UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934

Filed by the Registrant  x

Filed by a Party other than the Registrant  ¨

Check the appropriate box:

HSN, Inc.

(Name of Registrant as Specified In Its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

April 4, 20116, 2012

Dear Shareholder:

You are invited to attend the 20112012 annual meeting of shareholders of HSN, Inc., which will be held on Tuesday,Friday, May 17, 201118, 2012, at 2:30 p.m.10:00 a.m., local time, at the HSN, Inc. corporate headquarters located at 1 HSN Drive, St. Petersburg, Florida 33729. At the meeting you will be asked to vote on (i) the election of our directors, and (ii) ratification of the appointment of our auditors, (iii) approval, on an advisory basis, of the compensation paid to our named executive officers, and (iv) approval, on an advisory basis, of the frequency of the vote on the compensation paid to our named executive officers. We are pleased to announce that all of our directors have agreed to stand for re-election at the annual meeting.auditors.

Based on the Securities and Exchange Commission rules that allow companies to furnish proxy materials to shareholders over the internet, we have elected to deliver our proxy materials to the majority of our shareholders over the internet. This delivery process will allow us to provide shareholders with the information they need, while at the same time conserving natural resources and lowering the cost of delivery. On or about April 4, 2011,6, 2012, we mailed to our shareholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy statement and annual report online. The notice also provides instructions on how to vote online or by telephone and includes instructions on how to receive a paper copy of the proxy materials by mail. We encourage you to take advantage of voting on the internet because it is a convenient and less expensive way for us to tabulate your vote.

Your vote is very important, regardless of the number of shares you own. Whether or not you plan to attend the meeting, please take the time to complete, sign, date and return the proxy card or vote over the telephone or on the internet.

Thank you for your continued support of HSN, Inc.

Sincerely,

Mindy Grossman

Chief Executive Officer

HSN, INC.

1 HSN Drive

St. Petersburg, Florida 33729

NOTICE OF 20112012 ANNUAL MEETING OF SHAREHOLDERS

Notice is hereby given that the annual meeting of shareholders of HSN, Inc., a Delaware corporation, will be held on Tuesday,Friday, May 17, 201118, 2012 at 2:30 p.m.10:00 a.m., local time, at the company’s corporate headquarters located at 1 HSN Drive, St. Petersburg, Florida 33729. At the annual meeting, shareholders will be asked to:

Our Board of Directors has set March 21, 201122, 2012 as the record date for the annual meeting. This means that only holders of record of our common stock at the close of business on that date are entitled to receive notice of the meeting and to vote their shares at the meeting or any related adjournments or postponements.

Important Notice Regarding the Availability of Proxy Materials for the 20112012 Annual Meeting of Shareholders.On or about April 4, 2011,6, 2012, we are mailing to many of our shareholders a notice of availability of the proxy materials over the internet, rather than mailing a full paper set of the materials. The notice of availability contains instructions on how to access our proxy materials on the internet, as well as instructions on obtaining a paper copy of the materials. This process is more environmentally friendly and reduces our costs to print and distribute these materials. Shareholders who do not receive such a notice of availability and shareholders who have previously requested to receive a paper copy of the materials, will receive a full set of paper proxy materials by U.S. mail.

By Order of the Board of Directors,

Gregory J. Henchel

Secretary

April 4, 20116, 2012

St. Petersburg, Florida

PROXY STATEMENT

TABLE OF CONTENTS

i

PROXY STATEMENT

TABLE OF CONTENTS

(continued)

ii

PROXY STATEMENT

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

Proposal 1—to elect tennine directors, each to hold office for a one-year term ending on the date of the next succeeding annual meeting of shareholders or until such director’s successor shall have been duly elected and qualified; and

Proposal 2—to ratify the appointment of Ernst & Young LLP as our independent registered certified public accounting firm for the year ending December 31, 2011;

Proposal 3—to approve, on an advisory basis, the compensation paid to our named executive officers; and

Proposal 4—to approve, on an advisory basis, the frequency of future advisory votes on the compensation paid to our named executive officers.2012.

We will also consider other business as may properly come before the meeting and any related adjournments or postponements.

For a more detailed discussion of each of these proposals, please see the information included elsewhere in the proxy statement relating to these proposals.

Q:	What are the Board’s voting recommendations?

“FOR” each of the tennine nominees to the Board of Directors (Proposal 1); and

“FOR” the ratification of the appointment of Ernst & Young LLP as our independent registered certified public accounting firm (Proposal 2);

“FOR” the approval, on an advisory basis, of the compensation paid to our named executive officers (Proposal 3); and

“FOR” the approval, on an advisory basis, of a triennial vote, or vote every three years, on the compensation paid to our named executive officers (Proposal 4).

If your shares are held in the name of your broker, bank or other nominee, these shares are held in street name. As the beneficial owner of these shares, you have the right to direct your broker, bank or other nominee on how to vote the shares in your account. Since you are not the shareholder of record, you must request and receive a valid proxy from your broker, bank or anotherother holder of record in order to vote these shares in person at the annual meeting.

There is an important change this year regarding broker non-votes and director elections. If you are a beneficial owner whose shares are held of record by a broker, your broker has discretionary voting authority under NASDAQ rules to vote your shares on the ratification of Ernst & Young LLP, even if the broker does not receive voting instructions from you. However, your broker does not have discretionary authority to vote on the election of directors, the compensation of our named executive officers or the frequency of the vote on compensation without instructions from you, in which case a broker non-vote will occur and your shares will not be voted on these matters.

The proposal to ratify the appointment of Ernst & Young LLP as our independent registered certified public accounting firm requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote.

The proposals with respect to executive compensation are “advisory” and not binding upon the Board of Directors.

Street name holders may submit a proxy by telephone or the internet if their bank or broker makes these methods available, in which case the bank or broker will enclose related instructions with this proxy statement. If you submit a proxy by telephone or via the internet you should not return your proxy card. Instructions on how to submit a proxy by telephone or via the internet are located on the proxy card enclosed with this proxy statement. If you hold your shares through a bank or broker, follow the voting instructions you receive from your bank or broker.

You should send any written notice or a new proxy card to HSN, Inc. c/o BNY Mellon Shareowner ServicesComputershare at the following address: BNY Mellon Shareowner Services, P.O. Box 3550, South Hackensack, NJ 07606-9250, or follow the instructions provided on your proxy card to submit a proxy by telephone or via the internet. You may request a new proxy card by calling BNY Mellon Shareowner Services,Computershare, Proxy Processing at 1-888-313-0164 (toll-free).

In addition to solicitation by mail, our directors, officers and employees may solicit proxies from shareholders by telephone, letter, facsimile or in person; but will not receive any additional compensation for these services. Following the original mailing of the proxy solicitation materials, we will request brokers, custodians, nominees and other record holders to forward copies of the proxy statement and related soliciting materials to persons for whom they hold shares of our common stock and to request authority for the exercise of proxies. In such cases, upon the request of the record holders, we will reimburse such holders for their reasonable expenses.

Eligible shareholders who intend to present a proposal at the 20122013 annual meeting of shareholders without inclusion of the proposal in the proxy materials must provide notice no earlier than January 20, 201219, 2013 and no later than 5:00 p.m., Eastern Time, February 19, 201218, 2013 and must comply with the provisions of our By-Laws. We advise you to review our By-Laws, which contain these and other requirements with respect to advance notice of shareholder proposals and director nominations, including certain information that must be included concerning the shareholder making the proposal, each nominee and the proposal itself. Our By-Laws were filed as an exhibit to our Form 8-K filed with the SEC on August 25, 2008. Our public filings can be viewed by visiting our investor relations website athttp://www.hsni.com/. You may also obtain a copy, free of charge, by writing to our Corporate Secretary at our principal executive office at 1 HSN Drive, St. Petersburg, Florida 33729, Attention: Legal Department.

PROPOSAL 1—ELECTION OF DIRECTORS

Proposal and Required Vote

Proposal 1 is the election of tennine nominees to the Board of Directors. In accordance with our By-Laws, the Board has fixed the number of directors constituting the entire Board of Directors at ten.nine. The Governance and Nominating Committee, or Governance Committee, has evaluated individual board members, the committees and the Board of Directors as a whole. The evaluation sought to ascertain, among other things, whether the Board and its committees were functioning effectively and whether the directors had the necessary skills, background and experiences to meet the company’s evolving needs. Based on this evaluation, the Governance Committee has recommended that all ten of ourthe current directors described below be nominated for re-election. If elected, each will hold office until the next succeeding annual meeting of shareholders or until such director’s successor has been duly elected and qualified. Information concerning all director nominees appears below.

Each of the nominees has consented to be named as a nominee and has indicated his or her intention to serve, if elected. If any nominee should decline re-election or become unable to serve for any reason, votes will be cast for a substitute nominee, if any, designated by the Board of Directors or, if none is so designated prior to the election, votes will be cast according to the judgment of the person or persons voting the proxy.

Our directors are elected by a plurality vote of the shares present in person or represented by proxy at the meeting and entitled to vote. In accordance with our Corporate Governance Guidelines, in an uncontested election (i.e., an election where the number of nominees is not greater than the number of directors to be elected) any nominee for director who receives a greater number of votes “against” his or her election than votes “for” such election shall promptly offer his or her resignation to the Board. The Governance Committee shall consider the resignation offer and make a recommendation to the Board. In deciding the action to be taken with respect to any such resignation offer, the independent members of the Board shall consider a number of factors to determine what is in the best interests of the company and its shareholders. Following the Board’s decision, we will promptly disclose publicly such decision, together with a description of the process by which the decision was made and, if applicable, the Board’s reason or reasons for rejecting the tendered resignation.

Valid proxies received pursuant to this solicitation will be voted in the manner specified. Where no specification is made, it is intended that the proxies received from shareholders will be voted FOR the election of the director nominees identified below.

The Board of Directors unanimously recommends that shareholders vote FOR the election of each of its nominees for director named below.

