell stock after AT&T merged with TCI). Most of his remaining interest was sold in 1993 for another $100 million. Speer also resigned from his position in the fall of 1993 as chairman and CEO of HSN, although he was retained by the company for the next five years as a consultant. His official resignation followed a lawsuit naming Speer and other top executives, which alleged his involvement in "hush money" payments to potential whistleblowers, ties with organized crime, hidden vendor stakes (involving charges that Speer required vendors to give him a stake in their company in return for having their products offered on HSN) and commercial bribery. At that time, there were nine pending lawsuits in Florida in which Speer was named as a defendant.

Some of the other lawsuits were brought by investors and involved what is referred to as "related party transactions" by company executives that may not be in the best interest of shareholders. For example, HSN leased equipment from Speer's family trust. HSN also entered into two agreements with Interphase, Inc. (a company in which Speer was the sole shareholder) for the leasing of certain communication equipment at a monthly rental fee of $40,000. Interphase was also retained by HSN to construct a television studio for $100,000. HSN also borrowed nearly $400,000 from Interphase at 2 percent above prime rate. HSN leased real property owned by the Speer family for use as the company's accounting and data processing center. While these facts did not constitute illegal activity per se, they reflected poorly on the integrity of the management at HSN and damaged investment interest. In 1994 Speer was issued a court order to pay his former company (HSN) $2 million to fulfill the terms of one (the "7547 Corp.") lawsuit.

Chronology: Roy M. Speer

1932: Born.

1956: Graduated from Southern Methodist University.

1959: Graduated from law school at Stetson University.

1978: Acquired first radio station.

1983: Formed Home Shopping Network (HSN) with Bud Paxson.

1986: HSN has its first public offering.

1992: Sold controlling interest in HSN to Liberty Media.

1998: Merged with PrimeQuest to form LifeScience Technologies Ltd. (LST).

2001: Advantage Marketing Systems acquired collective LST entities.

During those years, HSN was also being investigated by the Securities and Exchange Commission (SEC) for allegations of improper transactions with related parties, as well as by the Internal Revenue Service. The only well–publicized outcome of those investigations occurred in 1996. The U. S. Tax Court had ruled that Speer and his wife Lynnda did not use a computer software company, Pioneer Data Processing Inc. (owned by Speer's son Richard) to hide income. Pioneer had developed software for HSN from 1986 to 1992 and was paid $14 million for it. The IRS had charged that the money paid to Pioneer as royalties actually constituted HSN profits that were going untaxed and, further, should have been considered gifts to Richard. However, the tax court ruled that the payments to Richard's company were "fair and reasonable," and the case was dismissed.

Not everything Speer touched turned to gold, however. In 1989, for example, Speer claimed losses of $1.1 million and $78 million respectively for a Florida full–service marina and tugboat/barge service in which he had controlling interests.

At one time it was estimated that Speer had ownership interest in as many as 108 different companies and owned ten cable TV stations with a paying subscription of ten million home viewers. In 1998 Speer bought an 80 percent controlling interest in Precision Systems Inc., a producer of voice recognition systems. Precision Systems was another spin–off company from HSN, having handled its computer systems for callers–in, among other things. In the $106 million deal, several of Speer's Nashville companies (e.g., Speer Communications Inc., which controls a company that sells telecommunications technology) contributed several million dollars in cash along with assets and products involved with digital storage, video production, and telecommunications. In 1999 Speer sold his interest in Precision Systems and Vulcan Ventures, another company in his portfolio (which seeded Precision Systems) to Phil Anshutz for $23 million and $106 million respectively.

Another 1998 venture for Speer was the merger of his Speer Communications in Nashville with Celerity Systems Inc., another Tennessee company. Speer Communications at that time had one of the largest digital video storage vaults in the world and offered digitally equipped video studios and on–location video teams across the country. Celerity, in turn, provided interactive video hardware, along with some software and computer systems. The merger intended to combine their capabilities in the interactive video services industry.

