June 27 (Bloomberg) -- Martha Stewart Living Omnimedia Inc. and Eastman Kodak Co. said they are forming a joint digital- photography service to create cards and photo albums using designs overseen by Martha Stewart.

The service will begin in late September with holiday cards and photo books and will be expanded in 2006 and 2007, the companies said in a statement today. The service allows consumers to place their digital photos within Martha Stewart Living- designed templates for products such as invitations, stickers and stationary, they said.

The partnership marks the first time Kodak, the world's largest photography company, is creating a private-label line for digital photos, Sandra Morris, general manager of consumer digital imaging services at Kodak, said in an interview. The venture will provide a ``design sensibility'' on high-quality paper, a service that doesn't exist among the digital-photo services currently, said Martha Stewart Living founder Stewart, who also participated in the interview.

``I've tried many of the services that do exist, and I think what we are proposing are unique ideas,'' Stewart said. ``All the prototypes are original for Kodak, and we have been working feverishly'' to design the templates, she said.

Product Pricing

The companies, which will share the revenue, declined to disclose terms of the agreement, Martha Stewart Living Chief Executive Susan Lyne said in the interview. Prices of the cards and other products haven't yet been set, she said.

The service comes as New York-based Martha Stewart Living expands its Internet site with more content and links to e- commerce ventures such as Martha Stewart-branded music CDs.

Digital photography ``is a very fast-growing area,'' Lyne said. The service may ``encourage more of that customer base to explore what's possible in the digital space and upgrade with more beautiful templates.''

Shares of Martha Stewart fell 17 cents to $16.82 at 4:02 p.m. in New York Stock Exchange composite trading. They have dropped 3.5 percent this year. Rochester, New York-based Kodak declined 57 cents to $23.11.

To contact the reporter on this story: Aimee Picchi in New York at apicchi@bloomberg.net.

Last Updated: June 27, 2006 16:12 EDT