Information Regarding Director Nominees

The information provided below about each nominee is as of the date of this proxy statement. The information presented includes the names of each of the nominees, along with his or her age, all positions held with the company, term of office as a director, principal occupations or employment for the past five years or more, involvement in certain legal proceedings, if applicable, and the name of all other publicly-held companies for which he or she currently serves as a director or has served as a director during the past five years. The information also includes a description of the specific experience, qualifications, attributes and skills of each nominee that led our Governance Committee to conclude that he or she should serve as a director of the company for the ensuing term.

Gregory R. Blatt, 42, has served as a member of the Board of Directors since August 2008. Since November 2003, Mr. Blatt has held positions of increasing responsibility with IAC/InterActiveCorp, or IAC, our former parent and a leading internet company. Since December 2010, Mr. Blatt has served as Chief Executive Officer of IAC. From February 2009 to December 2010, Mr. Blatt served as Chief Executive Officer of Match.com, the leading subscription based on-line dating service and an operating segment of IAC. From March 2005 through February 2009, Mr. Blatt served as Executive Vice President, General Counsel and Secretary of IAC and from

November 2003 through March 2005, Mr. Blatt served as Senior Vice President, General Counsel and Secretary. Prior to joining IAC, from May 1999 through October 2003, Mr. Blatt served as General Counsel of Martha Stewart Living Omnimedia, Inc., or MSO, an integrated media and merchandising company providing consumers with lifestyle content and products. Mr. Blatt was previously an associate at Grubman Indursky & Schindler, P.C., a New York entertainment and media law firm, and Wachtell, Lipton, Rosen & Katz, a New York law firm. Mr. Blatt also currently serves on the boards of directors of Interval Leisure Group, Inc. and Meetic, Inc.

During the time we were a subsidiary of IAC, Mr. Blatt gained unique insight into our business model and operations. As a result of his positions with IAC, Mr. Blatt has a deep understanding of online and offline marketing, as well as brand management. Mr. Blatt’s experiences as a mergers and acquisitions attorney, a media attorney, and a general counsel give him an in-depth understanding of the transactional, financial and legal issues impacting our company.

Patrick Bousquet-Chavanne, 53,54, has served as a member of the Board of Directors since August 2008. Since September 2009, Mr. Bousquet-Chavanne has held positions with Yoostar Entertainment Group, the owner and developer of the Yoostar technology and interactive entertainment system. Since May 2010, Mr. Bousquet-Chavanne has served as Co-Chairman of Yoostar and from September 2009 to May 2010, he served as President and Chief Executive Officer. From July 2008 to August 2009, Mr. Bousquet-Chavanne served as President,

Chief Executive Officer and member of the board of directors of T-Ink, Inc., a company specializing in advanced conductive technology. From July 2001 through June 2008, Mr. Bousquet-Chavanne served as Group President of The Estée Lauder Companies Inc., a leading provider of skin care, makeup and fragrance products. Previously, Mr. Bousquet-Chavanne was President of Estée Lauder International, Inc. Prior to that, Mr. Bousquet-Chavanne served as Managing Director in the United Kingdom for Elizabeth Arden, a global prestige and beauty products company. Mr. Bousquet-Chavanne is a member of the board of directors of Brown-Forman Corporation and serves on the Advisory Board of the New York City Ballet.

Mr. Bousquet-Chavanne’s service with both The Estée Lauder Companies Inc. and Elizabeth Arden provide him with invaluable insight into the beauty industry. Beauty products are generally key entry points for customers of our HSN operating segment. In his roles with Yoostar, Mr. Bousquet-Chavanne also has insight into the retail electronics market, another important category for HSN. As a result of Mr. Bousquet-Chavanne’s knowledge of these two merchandise categories and his many years of experiences developing brandswith branding, licensing and marketing to women,distribution of consumer goods, he is able to provide valuable strategic insight on reaching consumers and on the importance of innovation.

Michael C. Boyd, 69,70, has served as a member of the Board of Directors since August 2008. Mr. Boyd currently serves on the board of directors of FourthWall Media, formerly known as BIAP.com, and a leading provider of interactive television and advanced advertising solutions. From 2002 to 2010, Mr. Boyd served as Chairman and Chief Executive Officer of Longport, Inc., a medical technology company specializing in high resolution imaging. In 1986, Mr. Boyd was a co-founder ofco-founded QVC, Inc., a leader in consumer direct commerce and one of our direct competitors in the direct response television arena. He served as President until his retirement in 1994. Mr. Boyd previously served on the board of directors of SHOP.COM, a site devoted to delivering a comprehensive shopping experience on the web, and The Franklin Mint, the world’s leading private mint. Mr. Boyd has been nominated as a director by Liberty Media Corporation, our largest shareholder. See “Certain Relationships and Related Party Transactions—Relationship Between HSNi and Liberty.”

Mr. Boyd’s experience with QVC and his service on the board of directors of Fourth Wall Media, and formerly SHOP.COM, provide him with valuable insight into the electronic retailing and direct-to-consumer markets. Mr. Boyd also has extensive experience in the direct response catalog and collectible businesses. Mr. Boyd’s professional experiences and his significant knowledge of issues that directly impact the television retail and catalog industries make him particularly well-suited for service to HSNi.

William Costello, 64,65, has served as a member of the Board of Directors since August 2008. Beginning in November 1989 and through his retirement in March 2007, Mr. Costello served in a number of executive

positions with QVC. He joined QVC as its Chief Financial Officer in November 1989, became President of QVC International in July 2001 and Chief Operating Officer in May 2002. Prior to joining QVC, Mr. Costello served as Chief Financial Officer, then Chief Operating Officer and a member of the board of directors of Best Products, a catalog showroom retailer. Prior to joining Best Products, Mr. Costello was a partner at KPMG LLP. Mr. Costello was nominated as a director of HSNi by Liberty Media Corporation. See “Certain Relationships and Related Party Transactions—Relationship Between HSNi and Liberty.”

Mr. Costello’s executive positions with QVC have given him important insight into the area of electronic retailing and his experience with Best Products has given him valuable insight into the catalog business. Mr. Costello’s professional experiences as well as his financial acumen enable him to provide significant contributions to HSNi, particularly in the areas of operations and finance.

James M. Follo, 51,52, has served as a member of the Board of Directors since August 2008. Since January 2007, Mr. Follo has served as Senior Vice President and Chief Financial Officer of The New York Times Company, a diversified media company that includes newspapers and internet businesses. From July 1998 through March 2006, Mr. Follo served in various senior financial management positions at MSO,Martha Stewart Living Omnimedia, Inc., an integrated media and merchandising company, most recently as Chief Financial and Administrative Officer. Mr. Follo is a certified public accountant.

As the Chief Financial Officer of The New York Times, Mr. Follo’s responsibilities include all treasury, financial reporting, financial management, investor relations, taxes and internal audit oversight. Mr. Follo’s professional experiences enable him to qualify as an “audit committee financial expert” as defined by the SEC. Mr. Follo also has experience in such industries as print media, digital media, television, licensing and product design, catalog and e-commerce, all industries in which HSNi also operates. As a result of Mr. Follo’s extensive business and financial experience, he is able to provide valuable business, financial and risk management advice. Mr. Follo’s specific experiences and leadership skills make him a valuable asset to our Board and a natural leader for our Audit Committee.Board.

Mindy Grossman, 53,54, has served as a member of our Board of Directors and Chief Executive Officer since completion of the spin-off in August 2008. Commencing in April 2006 and through the spin-off,August 2008, Ms. Grossman served as Chief Executive Officer of IAC Retailing, which consisted of HSN, Cornerstone Brands and two other IAC e-commerce businesses. Ms. Grossman joined IAC from Nike, Inc., the largest seller of athletic footwear and apparel in the world, where she served as Vice President and head of the company’s global apparel business from October 2000 to March 2006. From October 1995 to October 2000, Ms. Grossman was President and CEO at Polo Jeans Company, then a licensee of Polo Ralph Lauren Corporation, and from October 1994 to October 1995, Vice President of New Business Development at Polo Ralph Lauren Corporation, a global leader in the design, marketing and distribution of premium lifestyle products. From September 1991 to October 1994, Ms. Grossman was President of the Chaps Ralph Lauren division of Warnaco’s Menswear and Executive Vice President of Warnaco Menswear division. From June 1987 to September 1991, Ms. Grossman was Vice President of Sales and Merchandising at Tommy Hilfiger.Hilfiger, a global apparel and retail company. Ms. Grossman serves on the board of directors atof the National Retail Federation and Fisker Automotive, as well as on the board of Cosmetic Executive Women. She is the Chairperson of the Fashion Institute of Technology’s Executive Women in Fashion Advisory Board, and is a member of the advisory board of the J. Baker School of Retail at the Wharton School of Business.

Ms. Grossman is a 33-year veteran of the apparel and retail industries and is well-known for brand strategy and business development. She gained significant experience building businesses at Nike, Polo Jeans, Ralph Lauren and Tommy Hilfiger and, since becoming CEO of HSNi in 2006, has used this experience to help transform and relaunch HSN and to develop and expand the brand and product portfolio. Ms. Grossman brings to the Board extensive leadership, business and management experience, including specific experience in brand development. Ms. Grossman’s service as a director and CEO establishes a critical link between the Board and the senior leaders at HSNi, enabling the Board to perform its oversight function with the benefit of management’s perspective on the business.

Stephanie Kugelman, 63,64, has served as a member of our Board of Directors since August 2008. Ms. Kugelman currently serves as a principal of A.S.O., A Second Opinion, a brand consultancy firm that she founded in 2007. Prior to that, for 36 years and until her retirement in 2007, Ms. Kugelman was employed by Young & Rubicam, a marketing and communications company specializing in advertising, public relations, direct marketing and brand identity consulting. During her tenure at Young & Rubicam, Ms. Kugelman served in increasingly senior roles, most recently as Vice Chairman and Chief Strategic Officer from June 2001 to March 2007 and as Chairman and Chief Executive Officer of Young & Rubicam’s New York office from May 1999 to May 2001. Ms. Kugelman continues to serve as a Vice Chairman Emeritus at Young & Rubicam. She is also a member of the board of directors of Whole Foods Market, Inc., the world’s largest retailer of natural and organic foods, as well as Safe Horizon, a support and advocacy agency for victims of crime and abuse.

