Martha Stewart Living Omnimedia, Inc.

11 West 42nd Street
New York, New York 10036
U.S.A.
Telephone: (212) 827-8000
Fax: (212) 827-8204
Web site: http://www.marthastewart.com

Public Company
Incorporated: 1997
Employees: 480
Sales: $200 million (2005 est.)
Stock Exchanges: New York
Ticker Symbol: MSO
NAIC: 511120 Periodical Publishers; 511130 Book Publishers; 512110 Motion Picture and Video Production

Martha Stewart Living Omnimedia, Inc. (MSLO) encompasses the varied publishing, broadcasting, and merchandising enterprises of its founder, Martha Stewart. With products reflecting the personal tastes and style of Stewart, the company's brands have been compared to the likes of Calvin Klein and Ralph Lauren in terms of name recognition and quality. The company is comprised of four divisions: publishing, television, merchandising, and Internet/direct commerce, though all units took a beating after Stewart was convicted of stock fraud charges and served time from 2004 to 2005. Stewart has long denied any wrongdoing and her attorneys have appealed her conviction. Back in the fold, however, Stewart has been buoyed by public support and has returned to work. A number of television projects were in the works in 2005, including two shows with Survivor wunderkind Mark Burnett as well as joint ventures with Kmart, Bernhardt Furniture, Sirius satellite radio, Sherwin-Williams, and others.

In the Beginning, 1970s–80s

Although Martha Stewart bought the company bearing her name from Time Warner and incorporated it in 1997, the beginnings of the business can be traced to Stewart's activities two decades earlier. Stewart's formal education consisted of a bachelor's degree in history and architecture from Barnard College, and, following limited success as a model and a stockbroker, she decided to make a career out of her passion for food preparation and presentation. In 1976 Stewart founded her own business, a catering operation headquartered in the basement of the historic farmhouse she lived in with her husband and daughter in Westport, Connecticut.

By the late 1970s, Stewart was running a successful, upscale catering business on the East Coast and contributing articles to The New York Times and House Beautiful. She was also hoping to parlay her expertise in party planning into a book on the subject. In 1980 she forged an agreement to write such a book for Crown Publishing, a division of Random House. Stewart reportedly had to fight for the lavish style she envisioned for the book, which included a multitude of color photographs and the large-sized format of a "coffee table book." Published in 1982, Stewart's Entertaining helped establish Stewart as an authority on taste; by the mid-1990s the book had sold over half a million copies. The production of her first book also proved to be a blueprint for how Stewart would build her image, and she continued to think big while maintaining a perfectionist's attention to detail.

Stewart authored several more books in the 1980s, including Martha Stewart's Quick Cook, Martha Stewart's Hors d'Oeuvres, Martha Stewart's Quick Cook Menus, and Martha Stewart's Christmas. The books proved to have an enduring shelf life earning significant income as backlist titles and remained in print well into the next decade. The next step in making Martha Stewart a nationally known brand name came in 1987 when Stewart signed a $5 million five-year consulting contract with Kmart. Stewart was hired to help create home products for the retailer, including a line of Dutch Boy paint colors and bath and bedding products. Stewart's primary role, however, was to lend her name to Kmart's products, to appear in print and television ads, and to make in-store appearances.

Creation of a Magazine, the Early 1990s

Back in the late 1980s Stewart had pitched an idea for a magazine to the publishing house of Condé Nast. The company's chairman, Si Newhouse, was wary of the idea for Martha Stewart Living, deeming a product dependent on one person as too risky. Stewart's idea was also turned down by Rupert Murdoch's magazine empire. In 1990, however, Time Inc. approved two test issues of Martha Stewart Living, with the first scheduled to come out in November 1990 and the second in March 1991. The public's response was strong enough for Time to commit to six issues a year. Although Stewart had achieved her goal of moving into magazine publishing, the deal with Time was not particularly lucrative, at least not until the magazine became profitable—reportedly because other publishers had turned down her concept for Martha Stewart Living.

