This story has been updated from 2:18 p.m. EST
Polo Ralph Lauren
said Monday that they would spend upwards of $200 million to form a Web joint venture, dubbed
Ralph Lauren Media
The deal involves not only the NBC network but
, the company's Web unit, and
. NBC and
own a chunk of ValueVision.
The news sent shares of Ralph Lauren surging 1 7/8, or 13%, to 16 by midafternoon Monday, while NBCi stock gained 2 15/16, or 3%, to 74 1/8. (Ralph Lauren closed up 2 1/8, or 15%, at 16 1/4. NBCi rose 1 5/16, or 1.8%, at 73 7/8.)
But ValueVision's shares were down 2 5/16, or 6%, to 38 5/8. GE was down as well, falling 3 5/8, or 3%, to 137 15/16. (ValueVision closed down 4 1/16, or 9.8%, at 37 9/64. GE closed down 5 1/16, or 3.6%, at 136 1/2.)
The deal -- the parameters of which have become increasingly common in the Internet economy -- revolves around both cash investments and ad space on NBC properties. The first initiative out of the new company will be
, which is expected to be started in the fourth quarter. The companies are characterizing Polo.com as a "lifestyle destination site."
"This moves e-commerce to the next generation," said Chris Kitze, chief executive of NBCi, which went public last fall. "It will be an environment where things are sold vs. where things are bought." The companies expect the site's introduction to benefit from the increasing availability of broadband Web access, which will allow for television-quality content to become available on the Internet.
"Retail is becoming more like media," Kitze said. Polo.com "will be a rich, immersive experience on the Web."
The management of the new unit reflects that media tilt; it will be headed by former magazine executive Jeffrey D. Morgan, who had been publisher of men's lifestyle magazine
, and David Lauren, Ralph Lauren's son and founder of the now defunct
magazine. Morgan will serve as chief executive and David Lauren will be the company's creative director.
Ralph Lauren, founder, chairman and chief executive of Polo Ralph Lauren, told
in an interview Monday that he hasn't ruled out selling a piece of the new venture to the public sometime down the road.
Under the terms of the 30-year joint venture, Polo Ralph Lauren will own 50% of the company, NBC will own 25%, ValueVision 12.5%, NBCi 10% and GE business site
2.5%. NBC will contribute $110 million in advertising and promotion across its TV and Web properties while NBCi will contribute $40 million in online distribution and promotion. ValueVision is committed to providing $50 million in cash as well as its customer order fulfillment capabilities. Ralph Lauren will market the new site through its $100 million annual ad campaign. The company will also promote the site in its 27 retail outlets.
Polo.com will be an anchor tenant on NBCi's
shopping portal, and, according to NBCi's Kitze, will help drive to Snap a slice of the consumer populace that likes to spend a lot of money. "We think it's a terrific audience," he said. "Which audience would you rather have,
or Ralph Lauren's?"
Analysts applauded the deal and called it an excellent means of extending the Polo Ralph Lauren brand onto the Web in a big way.
Apparel makers such as Polo Ralph Lauren have been itching to gain more control over their brands, as retailers such as
have demonstrated the efficacy of that model, said Jeff Klinefelter, analyst at
U.S. Bancorp Piper Jaffray
"They're saying, 'We want to represent the brand to consumers,'" he said. By creating a full-blown brand experience online, Polo Ralph Lauren is positioning itself to do just that, Klinefelter said. He does not have a rating on the stock; his firm does not have an underwriting relationship with the company.
While potential conflict with its retailing partners has been one of the issues that has held Polo Ralph Lauren from developing a serious Web presence prior to Monday's announcement, Klinefelter believes this venture will only help retailers. "This will likely drive more business to the retailers."