Ms. Kugelman has significant experience with research, strategy, branding and management through her many years with Young & Rubicam. Through her consulting firm, Ms. Kugelman also specializes in consulting on strategy and marketing. Ms. Kugelman brings significant insight on strategic matters such as brand development, management and marketing. Through her professional and personal experiences, Ms. Kugelman is able to identify with our core customers and provide tremendous insight into the buying trends of those core customers.

Arthur C. Martinez, 71,72, has served as the Chairman of the Board since August 2008. Mr. Martinez retired in 2000 as Chairman of the Board, President and Chief Executive Officer of Sears Roebuck and Co., positions he held since 1995. From 1992 to 1995, he was Chairman and Chief Executive Officer of the former Sears Merchandise Group, the fourth largest broadline retailer with approximately 3,900 retail stores. From 1990 to 1992, Mr. Martinez served as Vice Chairman and a director of Saks Fifth Avenue, a fashion retail organization. Mr. Martinez is currently a member of the boards of directors of American International Group, Inc., IAC, International Flavors & Fragrances Inc., Liz Claiborne, Inc. and PepsiCo, Inc. In addition, Mr. Martinez serves as a Trustee of Greenwich Hospital, Northwestern University, the Chicago Symphony Orchestra and Maine Coast Heritage Trust. Mr. Martinez previously served as Chairman of the Supervisory Board of ABN AMRO Holding, N.V.

Mr. Martinez’s significant experience working in the retail industry and advising and counseling members of senior management has made him a valuable resource to our executive officers. As a result of his significant professional experience in the retail environment, Mr. Martinez is very familiar with issues related to strategy, finance and operations faced by HSNi. Mr. Martinez’s service on the boards of several leading public companies enables him to provide critical corporate governance and compliance insights as well as ensure that our Board meetings are efficiently and effectively run.

Thomas J. McInerney, 46,47, has served as a member of the Board of Directors since August 2008. SinceMr. McInerney is currently a private investor. From January 2003 through March 2012, Mr. McInerney has held positions of increasing responsibilities with IAC. SinceIAC/InterActiveCorp, or IAC, our former parent and a leading internet company. From January 2005 through March 2012, Mr. McInerney has beenserved as Executive Vice President and Chief Financial Officer of IAC. FromIAC and, from January 2003 through December 2005, Mr. McInerney served as Chief Executive Officer of the retailing division of IAC (which included HSN and Cornerstone). Beginning in May 1999 and through January 2003, Mr. McInerney served as Executive Vice President and Chief Financial Officer of Ticketmaster and its predecessor company, Ticketmaster Online-Citysearch, Inc., a leading live entertainment ticketing and marketing company. Prior to joining Ticketmaster, Mr. McInerney worked at Morgan Stanley, most recently as a Principal. Mr. McInerney also serves on the board of directors of Interval Leisure Group, Inc. and Yahoo! Inc.

Mr. McInerney has served as a senior executive officer of IACour former parent company for over eight years and he served as Chief Executive Officer of HSNi’s predecessor company for three of those years. As a result, Mr. McInerney has specific knowledge of our business model and operations. Mr. McInerney’s experience with technology companies gained through his years with IAC, enables him to provide valuable insight as we continue to expand our business model on to different platforms. The Board has been able to leverage Mr. McInerney’s significant knowledge of financial matters as well as specific knowledge of HSNi historical matters.

John B. (Jay) Morse, Jr., 64,65, has served as a member of the Board of Directors since December 2008. From November 1989 and until his retirement in December 2008, Mr. Morse served as Senior Vice President—Finance and Chief Financial Officer of The Washington Post Company, a diversified education and media company. He also served as President of Washington Post Telecommunications, Inc. and Washington Post Productions, Inc., both subsidiaries of The Washington Post Company. Prior to joining The Washington Post Company, Mr. Morse was a partner at PricewaterhouseCoopers where he worked with publishing/media companies and multilateral lending institutions for more than 17 years. Mr. Morse is currently a member of the board of directors of Host Hotels & Resorts Inc. (formerly Host Marriott Corporation) and AES Corporation. Mr. Morse also serves as a Trustee and President Emeritus of the College Foundation of the University of Virginia and is a former member of the Financial Accounting Standards Advisory Council (FASAC), an advisory group to the Financial Accounting Standards Board.

Mr. Morse brings substantial executive experience to our Board, specifically in the areas of finance, board oversight and investments. In his former positions, Mr. Morse was responsible for preparation of financial statements and SEC filings as well as treasury, tax, audit and risk management.management and has a deep understanding of accounting principles and financial reporting rules and regulations. Mr. Morse’s experiences enable him to

qualify as an “audit committee financial expert.” He has significant financial knowledge as demonstrated by his work history, his current service on the audit committees of Host Hotels & Resorts, Inc. and AES Corporation and his involvement with the FASAC. Mr. Morse’s experience with companies operating in different industries enables him to provide broad perspectives.

Assuming election of all nominees above, below is a list of persons who will constitute our Board of Directors following the meeting, including their committee assignments. Additional information regarding the roles and responsibilities of each of the different committees is provided in the section entitled “Corporate Governance.”

PROPOSAL 2—RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED

CERTIFIED PUBLIC ACCOUNTING FIRM

Proposal and Required Vote

Proposal 2 is to ratify the appointment of our independent registered certified public accounting firm. Based on the recommendation of our Audit Committee, the Board of Directors has appointed Ernst & Young LLP, or E&Y, as our independent registered certified public accounting firm for the fiscal year ending December 31, 2011.2012. E&Y has served as our independent registered certified public accounting firm since 2008. A representative of E&Y is expected to be present at the annual meeting and will be given an opportunity to make a statement if he or she so chooses and will be available to respond to appropriate questions.

Our By-Laws do not require that the shareholders ratify the appointment of E&Y; however, we are submitting the appointment of E&Y to the shareholders for ratification as a matter of good corporate governance. If the shareholders do not ratify the appointment, the Board of Directors and the Audit Committee will reconsider whether or not to retain E&Y. Even if the appointment is ratified, the Board and the Audit Committee, in their discretion, may change the appointment at any time during the year if they determine that such a change would be in the best interests of HSNi and our shareholders.

The ratification of the appointment of E&Y as our independent registered certified public accounting firm for 20112012 requires the affirmative vote of the majority of shares present in person or represented by proxy and entitled to vote.

The Board of Directors unanimously recommends that the shareholders vote FOR ratification of the appointment of Ernst & Young LLP as our independent registered certified public accounting firm for 2011.2012.

Fees Paid to Our Independent Registered Certified Public Accounting Firm

The following table describes the fees for all professional services rendered by E&Y for the audit of our financial statements for 20092010 and 20102011 and for other services rendered by E&Y:

Audit and Non-Audit Services Pre-Approval Policy

Consistent with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation of and overseeing the work of the independent auditor. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent auditor. The Audit Committee determines the scope of the independent auditor’s engagement and approves the fees and other compensation to be paid. On an annual basis, the Audit Committee reviews and discusses with the independent auditor all significant relationships the firm has with HSNi to determine the auditor’s independence.

The Audit Committee’s policy is to pre-approve all audit and permitted non-audit services, in accordance with guidelines established by the Audit Committee, performed by our independent registered certified public accounting firm. Pre-approval is generally detailed as to the particular service or category of services and is subject to a specified budget. Management is required to seek pre-approval of services that will exceed the budget or for services that are not detailed in an existing pre-approval. The Chair of the Audit Committee has been delegated the authority to pre-approve certain services between regularly scheduled meetings, with ratification by the Audit Committee at the next regularly scheduled meeting. Management reports quarterly to the Audit Committee on the services provided by the independent registered certified public accounting firm and the fees for the services performed to date. All services performed by E&Y during fiscal years 20092010 and 20102011 were approved in accordance with this policy.

PROPOSAL 3—ADVISORY VOTE ON EXECUTIVE COMPENSATION

Proposal and Required Vote

Proposal 3 is to approve the compensation of our named executive officers, or NEOs, disclosed pursuant to the SEC’s compensation disclosure rules, including the compensation discussion and analysis, compensation tables and narrative discussion. These are described in the sections of this proxy statement entitled “Compensation Discussion and Analysis” and “Executive Compensation.” This proposal, commonly known as a “say on pay” proposal, is in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Reform Act, which requires companies such as HSNi to include an advisory vote on executive compensation at certain shareholder meetings held on or after January 21, 2011.

The advisory vote is non-binding, meaning that our Board will not be obligated to take any compensation actions or adjust our executive compensation in response to the vote. The proposal gives shareholders the opportunity to endorse or not endorse our fiscal 2010 executive compensation, including philosophy, programs and policies and the compensation paid to our NEOs. Although the vote is non-binding, the Compensation Committee and the Board will review the results of the vote. To the extent there is a significant vote against the compensation of our NEOs, we would expect to communicate with our shareholders to better understand the concerns that influenced that vote. The Board and Compensation Committee would consider constructive feedback obtained through this process in making future determinations concerning our executive compensation.

The Board of Directors unanimously recommends that the shareholders vote FOR the approval, on an advisory basis, of the compensation of our NEOs as described in the sections of this proxy statement entitled “Compensation Discussion and Analysis” and “Executive Compensation.”

Information Regarding Executive Compensation

As described in the Executive Compensation and the Compensation and Discussion Analysis sections included in this proxy statement, the Compensation Committee has developed an executive compensation program and related practices, policies and procedures, designed to attract and retain talent critical to our long-term success, reward performance and align the interests of our NEOs with the interests of our shareholders. Consistent with this philosophy, a significant portion of the total compensation opportunity for each of our NEOs is directly related to performance factors that measure our progress against the goals of our operating plan. We believe that our executive compensation program is strongly aligned with the interests of our shareholders.

Shareholders are urged to read the Compensation Discussion and Analysis and Executive Compensation sections of this proxy statement, which discuss and describe how our compensation policies and procedures implement our compensation philosophy. Management of the company and the Compensation Committee believe that the compensation program is instrumental in helping HSNi achieve strong financial performance.