By 1992 Stewart had become dissatisfied with her Kmart consulting and let the contract lapse, though Kmart continued to sell Martha Stewart towels, bedding, and paints. "I thought they wanted me to make real decisions for them," Stewart told Working Woman in 1995 about the Kmart deal, "but it turns out I was really hired as a personality, not a consultant … they acted on nothing I proposed." While the Kmart venture may have been a disappointment, Stewart's publishing career ramped into high gear. By 1995 there were more than four million copies of her books in print, her magazine was selling over a million copies per issue and had been voted "Magazine of the Year" by Ad Age, and she began touring the country. Her book tours soon led to paid lecture appearances, which in turn kept Stewart and her products in the media, popularizing her inimitable style.

The magazine spawned several other new enterprises in the early and mid-1990s. Morning television's Today show agreed to fund the production costs of an appearance by Stewart every other week on the program. Stewart appeared at no charge and in return received free publicity for her magazine and books. Time, Inc. also began publishing books that made use of articles from the magazine, grouped according to theme; the first two were titled Holidays and Special Occasions.

Once again ready to expand into new areas, Stewart convinced Time to fund a television show based on the magazine, also to be called Martha Stewart Living. The weekly show covered home decorating, entertaining, gardening, cooking, and featured Stewart as the host. By 1993 the show was broadcast in 84 percent of the nation's markets.

MSL Enterprises, 1995 and 1996

New ventures and the continued popularity of her magazine led Stewart to renegotiate her relationship with Time. To help with her negotiations, Stewart gathered a team of lawyers and consultants: Allen Grubman, a prominent entertainment lawyer; Sharon Patrick, strategy consultant; and Charlotte Beers, chair and chief executive of Ogilvy & Mather Worldwide. With these three advisers, Stewart persuaded Time to create a subsidiary of Time Warner called Martha Stewart Living Enterprises and to name Stewart chair and chief executive officer. Time provided all of the funds for the company, and Stewart provided the ideas and her name. The new corporation was jointly owned by Time Inc. Ventures, a division of Time Warner Inc., and Martha Stewart, though neither party revealed the percentage of their ownership. The company encompassed Martha Stewart Living magazine, its spinoff books, the new television show, and Stewart's Today Show appearances. Outside the company's purview were the books Stewart had written between 1982 and 1995; the royalties from the sales of Kmart bedding, towels, and paints; and Stewart's lecture fees. In 1995 Stewart continued to expand her reach with Martha by Mail, which had begun as an insert in Martha Stewart Living magazine and was expanded into a full direct mail catalogue; a weekly syndicated newspaper column; and even a prime-time Christmas special featuring Hillary Rodham Clinton.

By 1996 Martha Stewart Living Enterprises had a staff of 140 and burgeoning sales. Because Time Warner only announced sales figures for its publishing businesses as a whole, the value of the company was difficult to ascertain. Some industry analysts placed its worth at $70 million and estimated annual revenues at $200 million. Stewart began pushing to renegotiate her relationship with Time again just a year after the formation of Martha Stewart Living Enterprises. She wanted a greater equity stake (40 percent) in the company and the power to expand in new directions as the firm flourished.

A New Name and Rapid Expansion, 1997 and 1998

In 1997 Stewart acquired majority interest in the company and renamed it Martha Stewart Living Omnimedia, L.L.C. With the continued help of Sharon Patrick, Stewart had arranged the purchase of at least 80 percent of the company for about $75 million, although figures varied according to different accounts. Time's remaining stake in the company was generally estimated to be between 5 and 10 percent, with the balance of the stock held by Patrick and staff members. The separation from Time was reportedly a friendly one. Don Logan, chair and CEO of Time Inc., agreed to join the new board for Martha Stewart Living Omnimedia. Stewart initially appointed Patrick president and chief executive officer, but soon took the helm as CEO, while Patrick remained president and COO. The buyout was financed in large part with new contracts from Kmart and Sherwin-Williams.

