Martha's Latest Recipe

Print acquisitions and a TV spinoff demonstrate the jailbird-to-be's strategy: Branch out -- and keep a lower profile

By Robert McNatt

It has been a busy two weeks at Martha Stewart Living Omnimedia (MSO ). On Aug. 12, the company announced that it's paying $6 million for the 200,000-circulation Body & Soul magazine, which comes out eight times a year, and Dr. Andrew Weil's Self Healing newsletter. That happened only nine days after the company said that next year, in cooperation with Public Broadcasting Station WETA in Washington, D.C, it will launch a new cooking show, Everyday Food, based on the magazine of the same name published by Martha Stewart Living Omnimedia.

The fine print somewhere on those publications and in the credits rolling at the end of the TV show will undoubtedly contain the words Martha Stewart Living Omnimedia. But the likelihood is that nothing else will. And, say industry watchers, Martha Stewart Omnimedia probably will be all the better because of it, whether or not the company's founder ever returns.

The debranding of Martha Stewart -- the deletion of her name and face from some of the company's goods -- isn't just a reaction to Stewart's well-publicized legal woes. Rather, it's a transformation that the company would have had to undergo eventually, anyway. "You can't have a whole company in the long run totally dependent on the life of one individual," says Chip Block, vice-chairman of direct marketing company USAPubs.


  The publishing business is littered with the corpses of magazines that couldn't survive the departure of their leading lights: Consider the fate of Rosie, the doomed makeover of McCall's named after entertainer Rosie O'Donnell, Lear's magazine, which was the late Frances Lear's brainchild for "the woman who wasn't born yesterday," and George, the politics magazine strongly identified with the late John F. Kennedy Jr.

Of course, the homemaking diva still has her fans. So, MSO must walk a fine line between extending its reach into new areas, such as the health market represented by the new publications and TV show, while not alienating the people who love Martha, regardless of whether she's in prison stripes or a pantsuit and pearls. On July 16, Stewart was sentenced to five months in prison and two years' probation for lying to investigators about the sale of ImClone Systems (IMCL ) stock in late 2001.

Barring some spectacular misfortune that prevents her from returning to the company, Stewart probably will be back. "People tend to forgive and forget," says Samir Husni, Hederman lecturer and professor of journalism at the University of Mississippi. Moreover, quips Husni: "If she goes to jail, once she's out, everyone will rally around her and we'll have her new bestseller, 'When Bad Things Happen to Good People' or 'Seventeen Easy Ways to Live in Prison.'"

Still, there are sound business reasons for MSO to diversify. Offering a broad portfolio of products in food, style, and now health, should attract new readers. Robert Clauser, partner at Entertainment and Media group at Accenture (ACN ), suggests that it also is a good way for the shrunken company to better use its resources and achieve operational economies of scale. With its television shows, which also include Petkeeping on the Style Network, he adds that MSO is also setting itself up nicely to participate in syndication deals that could be worth a great deal down the road.


  And of course, there are all sorts of cross-marketing opportunities among the properties. That could help MSO address its most urgent concern right now: plummeting ad sales. Magazine revenues fell 40%, year-to-year, in the second quarter, which ended June 30, while those in the TV division were off 54%. As a whole, the company recorded a $19.2 million net loss, vs. a small profit of $931,000 a year ago.

Martha Stewart's image will linger in the public's consciousness for many years. But whether consumers know who is behind their new newsletter, cooking show, or health magazine probably won't matter much over the long haul. As long as the company delivers the goods, both they and Martha Stewart Omnimedia should be content.

McNatt is associate editor of BusinessWeek in New York

Edited by Thane Peterson

Before it's here, it's on the Bloomberg Terminal.