PROPOSAL 4—ADVISORY VOTE ON FREQUENCY OF VOTING

ON EXECUTIVE COMPENSATION

Proposal and Required Vote

Proposal 4 is to vote on a non-binding advisory proposal regarding the frequency of the advisory shareholder vote on the compensation of our NEOs discussed in Proposal 3 above. Pursuant to the Reform Act, at least once every six years, we are required to provide our shareholders with the right to cast an advisory vote on the frequency of the advisory vote on executive compensation. In casting their advisory vote, shareholders may choose among the following four options: (1) an annual vote, (2) a vote every two years (biennial), (3) a vote every three years (triennial) or (4) to abstain from voting on the matter.

Because your vote is advisory, it will not be binding upon the company or the Board of Directors; however, the Board of Directors will take into account the outcome of the vote when considering the frequency of the advisory shareholder vote on executive compensation.

The Board of Directors unanimously recommends that the shareholders vote for the approval, on an advisory basis, of a triennial vote, or vote every three years, on the compensation of our NEOs.

Information Regarding Frequency of Review of Executive Compensation

The Board believes that a triennial vote is most appropriate because a three-year period is more closely aligned with the longer-term view that the Compensation Committee takes with respect to significant components of our NEOs’ compensation, and would provide shareholders the appropriate time frame to evaluate the effectiveness of these programs. Additionally, a longer period of time between votes would provide the opportunity for shareholders and advisory services to engage in more thoughtful analysis and would facilitate more meaningful dialogue between shareholders and the Board regarding our executive compensation practices, which are best measured over a more complete awards cycle.

Like the advisory vote on compensation, the advisory vote on frequency of such vote is non-binding. Although the vote is non-binding, our Board and the Compensation Committee will review the voting results and, depending on the voting results, the Board and the Compensation Committee may consider an advisory vote more frequently than triennially.

CORPORATE GOVERNANCE

Generally

Our Board of Directors is elected by the shareholders to oversee management in the conduct of HSNi’s business and to assure that the long-term interests of our shareholders are being served. The Board holds regularly scheduled meetings at least quarterly and as otherwise needed to consider corporate decisions requiring its attention and action. The Board has four standing committees: the Audit Committee, the Compensation and Human Resources Committee (also referred to as the Compensation Committee), the Governance and Nominating Committee (also referred to as the Governance Committee), and the Executive Committee. With the exception of the Executive Committee, each of the committees operates under a written charter which may be found on our corporate website atwww.hsni.com. The principal responsibilities of these committees are described below.

Code of Ethics and Corporate Governance Guidelines

The Board of Directors adopted a Code of Business Conduct and Ethics which is applicable to all employees of HSNi, including all of our NEOs and directors. The code reflects our commitment to the conduct of our business affairs in accordance with not only the requirements of the law but also standards for ethical conduct that will maintain and foster our reputation for honest and straightforward business dealings.

The Board also adopted Corporate Governance Guidelines to provide a flexible framework for the effective functioning of the Board of Directors. HSNi’s corporate governance practices are designed to align the interests of the Board and management with those of HSNi’s stockholders and to promote honesty and integrity throughout the company. The guidelines address, among other things, the composition and functions of the Board of Directors, qualifications of Board and committee members, stock ownership guidelines and the process for the selection of new directors.

These documents are reviewed annually and amended as necessary or appropriate in response to changing regulatory requirements and evolving best practices. In 2010, the Board of Directors approved an amendment to the Code of Ethics to add an executive compensation recovery, or clawback policy, applicable to all of our executive officers. In 2012, the Board approved amendments to the Corporate Governance Guidelines to (i) include stock ownership guidelines for named executive officers and (ii) describe the disclosure process when the Board is faced with a resignation after a director has received a greater number of votes “against” his or her election than “for” such election.

These documents, as well as other documents relating to corporate governance at HSNi, are available in the corporate governance section of our website atwww.hsni.com. You may also obtain copies of these materials, free of charge, by sending a written request to HSN, Inc., Legal Department, 1 HSN Drive, St. Petersburg, FL 33729, Attn: Corporate Secretary.

Director Qualifications

The Board seeks members from diverse personal and professional backgrounds who combine a broad spectrum of experience and expertise to facilitate Board deliberations that reflect a broad range of perspectives. While the company’s Corporate Governance Guidelines do not prescribe specific diversity standards, as a matter of practice, we broadly construe diversity to mean a variety of opinions, perspectives, personal and professional experiences and backgrounds, such as gender, race and ethnicity, as well as other differentiating characteristics. At a minimum, directors should also have an inquisitive and objective perspective, practical wisdom and mature judgment. Directors should also possess the highest personal and professional ethics, integrity and values, and be committed to representing the long-term interests of the shareholders. The directors we seek must exhibit a commitment of both time and active attention to fulfill their fiduciary obligations. We also expect our directors to stay informed about issues that are relevant to the company.

The Governance Committee is responsible for identifying, evaluating and recommending candidates to the Board for Board membership. The Governance Committee believes that each of our directors has the qualities

and skills that are necessary to effectively serve the Board of Directors. In addition, each of our directors has certain specific experience, qualities, attributes and/or skills that make him or her uniquely qualified to serve as a director of HSNi.

Director Nominations Process

Directors may be nominated by the Board of Directors or by shareholders in accordance with our By-Laws. In order to fulfill its responsibility to recruit and recommend to the full Board nominees for election as directors, the Governance Committee annually reviews the size and composition of the Board and its committees. In accordance with our Corporate Governance Guidelines, with respect to each nominee, the committee considers director qualifications (as described above), director independence, other directorships or significant activities, service on other boards and the results of the annual evaluations of the Board and its members.

The Governance Committee will, when appropriate, actively seek individuals qualified to become Board members, and solicit input on director candidates from a variety of sources, including current directors. As a matter of course, the Governance Committee will evaluate a candidate’s qualifications and review all proposed nominees, including those proposed by shareholders. While theThe Governance Committee may retain a third party to assist in the nomination process, it has not done so to date.process.

Eligible shareholders may nominate a candidate for election to the Board by complying with the nomination procedures in our By-Laws. For an election to be held at an annual meeting of shareholders, nomination by a shareholder must be made by written notice delivered to the Corporate Secretary not less than 45 days nor more than 75 days prior to the anniversary of the date on which we first mailed the proxy materials for our last annual meeting. An eligible shareholder’s notice to the Corporate Secretary must be in writing and be delivered to HSN, Inc., Legal Department, 1 HSN Drive, St. Petersburg, Florida 33729, Attn: Corporate Secretary, and must include:

The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedures. A shareholder’s compliance with these procedures will not require HSNi to include information regarding a proposed nominee in HSNi’s proxy solicitation materials.

Pursuant to an agreement with Liberty Media Corporation, our largest shareholder, so long as Liberty beneficially owns securities representing at least 20% of the total voting power of HSNi’s equity security, Liberty has the right to nominate up to 20% of the directors serving on the Board of Directors (rounded up to the nearest whole number). Any individual nominated by Liberty must be reasonably acceptable to a majority of the directors on HSNi’s Board who were not nominated by Liberty. All but one of Liberty’s nominees serving on the Board of Directors must qualify as “independent” under applicable stock exchange rules.

Director Independence

It is the Board’s policy that a majority of the members of the Board shall be directors who are independent. Under applicable listing standards, the Board must determine the independence of its directors in light of their

relationships with HSNi and in light of applicable listing standards. To determine independence, the Board uses the NASDAQ rules and reviews information obtained from director questionnaires, our records and publicly available information regarding relationships with HSNi. Following these determinations, management monitors transactions, relationships and arrangements that it has considered, as well as any new relationships, for developments that could affect its determinations.

The Board, upon the recommendation of the Governance Committee, has determined that each of Messrs. Bousquet-Chavanne, Boyd, Follo, Martinez, McInerney and Morse and Ms. Kugelman are independent.

This independence determination is analyzed annually in both fact and appearance to promote arms-length oversight.

Board Leadership Structure

Our Corporate Governance Guidelines do not require that we separate the roles of Chairman of the Board and Chief Executive Officer (“CEO”); however, we do currently separate these roles. The CEO is responsible for setting the strategic direction of HSNi and for the day-to-day leadership and performance of the company. The Chairman is the Board’s principal liaison with management, with particular focus on public company reporting obligations and corporate governance matters. Our Chairman maintains an effective working relationship with the CEO and senior management, provides ongoing guidance to the CEO as to the Board’s needs, interests and opinions and sets the agenda for Board meetings and presides over such meetings. We believe the current structure provides strong leadership for our Board, while also positioning the CEO as the leader of the company for our investors, employees and other stakeholders.

Shareholder Communications with the Board of Directors

Shareholders who wish to communicate with the Board of Directors or a particular director may send such communication to HSN, Inc., 1 HSN Drive, St. Petersburg, Florida 33729, Attention: Corporate Secretary. The mailing envelope must contain a clear notation indicating that the enclosed letter is a “Shareholder-Board Communication” or “Shareholder-Director Communication.” All such letters must identify the author as a shareholder, provide evidence of the sender’s stock ownership, and clearly state whether the intended recipients are all members of the Board or a particular director or directors. The Corporate Secretary will then review such correspondence and forward it to the Board, or to the specified director(s).

The Board of Directors and Committees

The Board

HSNi’s business is conducted by its employees, under the direction of the CEO and with oversight by the Board of Directors. Board members are elected by the shareholders to oversee management and to assure that the interests of the shareholders are being served. Both the Board and management recognize that the interests of the shareholders are advanced by responsibly addressing the concerns of other stakeholders and interested parties including employees, customers, vendors, suppliers, government officials and the public at large. The Board believes the primary responsibilities of directors are to exercise their business judgment in good faith and to act in a manner they reasonably believe is in the best interests of the company and its shareholders. Directors must fulfill their responsibilities consistent with their fiduciary duties to shareholders and in compliance with all applicable rules and regulations.

In 2010,2011, the Board met four times and acted by written consent once. Each member of the Board of Directors attended at least 75% of the meetings of the Board and the Board committees on which the director served. Although HSNi has no policy with respect to director attendance at annual meetings, it is anticipated thatmeetings; however, all Board members will attendhave historically attended the annual meetings of shareholders in person.