Company Perspectives:

Martha Stewart Living Omnimedia, Inc. (MSLO) is the leading integrated content company devoted to enriching the changing lives of today's women and their families. Our community of how-to experts is committed to teaching, innovating, designing, and inspiring with ideas and products that make every day more meaningful, more functional, and more beautiful. We elevate the familiar elements of daily life, infusing them with the pleasure and confidence that come from the growing sense of mastery and discovery we foster in our customers and ourselves. Our products are stylish and distinctive, with a consistently high level of quality. Though our content is timeless, we deliver it in the most current ways: wherever, whenever, and however our customers need and want it.

The Kmart deal added to concern among market analysts that Stewart was clouding her image with too many endorsements and target markets. The new Kmart deal, however, was different than the first in that Martha Stewart Living Omnimedia retained control over the entire production process, from design to advertising, of the newly named Martha Stewart Everyday product line. "Whether it's a hang tag on a dish towel or a label on a paint can, everything has to look as good as the magazine," Production Director Dora Braschi Cardinale explained to the New York Times. With such control, the company hoped to maintain a consistent brand image. The contract with Sherwin-Williams was signed in May 1997 for a line of Martha Stewart paints. Originally carried exclusively by Kmart, Sears began offering the paint line in March 1998.

Free to pursue her vision for the company, Stewart led a rapid and varied expansion of Martha Stewart Living Omnimedia in 1997 and early 1998. The Martha Stewart Living television show moved from a weekly to a weekday schedule. The show was distributed by CBS and Stewart soon left her biweekly appearance schedule on NBC's Today Show to appear weekly on the CBS This Morning program. In addition, the company launched a daily 90-second radio feature known as "askMartha" and a web site with a wide range of information about the television show, magazine, and Stewart's books. The site also highlighted items from the Martha by Mail catalogue and allowed users to order over the Internet.

Stewart also had further plans for the lucrative Kmart partnership, hoping to build on her brand's name by introducing new lines of cooking, gardening, and decorating merchandise. Near the end of 1997 the company completed construction on a new $4 million studio in Westport, Connecticut, for taping Stewart's television and radio shows with large kitchens and state-of-the-art equipment. Circulation of Martha Stewart Living magazine had grown to 2.3 million for 1997, 30 percent higher than 1996. Total year-end revenues for 1997 came to $132.8 million, with earnings of $13.9 million.

In early 1998 the company's new and established ventures were going strong. The "askMartha" newspaper column was syndicated in 212 papers and the radio program was broadcast on 135 stations. The Martha Stewart Living television show had top ratings and was offered on 197 stations across the nation. Though Stewart had talked about taking the company public since gaining ownership, she became more serious about the issue in 1998. Market analysts debated whether the company had the ability to stand on its own. Linda R. Killian, an analyst and portfolio manager with the Renaissance Capital Corporation, commented to the New York Times, "If Martha Stewart got hit by a cab tomorrow, to what extent is there a viable company there?" Others questioned whether profits would be hurt by continued expansion. Stewart, herself, expressed total confidence in the independence of her company to the New York Times: "It won't die without me. I think we are now spread very nicely over an area where our information can be trusted." Consumers evidently concurred, helping MSLO bring in revenues of $177.2 million for 1998 with net income climbing to $23.8 million.

Martha Storms Wall Street, 1999 to 2001

Stewart took her road show to Wall Street in October 1999 with an initial public offering of over 8.28 million shares for $18 each. The offering generated funds of more than $132 million and amazed naysayers and fans alike. The new firm, Martha Stewart Living Omnimedia, Inc., under the ticker symbol MSO, became a favorite of Wall Street and consumers alike with stock prices rising as high as $50 a share. It was the perfect time to launch another new venture with the debut of From Martha's Kitchen, a half-hour cooking program to air on cable television's Food Network in late 1999. Martha Stewart Living Omnimedia, Inc. finished its maiden year as a public company with revenues topping $229 million.