Over the years, Speer created a series of broadcasting ventures that required sophisticated digital network systems. After Speer's computer teams developed expertise in those systems, Speer began to market the expertise to the outside world by starting yet another company—Orlando, Florida–based Advanced Datacom Inc., in 1999. Speer wanted to capitalize on e–commerce through an on–line shopping channel and Web production studio. Speer became chairman and owner of both Advanced Datacom and its relative, Advanced Data Designs Ltd. Advanced Data Designs installed high–speed computer network cable systems, while Advanced Datacom handled Web–hosting, online marketing, computer security systems, and Internet security for other businesses. Organizationally, both companies were subsidiaries of another very large Speer company known as Life Sciences International Inc., a nutritional and skin–care product company based in Orlando, Florida.

LifeScience Technologies, Ltd., a spin–off, was the surviving company resulting from yet another 1998 Speer merger with the former PrimeQuest International. LifeScience specializes in dietary supplements and natural products. One of its key products is "adaptogens," marketed as "a secret blend of plants that the Russians have had for years. " After PrimeQuest was able to secure exclusive rights to the research on adaptogen plants being conducted by Dr. Israel Breckman in Russia, Speer funded the efforts to bring Dr. Breckman to the United States to market the resulting product. Copious information is available on the Internet about LifeScience products, on various web pages maintained by distributors and marketers. Meanwhile, according to Gerry David, vice president of sales, Speer was building a life extension facility in the Bahamas.

LifeScience Technologies was expected to be Speer's second "billion–dollar baby." Ever the telemarketing wizard, Speer had innovatively come full circle with his companies and put together a package that incorporated much of their expertise. According to Speer himself, in his web site message regarding LifeScience, "I've invested all my years of business experience as an entrepreneur in the development of the product technologies, a merit compensation program, and the bringing together of an experienced management team—everything to put you well on your way to creating a successful business." The network marketing company was set up to market and distribute its products through individually held interests purchased by investor–franchisers. LifeScience Technologies had sales of approximately $7 million in 2000. However, in January 2001, Advantage Marketing Systems, Inc. announced to investors that on January 4, 2001, it had acquired LifeScience Technologies Holdings Limited Partnership, LifeScience Technologies Limited, LifeScience Technologies of Japan, LST Fulfillment Limited Partnership, and LifeScience Technologies of Canada, Inc. for an undisclosed amount. LST was thereafter listed as a division of Advantage Marketing Systems.

In 2000 Forbes listed Speer's worth at $1.1 billion. Although officially semi–retired, Speer did not disappear from view. Dividing his time between residences in the Bahamas, Florida, and Nashville, Tennessee, he spends his time fishing and looking for new investments. He continues to oversee his real estate investments in Florida, Las Vegas, and the Caribbean and to invest in new technology companies, but he rarely gets involved in their day–to–day business anymore.

Social and Economic Impact

Together with his partner Bud Paxson, Speer changed shopping forever with the advent of his Home Shopping Network concern. He also changed TV viewing forever, as HSN provided not only entertainment but also electronic interactivity: prospective shoppers viewing a product demonstration on their televisions from the privacy of their homes could pick up their telephones and dial directly to the station. For some, hearing their own real–time voices on television (as they telephoned in to ask questions about the product or place an order) was itself enough of a thrill, but the program was often enhanced with celebrity appearances to endorse products and/or with special sales and deals not available to non–HSN viewers. When the focus of telemarketing shifted to e–commerce, Speer was there and ready to capitalize again, with ownership interest in companies that designed websites, set up computer and communication systems, and set up and trained new entrepreneurs. He has remained one step ahead of the market but has often been mired in controversial deals and arrangements involving multiple companies to a transaction and his financial involvement with each of them.

Sources of Information

Contact at: Home Shopping Network (HSN)
1 HSN Dr.
St. Petersburg, FL 33729
Business Phone: (800)284–3900
URL: http://www.hsn.com

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