Audit Committee

The Audit Committee oversees our accounting and financial reporting processes and the audits of our consolidated financial statements. The committee assists the Board of Directors in monitoring (1) the integrity of our financial statements, (2) the effectiveness of our internal control over financial reporting, (3) the qualifications and independence of our independent registered certified public accounting firm, (4) the performance of our internal audit function and independent registered certified public accounting firm, and (5) our compliance with legal and regulatory requirements. The committee is also directly responsible for the appointment, compensation, retention and oversight of the independent registered certified public accounting firm.

The Audit Committee is also responsible for oversight over the company’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the company’s risk assessment and risk management policies. The Audit Committee reviews all related party transactions in accordance with the company’s formal written policy. In addition, the Audit Committee has established procedures for the receipt, retention and treatment of complaints received by the company regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by company employees of concerns regarding accounting and auditing matters.

The Audit Committee must consist of no fewer than three members, all of whom must be independent in accordance with applicable listing standards and at least one member must be a “financial expert” as defined under SEC rules. The Audit Committee currently consists of Messrs. Boyd, Follo and Morse, with Mr. Follo serving as Chairman of the committee. Assuming the election of all nominees to the Board of Directors, it is contemplated that Mr. McInerney will join the Audit Committee and Mr. Morse will assume the position of Chairman of the committee. Each of the Audit Committee members is considered “independent” as defined in the NASDAQ rules and SEC rules and regulations applicable to audit committees. The Board of Directors has determined that Mr.Messrs. Follo, McInerney and Mr. Morse are bothall “audit committee financial experts,” as such term is defined in applicable SEC rules. In 2010,2011, the Audit Committee met seven times.

Compensation and Human Resources Committee

The Compensation Committee exercises the powers of the Board of Directors pertaining to compensation and benefits, including incentive/bonus plans, stock compensation plans, retirement programs, insurance plans and salary matters relating to the compensation of the CEO and other executive officers. The Compensation Committee is responsible for periodically reviewing our incentive compensation arrangements to confirm that the design of incentive pay does not encourage unnecessary risk taking. The Compensation Committee also reviews the Compensation Discussion and Analysis contained in our proxy statement and prepares a report for inclusion in our proxy statement.

The Compensation Committee must consist of no fewer than two members, all of whom must be independent in accordance with applicable listing standards. In addition, at least two members must qualify as “outside” directors within the meaning of Section 162(m) of the Code. The Compensation Committee currently consists of Ms. Kugelman and Messrs. Morse and Bousquet-Chavanne, with Mr. Morse serving as Chairman of the committee. Assuming the election of all nominees to the Board of Directors, it is contemplated that Mr. Bousquet-Chavanne will assume the position of Chairman of the committee. Each of the Compensation Committee members is considered “independent” as defined in the NASDAQ rules and qualifies as an “outside” director within the meaning of Section 162(m) of the Code. In 2010,2011, the Compensation Committee met six times and acted by written consent twofour times.

Governance and Nominating Committee

This committee was originally established in August 2008 as the Nominating Committee and performed traditional nominating committee type functions. In December 2009, the committee and Board determined it was in our best interest to have a governance committee and revised the name, authority and responsibilities of this committee to include corporate governance and oversight. The Governance Committee oversees the identification and evaluation of director candidates, consistent with the criteria approved by the Board, and makes recommendations to the Board with respect to director nominees and the membership of the Board

committees. The Governance Committee also reviews and recommends to the Board compensation and benefits for non-employee directors. The committee annually evaluates our Corporate Governance Guidelines and Code of Business Conduct and Ethics. The committee also reviews and assesses the channels through which the Board receives information and the quality and timeliness of that information.

Although the NASDAQ rules do not require that listed companies have a nominating/governance committee, they do require that all director nominees be selected or recommended for the board of directors’ selection either by a majority of independent directors or by a nominating committee composed solely of independent directors. As a result, our Governance Committee is comprised solely of independent directors. In 2010,2011, the Governance Committee consisted of Messrs. Bousquet-Chavanne, Follo and Martinez, with Mr. Martinez serving as Chairman of the committee. Assuming the election of all nominees to the Board of Directors, it is contemplated that Mr. Follo will assume the position of Chairman of the committee. Each of the Governance Committee members is considered “independent” as defined in the NASDAQ rules. In 2010,2011, the Governance Committee met threefour times.

Executive Committee

The Executive Committee has all power and authority of our Board of Directors, except those powers specifically reserved to our Board of Directors by Delaware law or our organizational documents. The Executive Committee serves primarily as a means for addressing issues that may arise and require Board approval between regularly scheduled Board meetings.

The Executive Committee consists of Ms. Grossman and Messrs. Martinez and McInerney. During 2010,2011, the committee did not meet and did not take any action.

Other Committees

In addition to its standing committees, our Board of Directors may from time to time establish other committees of our Board of Directors, consisting of one or more of its directors.

The Board’s Role in Risk Oversight

The Board performs its riskis actively involved in the oversight roleof risks that could affect HSNi. This oversight is conducted in several different ways. The Board of Directors has allocated some areas of focus to its committees and has retained some areas of focus for itself. The Board has primary responsibility for overall enterprise risk management as well as oversight of the company’s strategic, operational, legal and regulatory and reputational risks. Board meetings regularly include strategic overviews by the CEO and CFO that describe the most significant issues, including risks, affecting HSNi. RisksKey enterprise risks are identified by management. HSNi’s plans to mitigate, manage and managed in accordance with the company’s risk management policy. HSNi’s risk management policy includes a formal process to identify and document the keymonitor these risks to the company and present theseare periodically presented to the Board of Directors.Directors, as are regular reports on the status of these efforts.

Our Audit Committee has primary responsibility for HSNi’s major financial risk exposures and the steps management has taken to monitor and control such exposures. The Compensation Committee is responsible for risks related to compensation matters and for periodically reviewing incentive compensation arrangements to

confirm that the design of incentive pay does not encourage unnecessary or excessive risk taking. The Governance Committee reviews risks related to legal and regulatory compliance as they relate to corporate governance structure and processes.

Ultimately, though, management is responsible for the day-to-day risk management process, including identification of key risks and implementation of policies and procedures to manage, mitigate and monitor risks. In fulfilling these duties, an Enterprise Risk Management Committee consisting of key members of management (including the Chief Financial Officer and General Counsel), was formed to assist the Board in fulfilling its oversight responsibilities. The Enterprise Risk Management Committee and/or senior management report regularly to the Board and its committees on areas of material risk to the company.

Review and Approval of Related-Person Transactions

Under the Audit Committee’s charter, and consistent with NASDAQ rules, any material potential or actual conflict of interest or transaction between HSNi and any “related person” of HSNi must be reviewed and approved or ratified by the Audit Committee. SEC rules define a “related person” of HSNi as any HSNi director (or nominee), executive officer, 5%-or-greater shareholder or immediate family member of any of these persons.

In August 2008, our Board adopted a written Policy for the Review and Approval of Related-Person Transactions. The policy provides that any “related person” as defined above must notify the chair of the Audit Committee before becoming a party to, or engaging in, a potential related-person transaction that may require disclosure in our proxy statement under SEC rules, or if prior approval is not practicable, as soon as possible after engaging in the transaction. Based on current SEC rules, transactions covered by the policy include any individual or series of related transactions, arrangements or relationships (including but not limited to indebtedness or guarantees of indebtedness), whether actual or proposed in which:

The Audit Committee chair has the discretion to determine whether a transaction is or may be covered by the policy. If the chair determines that the transaction is covered by the policy, then the full Audit Committee must review and approve it. The Audit Committee’s decision is final and binding. Additionally, the Audit Committee chair has discretion to approve, disapprove or seek full Audit Committee review of any other transaction involving a related person (i.e., a transaction not otherwise required to be disclosed in the proxy statement).

In considering potential related-person transactions, the Audit Committee looks not only to SEC and NASDAQ rules, including the impact of a transaction on the independence of any director, but also to the consistency of the transaction with the best interests of HSNi and our shareholders. As the policy describes in more detail, the factors underlying these considerations include:

Succession Planning

The Board recognizes the importance of effective executive leadership to HSNi’s success and views succession planning, for the CEO as well as certain other key executive officers, as one of its primary responsibilities. Pursuant to our Corporate Governance Guidelines, the full Board has primary responsibility for developing succession plans for the CEO and key executive officers.

Each year, we conduct an annual review process that includes succession plans for our Compensation Committee annuallysenior leadership positions. These succession plans are reviewed and approved by our CEO and details on these succession plans, including potential successors for members of our executive team (including the CEO), are presented to the Board. In addition, the Board reviews and updates our CEO succession plan, which includes formal criteria for the performanceCEO position used to evaluate potential successors, and addresses the possibility of an emergency situation. In conducting this review, the senior leaders to,Board considers, among other things, determine their compensationfactors, organizational and assist in the establishment ofoperational needs, competitive challenges, leadership/management potential and development, and emergency situations. The annual goals for the executive

officers. The CEO provides an annual report to the Board assessing senior managers and their potential to succeed the CEO and/or other executive officers. This reportreview is developedconducted in consultation with our Executive Vice President of Human Resources and the chair of our Compensation Committee and includes contingency plans in the event of our CEO’s termination of employment with HSNi for any reason. This process is enterprise-wide for senior leaders up to and including our CEO.Resources.

Director Compensation

General

The Governance Committee has primary responsibility for establishing director compensation arrangements, which are designed to provide competitive compensation necessary to attract and retain high quality non-employee directors and to encourage ownership of our stock to further align directors’ interests with those of our shareholders. When considering non-employee director compensation arrangements, our management will provide the Governance Committee with information regarding various types of non-employee director compensation arrangements and practices of selected peer companies.

In order to align the interests of our directors with those of our shareholders, a significant portion of the director fees are paid in the form of equity. Each non-employee director (other than Mr. Martinez) received an equity award, with a dollar value of $100,000 upon his or her initial election to the Board of Directors and receives grants in the same amount annually thereafter upon re-election at our annual meeting of shareholders. The equity compensation is paid in the form of deferred stock units, or DSUs. The DSUs are payable in actual HSNi shares six months following termination of Board service. In addition, each non-employee member of our Board of Directors receives an annual cash retainer in the amount of $50,000, which is payable quarterly. Each member of the Audit Committee and Compensation Committee (including their respective chairs) receives an additional annual cash retainer in the amount of $10,000. Each member of the Governance Committee receives an additional annual cash retainer in the amount of $5,000. The chair of each of the Audit Committee and Compensation Committee receives an additional cash retainer in the amount of $15,000. HSNi does not compensate employees for service on the Board.

Mr. Martinez serves as Chairman of the Board. For his services as Chairman, Mr. Martinez is paid an annual retainer of $250,000 and an annual equity grant with a dollar value of $250,000.

The original compensation program for non-employee directors was developed in 2008. In 2010, the Governance Committee conducted a review of the compensation paid to our non-employee directors. The committee retained Frederic W. Cook & Co., Inc. (“FWC”) which reviewed the company’s current director compensation as compared to the compensation structure of other companies in HSNi’s peer group. Based on this review and recommendation from the Governance Committee, the Board of Directors determined that the non-employee director compensation would remain the same; however, effective May 2011, the annual equity award granted upon election or re-election to the Board of Directors shall be paid in the form of deferred stock units, or DSUs, instead of restricted stock units, or RSUs. The DSUs would be payable in actual HSNi shares six months following termination of Board service. In addition, the Board determined to change equity vesting from two-year vesting to one-year vesting to be consistent with the Board members’ service for a one-year term.

Deferred Compensation Plan for Non-Employee Directors

Under our Deferred Compensation Plan for Non-Employee Directors, non-employee directors may defer all or a portion of their Board and committee fees.cash compensation. Eligible directors who defer all or any portion of these fees can elect to have such fees applied to the purchase of share units, representing the number of shares of our common stock that could have been purchased on the relevant date, or credited to a cash fund. If any

dividends are paid on the common stock, dividend equivalents will be credited on the share units. The cash fund will be credited with deemed interest at an annual rate equal to the weighted average prime lending rate of JPMorgan Chase Bank. After a director ceases to serve as such, he or she will receive (i) with respect to share units, such number of shares of our common stock as the share units represent and (ii) with respect to the cash fund, a cash payment in

an amount equal to deferred amounts, plus accrued interest. These payments will be made in either one lump sum or in up to five annual installments, as previously elected by the eligible director at the time of the related deferral election.

20102011 Director Compensation

The following table sets forth information for the fiscal year ended December 31, 20102011 regarding compensation of our non-employees directors:

Includes the impact of dividends paid on HSNi’s common stock through December 31, 2011 which were credited to the directors’ accounts as additional DSUs and share units and will be paid out as shares of HSNi common stock on the vesting date, subject to the same vesting restrictions as the underlying securities.

Report of the Audit Committee

Management is responsible for our internal controls and financial reporting process. Management is also responsible for the preparation of our consolidated financial statements in accordance with generally accepted accounting principles and applicable rules and regulations. Ernst & Young LLP, HSNi’s independent registered certified public accounting firm, is responsible for performing an independent audit of our consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board and an independent audit of our internal control over financial reporting and issuing reports thereon.

The Audit Committee is responsible for overseeing the accounting and financial reporting processes of HSNi and the audits of HSNi’s financial statements. In that regard, the Audit Committee assists the Board in monitoring (1) the integrity of our financial statements; (2) the effectiveness of HSNi’s internal control over financial reporting, (3) the qualifications and independence of HSNi’s independent registered certified public accounting firm, (4) the performance of HSNi’s internal audit department and independent registered certified public accounting firm; and (5) compliance by HSNi with legal and regulatory requirements. The Committee is directly responsible for the appointment (subject to shareholder ratification), compensation, retention, and oversight of the independent registered certified public accounting firm.

In fulfilling its obligations, the Audit Committee met seven times in 20102011 and held discussions with management, the company’s internal auditor and Ernst & Young LLP, or E&Y, both collectively and independently. The Audit Committee appointed E&Y and discussed with E&Y the overall scope and plans for the independent audit. The Audit Committee pre-approved all audit and non-audit services to be performed by E&Y. The Audit Committee regularly received reports from and met with management, internal audit and E&Y. In addition, among other things, the Audit Committee (1) reviewed all related party transactions in accordance with HSNi’s formal written policy; (2) compliedreviewed compliance with the procedures established by HSNi for the receipt, retention and treatment of complaints received by HSNi regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by company employees of concerns regarding accounting and auditing matters; (3) regularly discussed HSNi’s legal and regulatory environment, including specific legal and regulatory challenges; and (4) discussed with management HSNi’s major financial risks and the steps management has taken and will take to monitor and control such exposures.

In performance of its duties with respect to HSNi’s financial statements, the Audit Committee regularly met separately with E&Y, with and without management present, to discuss the results of their examinations, including the integrity, adequacy, and effectiveness of the accounting and financial reporting process and controls, and the overall quality of our financial reporting. In addition to discussing key areas, management, internal audit and E&Y also made presentations to the Audit Committee on specific topics of interest, including the audit process and methodology, SEC guidance and methodologies utilized by management for significant policies and accounting estimates.

The Audit Committee has reviewed and discussed the audited consolidated financial statements of HSNi for the fiscal year ended December 31, 20102011 with management and E&Y. The Audit Committee also reviewed HSNi’s quarterly financial statements with management and E&Y. The committee discussed HSNi’s interim financial information contained in each quarterly earnings announcement with HSNi’s Chief Financial Officer, HSNi’s Chief Accounting Officer and E&Y prior to public release.

In addition, the committee reviewed and discussed HSNi’s compliance with the requirements of the Sarbanes-Oxley Act of 2002 with respect to internal control over financial reporting. The Audit Committee also reviewed and discussed, together with management and E&Y, the results of management’s assessment of the effectiveness of HSNi’s internal control over financial reporting and E&Y’s audit of internal control over financial reporting.

The Audit Committee has discussed with E&Y the matters required to be discussed by Statement on Auditing Standards No. 61, as amended and adopted by theunder Public Company Accounting Oversight Board in

Rule 3200T,Auditing Standard AU Section 380, “Communication with Audit Committees.” The

Audit Committee has also received the written disclosures and the letter from E&Y required pursuant to Rule 3526 of the Public Company Accounting Oversight Board “Communication with the Audit Committees Concerning Independence,” and the Audit Committee has discussed with E&Y the firm’s independence. In addition, the Audit Committee considered whether the non-audit services provided by E&Y could impair its independence and concluded that such services would not.

Based on its review and the meetings, discussions and reports described above, and subject to the limitations of its role and responsibilities referred to above and in the Audit Committee Charter, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements for HSN, Inc. for the fiscal year ended December 31, 20102011 be included in our Annual Report on Form 10-K for the year ended December 31, 20102011 to be filed with the SEC.

Members of the Audit Committee

James M. Follo (Chairman)

Michael C. Boyd

John B. Morse, Jr.

Compensation Committee Interlocks Insider Participation

None of the members of the Compensation Committee is, or was during the last completed fiscal year, an employee or officer of HSNi or a former employee of HSNi, nor did any of them have any relationship requiring disclosure under Item 404 of Regulation S-K under the Securities Exchange Act of 1934, or the Exchange Act. In addition, during the last completed fiscal year, none of our executive officers have served as a member of the board of directors or compensation committee of any other entity that has or has had one or more of its executive officers serving as a member of our Board or the Compensation Committee.

Report of the Compensation and Human Resources Committee

The Compensation and Human Resources Committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K promulgated by the SEC and set forth in this proxy statement. The Compensation Committee has reviewed and discussed with management the company’s incentive compensation arrangements to confirm that the design of incentive pay does not encourage unnecessary risk taking. Based upon its review and the discussions referred to above, the Compensation and Human Resources Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.

Members of the Compensation and Human Resources Committee

John B. Morse, Jr. (Chairman)

Patrick Bousquet-Chavanne

Stephanie Kugelman

MANAGEMENT

Executive officers are elected annually by the Board and serve at the discretion of the Board. Set forth below is information regarding our executive officers as of March 31, 2011.2012.

Mindy Grossman’s biography is set forth under the heading “Proposal 1—Election of Directors.”

Judy A. Schmeling has served as Executive Vice President and Chief Financial Officer of HSNi since completion of the spin-off in August 2008. Ms. Schmeling has held positions of increasing responsibility with HSN, one of HSNi’s two operating segments, since joining the company in September 1994. From February 2002 through August 2008, she served as Executive Vice President and Chief Financial Officer of HSN, when it was IAC Retailing. From November 1999 to February 2002, Ms. Schmeling served as Senior Vice President, Finance; from January 2001 to February 2002, served as Chief Operating Officer of HSN’s international operations and from January 1998 to November 1999, as Vice President, Strategic Planning and Analysis. Ms. Schmeling served as Director of Investor Relations and Operating Vice President, Finance of HSN from September 1994 to January 1998 during the time in which HSN was a separately traded public company. Prior to joining HSN, Ms. Schmeling was Managing Director of Tunstall Consulting, Inc., a corporate financial planning firm, from 1986 to 1994. Ms. Schmeling began her career at Deloitte & Touche, an international public accounting firm where she held various positions from 1982 to 1986.

Gregory J. Henchel has served as Executive Vice President, General Counsel and Secretary of HSNi since February 2010. Prior to joining HSNi, Mr. Henchel was Senior Vice President and General Counsel of Tween Brands, Inc., a specialty retailer, from October 2005 to February 2010. Mr. Henchel2010 and served as the company’s Secretary sincefrom August 2008.2008 to February 2010. From May 1998 to October 2005, Mr. Henchel served Cardinal Health, Inc., a global medical device, pharmaceutical and healthcare technology company. From 2001 to 2005, Mr. Henchel served as Assistant General Counsel of Cardinal Health and from 1998 to 2001, Mr. Henchel served as Senior Litigation Counsel. Prior to his service at Cardinal Health, Mr. Henchel was an associate with the law firm of Jones Day from September 1993 to May 1998. Mr. Henchel also serves on the Board of Directors of the Electronic Retailing Association.

Lisa A. Letizio has served as Executive Vice President, Human Resources of HSNi since completion of the spin-off in August 2008. In this capacity, Ms. Letizio oversees the Human Resources team for all of HSNi, which includes both the HSN and the Cornerstone operating segments. From 1998 and until the spin-off,August 2008, Ms. Letizio served as Executive Vice President, Human Resources of HSN and Cornerstone (since its acquisition in 2005). Previously, Ms. Letizio spent six years as Vice President of Human Resources for the Timberland Company, a company listed on the New York Stock Exchange and recognized as a global leader in the design and marketing of premium-quality footwear, apparel and accessories with approximately 6,000 full and part-time employees worldwide. Ms. Letizio also serves onis the Chairperson of the Board of Big Brothers Big Sisters servingof Pinellas CitrusCounty, Florida and Hernando countiesis a member of the Board of Women Executive Leadership in Florida.

Lynne Ronon has served as Executive Vice President, Merchandising of HSN since October 2007. Prior to joining HSN, Ms. Ronon was Senior Vice President North Asia for Burberry from December 2003 to September 2007. From November 2001 to July 2003, Ms. Ronon worked at Lane Crawford, a luxury department store based in Hong Kong. Ms. Ronon served as a consultant to Lane Crawford from 2001 to 2002 and then as Senior Vice President Commercial between 2002 and 2003. Prior to her tenure with Lane Crawford, Ms. Ronon held various positions at Saks Fifth Avenue from August 1986 to August 2001, including Senior Vice President Chief Merchant from 2000 to 2001, Senior Vice President General Merchandise Manager from 1995 to 2000, Vice President Divisional Merchandise Manager from 1987 to 1995, and Buyer for Petites from 1986 to 1987. Prior to Saks Fifth Avenue, Ms. Ronon held various positions at Gimbels East in New York and Philadelphia.

There is no family relationship between any of the directors or executive officers of HSNi.

COMPENSATION DISCUSSION AND ANALYSIS

Overview

The Compensation Discussion and Analysis section of this proxy statement discusses and analyzes the executive compensation program for our named executive officers, or NEOs. The Compensation Committee is responsible for reviewing and approving the design and overseeing the administration of our compensation programs. The Compensation Committee also reviews and approves the annual compensation and annual incentive opportunities for our “executive officers.officers,” including NEOs. Our NEOs, as determined as of December 31, 20102011 under applicable SEC rules, are listed below.

Senior management, working with the Compensation Committee, has established our compensation philosophy and designed programs to support that philosophy and align compensation with business objectives and future performance. The programs are designed to ensure that compensation awards vest in a manner that rewards consistent performance over time and facilitates the retention of our key employees. In this regard, one of the Compensation Committee’s strategies is to ensure that a significant amount of the total compensation paid to our NEOs, who have the greatest influence over our performance, is performance-based. Another strategy is to grant equity awards that vest over a period of time.

Each year the Compensation Committee evaluates the programs, approves the performance measures and goals consistent with our business plan and objectives and approves the payments and awards to our NEOs based on HSNi’s and their performance.

Philosophy and Objectives

HSNi operates in the fast-paced and highly competitive retail environment. We are committed to achieving long-term sustainable growth and increasing shareholder value. To be successful, we must be able to attract and retain management that thrives in this environment. At the same time, we are committed to achieving long-term sustainable growth and increasing shareholder value. Our philosophy is to design executive compensation programs that will: (i) enable us to attract, retain and motivate talent by providing executive compensation with an appropriate mix of fixed and variable compensation, short-term and long-term incentives and cash and equity-based pay; (ii) reinforce our business objectives and performance for future periods by aligning compensation with key performance metrics; and (iii) align the interests of our executives and our shareholders by weighting a portion of executive compensation on financial performance metrics that will drive shareholder value.value and providing a significant portion of compensation in equity-based incentives.

Generally, our executive officer compensation programs are designed to increase long-term shareholder value by attracting, retaining, motivating and rewarding leaders with the competence, character, experience and ambition necessary to enable us to meet our growth objectives. Management and the Compensation Committee have worked with outside consultants to develop compensation programs that reward the culture, performance behaviors and culturebehaviors that we believe will drive long-term success. Each year the Compensation Committee evaluates the programs, approves the performance measures and goals consistent with our business plan and objectives and approves the payments and awards to our NEOs based on HSNi’s and their individual performance.

The compensation programs were designed with the following objectives in mind:

HSNi’s compensation programs have also been designed with features that discourage executives from taking unnecessary risks that would threaten the health and viability of the company. For our NEOs, at least 80% of the short-term incentive awards are based on company-wide or business unit financial performance. Long-term incentive compensation, which represents the most significant element of executive officer pay, is also based primarily on financial and stock performance and is designed to ensure that executives have a strong incentive to create shareholder value.

In our compensation review process, we consider, among other things, whether our compensation programs serve the best interests of our shareholders. In anticipation of the “say on pay” proposals included in the proxy statement related to our 2011 annual meeting of shareholders, we spoke with several of our institutional investors to solicit their views on our compensation programs. Over 83% of our shareholders who voted on the 2011 advisory proposal on executive compensation expressed approval of our executive compensation. In evaluating NEO compensation and our compensation programs, the Compensation Committee considered the feedback we received from our investors on our compensation program as well as these voting results. Based on the foregoing, we believe our programs are effectively designed and aligned with the interests of our shareholders. Based on our shareholders’ support of a triennial, or three year, vote on executive compensation, the next advisory vote on executive compensation will be held in 2014.

Alignment of Performance and Compensation

Among other things, our compensation programs are designed to align compensation with our business objectives and performance. The Compensation Committee sets the applicable performance goals for our short-term and long-term incentive programs at the beginning of the fiscal year using challenging but realizable targets. These targets are based upon the financial plan approved by our Board of Directors. Our goal setting process is based on historical operating trends and requires improvement over prior financial performance.

Our current executive team has successfully managed the company through challenging economic times. Some highlights for fiscal 2011 include the following:

Based on these results, the company performed well when measured against its peers. As a result of this performance, the portion of the company’s short-term incentive program attributable to financial performance was funded at 120% of target and the portion of the company’s long-term incentive program attributable to financial performance, i.e. the performance cash component, was funded at 141% of target.

Peer Group

The Compensation Committee believes that, in order to attract and retain talent, it is necessary to consider market data inwhen making compensation decisions in order to attract and retain talent.decisions. The committeeCompensation Committee also recognizes that at the executive level, we compete for talent against larger global companies. As a result, in 2008, we utilized Towers Watson, formerly known as Towers Perrin, to create a list of reference companies from which we recruit talent and to evaluate our forms of compensation relative to those companies.

The initial reference

Our business model is somewhat unique. We combine traditional retail with entertaining and informative content which we deliver through innovative technology systems, all in an effort to drive retail experiences. As a result, our peer group of companies consistedconsists of publicly-traded companies in two peer groups:industries: technology companies and retail companies.retail. Factors generally considered in deciding whether a company should be included in athe peer group include:

To ensure that this peer group continues to reflect companies comparable to HSNi and from which we compete for executive talent, the Compensation Committee reviews the peer group annually. In February 2011, when the Compensation Committee conducted its annual review of the group, it determined it was appropriate to eliminate Amazon.com, Inc. and Apple, Inc. from the peer group. Both of these companies are significantly larger than HSNi in terms of revenue and market capitalization. In addition, Amazon, Inc. has a somewhat unique compensation structure and Apple, Inc.’s primary line of business is very different from our business. The following is a complete list of the peer companies we considered for 2011:

To ensure that this peer group continues to reflect companies comparable to HSNi and from which we compete for executive talent, the Compensation Committee reviews the peer group annually. In February 2012, when the Compensation Committee conducted its annual review of the peer group, the Compensation Committee determined it was appropriate to make the following changes:

We compete with many companies that are much larger in size. As a result, many of the companies in our peer group are much larger, in terms of revenue and market capitalization, than we are. As noted above, size is but one factor we consider in deciding whether a company should be included in the peer group. To the extent that peer group data is used, we take into account variance in size among the companies and, historically, Towers Watson has assisted us in preparing a regression analysis that adjusts the compensation data for differences in revenue.

The Compensation Committee periodically reviews the compensation practices at these peer companies to inform the committee’s decision-making process and so it can setto assist in setting total compensation levels that it believes are reasonably competitive. Although thesethe practices at the other practicescompanies represent useful guidelines, the Compensation Committee does not rely solely on the peer group data in making its individual compensation determinations. Rather, the Compensation Committee also takes into account various factors such as our performance within the peer group, the unique characteristics of the individual’s position, internal equity and any succession and retention considerations. The Compensation Committee exercises discretion in setting individual executive compensation packages so that they appropriately reflect the value and expected contributions of each executive.

Roles and Responsibilities

The Compensation Committee was appointed by the Board of Directors to exercise all powers of the Board with respect to matters pertaining to compensation and benefits, including but not limited to, incentive/bonus plans, stock compensation plans, retirement programs and insurance plans and salary matters relating to our executive officers.

Senior management, led by our Executive Vice President of Human Resources, generally recommends compensation programs applicable to all executive officers, including the CEO, and presents these to the Compensation Committee for review, comment and approval. With respect to the compensation for our NEOs, the Compensation Committee may seek input from outside advisors. In that case, our Executive Vice President of Human Resources facilitates communication between the committee and the outside advisors. Our Executive Vice President of Human Resources also plays an active role in determining new executive officers’ total compensation as well as recommendations for annual compensation reviews. Recommendations are presented to the Compensation Committee for final approval. Our CEO, Chief Financial Officer, Executive Vice President of Human Resources and General Counsel regularly attend the Compensation Committee’s meetings to provide perspectives on the competitive landscape, the needs of the business, information regarding HSNi’s performance, as well as legal and technical advice. These officersadvice; however, NEOs are not permitted to participate in the discussions regarding their own specific compensation.

Our CEO generally plays an advisory role to the Compensation Committee during this process. Our CEO works with our Executive Vice President of Human Resources and Chief Financial Officer to assist the

Compensation Committee in establishing company-wide compensation programs, including the structure of bonus and equity programs, and in establishing appropriate company-wide bonus and equity pools. At year-end, the CEO meets with the committeeChairman of the Board and the Compensation Committee and discusses her views of corporate and individual executive officer performance for the prior year for purposes of determining whether individual executive officers other than her have met or exceeded expectations with respect to the individual performance component of executive compensation. The CEO, Chairman of the Board and the Compensation Committee discuss each individual recommendation. Following such discussion, the Compensation Committee and Chairman of the Board typically meetsmeet without the CEO and discussesdiscuss the CEO’s recommendations, as well asthe CEO’s compensation and any information provided concerning peer group comparisons and industry trends and makes the ultimate compensation decisions.

Use of Outside Advisors

HSNi first engaged Towers Watson in 2008 to assist in the development of short-term and long-term incentive programs. Towers Watson is a leading global professional services company with particular expertise in executive compensation matters. HSNi first engaged Towers Watson in 2008 to assist in the development of its short-term and long-term incentive programs. In 2010, the Compensation Committee approved the retention of Towers Watson to work with management to review (i) the short-term incentive compensation program, including practices of companies in our peer group and tax implications, and (ii) the total compensation package of our CEO.

HSNi also engaged Frederic W. Cook & Co., Inc., or FWC, a nationally recognized consulting firm focusing on compensation plan designs.designs, as its independent advisor. In 2010,2011, HSNi utilized Towers Watson to assist in the Governanceevaluation of executive compensation. In 2011, the Compensation Committee approved the utilization ofutilized FWC to review the company’s director compensation program as compared to the compensation structure of other companies in our peer group and the Compensation Committee approved the utilization of FWC to review the compensation and equity ownership of our CEO as compared to the compensation and beneficial ownership of other CEOs in our peer group.long-term incentive program.

Pursuant to the Compensation Committee charter, the Compensation Committee has sole authority to retain and terminate any compensation consultant to be used to assist in the evaluation of executive officer compensation and has sole authority to approve the terms and conditions of the consultant’s retention and the consultant’s compensation. Pursuant to the Governance Committee charter, the Governance Committee has sole authority to retain and terminate any consultant to be used in connection with its review of director compensation. In compliance with their respective charters,its charter, the committeescommittee approved the engagement of Towers Watson and FWC and approved the fees paid to both Towers Watson and FWCthese consultants for work completed prior to December 31, 2010.2011. In 2010,2011, payments to both Towers Watson and FWC did not exceed $120,000.$120,000, individually or in the aggregate.

Elements of Compensation

The key elements of HSNi’s compensation program are base salary, short-term incentive compensation in the form of annual bonuses and long-term incentive compensation in the form of equity awards and performance cash.

The compensation program also includes some minor perquisites and benefits but these are not significant elements of compensation. Prior to making specific decisions related to compensation, we determine which element or combination of compensation elements could be used most effectively to further our compensation objectives.

The following table outlines our objectives for each of the principal components of executive compensation:

A significant portion of the compensation program for our executive officers is variable. This means that it is contingent upon the company and the individual achieving specific results that are essential to our long-term success and growth in shareholder value. The Compensation Committee has not established a specific formula for the allocation of fixed and variable compensation components. In general, though, a large percentage of executive officers’ compensation is variable, with the CEO having the largest percentage of variable compensation. The Compensation Committee believes this approach directly aligns the interests of our executive officers with shareholder interests.those of our shareholders.

Types of Awards

Under our stock and annual incentive plan, the Compensation Committee may grant a variety of long-term incentive vehicles, including RSUs, SARs, performance cash and stock options. Following is a general description of each of these vehicles.

Restricted Stock Units. RSUs are a promise to issue shares of our common stock in the future provided the recipient remains employed with us through the award’s vesting period. RSU awards generally cliff vest over a three-year period or ratably vest over a five-year period. Unvested RSUs are generally forfeited upon termination of employment. As a result, RSUs are intended to retain key employees, including the NEOs. RSUs provide the opportunity for capital accumulation and long-term incentive value.

Stock Appreciation Rights. SARs are similar to traditional stock options except, upon exercise, holders of SARs will only receive a value equal to the spread between the current market price per share of our common stock and the exercise price. Upon exercise of SARs, payment may be made, in the sole discretion of HSNi, in cash or shares of HSNi common stock. Management has indicated it will likely settle these awards in shares of our common stock. The exercise price for awards granted under the Plan is required to be priced at, or above, the fair market value of our common stock at the date of grant. Awards typically vest ratably annually over a three-year term.

Performance Cash. An award of performance cash is typically based on the company’s achievement of a specific financial metric in the performance period but paid thereafter, assuming the recipient remains employed with the company through the award’s vesting period. In 2011, awards of performance cash vested in full on the second anniversary of the expiration of the one-year performance period. In 2012, awards of performance cash will vest at the end of the three-year performance period, assuming certain minimum performance thresholds are attained.

Stock Options. Options reward participants for long-term appreciation in HSNi’s stock price. Although the options are given a value at the date of grant for financial reporting purposes, the actual value of the options to the participant is entirely based on future increases in our stock price. If the stock price does not increase over the term of the option, the participant receives no value. Stock options were utilized by the company’s former parent company prior to the spin-off and, on a limited basis, by HSNi shortly after the spin-off. We do not currently issue stock options as part of our short-term or long-term incentive programs; however, we have done so in the past and may do so in the future if appropriate.

Salary

Base salary is the fixed portion of executive pay and is set to compensate individuals for their expected day-to-day performance. Salary is the most fundamental of all our compensation program elements. Providing a competitive salary to our executives is essential to achieving our objective of attracting and retaining talent.

HSNi negotiates a new executive officer’s starting salary upon arrival, typically based on the executive’s prior compensation history, HSNi’s prior compensation levels for the particular position, salary levels of other executives within HSNi, salary levels available to the individual in alternative opportunities, reference to certain survey information and the extent to which HSNi desires to secure the executive’s services. Once established, salaries can increase based on the assumption of additional responsibilities, internal equity, periodic market checks and other factors which demonstrate an executive’s increased value to HSNi. Our strategy for base salary is to generally target annual base salary of each of our executive officers at median levels relative to our peer group or market data, although individual officer salaries may be above or below those targets based on the factors described above.

The Compensation Committee annually reviews and approves the compensation package of each NEO. The Compensation Committee considers an individual’s qualifications and experience in setting our executives’ initial base salary, including those executive officers who are hired from the outside and those who are promoted from within. In determining base salary amounts and increases, the Compensation Committee considers the size and responsibility of the individual’s position, the business unit’s overall performance, the individual’s overall performance and future potential and the base salaries and merit increases paid by competitors to employees in comparable positions.

Short-Term Incentive ProgramStock Options. Options reward participants for long-term appreciation in HSNi’s stock price. Although the options are given a value at the date of grant for financial reporting purposes, the actual value of the options to the participant is entirely based on future increases in our stock price. If the stock price does not increase over the term of the option, the participant receives no value. Stock options were utilized by the company’s former parent company prior to the spin-off and, on a limited basis, by HSNi shortly after the spin-off. We do not currently issue stock options as part of our short-term or long-term incentive programs; however, we have done so in the past and may do so in the future if appropriate.

Salary

Our short-term incentive program, or STIP,Base salary is designed primarily to reward achievementthe fixed portion of our annual operating planexecutive pay and is payable inset to compensate individuals for their expected day-to-day performance. Salary is the formmost fundamental of annual cash bonuses. The STIPall our compensation program elements. Providing a competitive salary to our executives is provided foressential to achieving our objective of attracting and administered under our stock and annual incentive plan, which was approved by our shareholders. The amount payable each year isretaining talent.

HSNi negotiates a new executive officer’s starting salary upon arrival, typically based on the extent to which certain pre-established performance goals are achieved during the year and is “variable” because the company must achieve certain performance goals established by the Compensation Committeeexecutive’s prior compensation history, HSNi’s prior compensation levels for the executive officers to receive an annual incentive bonus. This short-term incentive program is designed to motivate our executive officers to continuously improve company performance. The program aligns a portionparticular position, salary levels of executive compensation with key business and financial targets and, as a result, provides a valuable link between compensation and creation of shareholder value. Due to its variable nature, and because in any given year bonuses have the potential to make up a significant portion of an executive officer’s total compensation, the bonus program provides an important incentive tool to achieve our annual performance objectives.

other executives within HSNi, awards annual bonuses based primarily on the achievement of specific financial performance goals. According to our stock and annual incentive plan, performance goals may be based on a wide variety of business metrics. The Compensation Committee has determined that the annual performance bonus for our NEOs (other than the CEO) will be based on Adjusted EBITDA and individual performance. For our CEO, the annual performance bonus will be based entirely on Adjusted EBITDA. For purposes of this program, Adjusted EBITDA is defined as operating income accordingsalary levels available to the company’s consolidated statement of operations

excluding, if applicable: (1) stock-based compensation expenseindividual in alternative opportunities, reference to certain survey information and amortization of non-cash marketing, (2) amortization of intangible assets, (3) depreciation and related gains and losses on asset dispositions, (4) goodwill, long-lived asset and intangible asset impairments, (5) pro forma adjustments for significant acquisitions, and (6) one-time items. The Compensation Committee determined this performance metric was appropriate since most executives have influence over Adjusted EBITDA. Individual performance is also based on the achievement of the Adjusted EBITDA target established by the Compensation Committee. Notwithstanding the extent to which HSNi achievesdesires to secure the Adjusted EBITDAexecutive’s services. Once established, salaries can increase based on the assumption of additional responsibilities, internal equity, periodic market checks and other factors which demonstrate an executive’s increased value to HSNi. Our strategy for base salary is to generally target all payments underannual base salary of each of our executive officers at median levels relative to our peer group or market data, although individual officer salaries may be above or below those targets based on the STIPfactors described above.

The Compensation Committee annually reviews and approves the compensation package of each NEO. The Compensation Committee considers an individual’s qualifications and experience in setting our executives’ initial base salary, including those executive officers who are subject tohired from the ability ofoutside and those who are promoted from within. In determining base salary amounts and increases, the Compensation Committee to exercise negative discretionconsiders the size and adjustresponsibility of the STIP amounts downward.

The short-term incentive program targetindividual’s position, the business unit’s overall performance, the individual’s overall performance and performance measures for each of our NEOs are as described in the table below.