By 2000 Martha Stewart Living magazine's circulation had reached 2.1 million and the homemaking publication went from 10 issues per year to 11, with plans for becoming monthly the following year. Its sibling publication, Martha Stewart Weddings, which had debuted in 1994, had gone from an annual publication to biannual then quarterly. Other special interest magazines had also joined the ranks, including Entertaining (which had also been the title of Stewart's first book in 1982), Martha Stewart Baby, Halloween, and Clotheskeeping. A new quarterly magazine for families, called Kids: Fun Stuff to Do Together was published in July 2001, filled with recipes, crafts, and games for kids aged three to ten.

Stewart also expanded further into home furnishings through a deal with Bernhardt Furniture Company for a Martha Stewart Signature collection in 2001, the same year MSLO signed with Japan's Seiyu, a retail chain of more than 200 stores. Seiyu was slated to carry a broad range of Stewart branded products, while the two companies were to collaborate on a new magazine called Martha, published in Japanese.

An error in judgment with devastating consequences also occurred in 2001. Whether Stewart willingly committed a crime or simply acted irresponsibly, she sold ImClone stock after allegedly receiving a tip from her friend Samuel Waksal, ImClone's chief executive. An adverse FDA report then sent ImClone stock tumbling, and soon Stewart, Waksal, and Stewart's broker Peter Bacanovic were questioned by federal investigators. As the case gained momentum, it became clear Stewart would face charges. While many called the investigation a witch hunt, few believed Stewart would ever face trial. Revenues for 2001 totaled $288.6 million as suspicion of Stewart's actions grew.

Key Dates:

1976:

Martha Stewart founds a catering company in Connecticut.

1982:

Stewart's first book, Entertaining, is published.

1987:

Kmart signs Stewart to a five-year consulting contract.

1990:

The first issue of Martha Stewart Living is published by Time Inc.

1993:

Stewart begins hosting a weekly television show, Martha Stewart Living.

1995:

Martha Stewart Living is voted "Magazine of the Year" by Ad Age; the Martha by Mail catalogue is launched.

1997:

Stewart buys the company bearing her name from Time Warner.

1999:

Martha Stewart Living Omnimedia, Inc. goes public on the New York Stock Exchange.

2001:

Stewart sells shares in ImClone.

2003:

Stewart is indicted on securities fraud charges.

2004:

Stewart is convicted and asks to begin serving her five-month prison term early.

2005:

Stewart is released from prison and welcomed back to her company.

Allegations, Court Time, and Prison, 2002–04

By 2002 Stewart was in the middle of a legal maelstrom. Waksal was arrested for insider trading and Bacanovic began cooperating with investigators. Federal prosecutors suspected not only wrongdoing but a coverup as well. With all the publicity affecting MSLO, Stewart cut back her involvement as the company began showing signs of the strain by the middle of the year. Consumer confidence in Stewart teetered despite her protestations of innocence; by the third quarter earnings had fallen and stock value was down by more than half. The end of the year brought revenues of a relatively strong $295 million, but income of only $7.3 million.

By the time Stewart was indicted in July and went on trial in 2003, she had resigned as chief executive and chair of her company, serving as a "creative" officer of the board. Revenues for the troubled year had fallen to $245.8 million and the company suffered its first ever annual loss of $2.7 million. Stewart's five-week trial ended in March 2004 when she was convicted on all charges. She was fined $30,000, sentenced to five months each of prison time and home confinement, and two years probation. She served her time from October 2004 to March 2005, and after her release was allowed to leave her estate for up to 48 hours per week while under house arrest.

While Stewart's legal woes certainly affected MSLO's performance (2004 revenues only reached $187.4 million with a hefty loss of $60 million), there was hope for a brighter future. New deals included broadening the company's branded product line with Bernhardt Furniture Company; extending its licensing agreement with Kmart until 2010; the purchase of Body & Soul magazine from New Age Publishing; and collaborating with pet guru Marc Morrone for a new television program called Petkeeping with Marc Morrone, which also included newspaper and magazine columns.

A New Era, 2005 and Beyond

In 2005 as Stewart returned to work, she was welcomed back by many of her colleagues and loyal customers. In her absence friend and stockholder Sharon Patrick had taken the helm but stepped down in late 2004, replaced by Susan Lyne, a former television executive, as CEO and president. With Stewart still under a cloud due to a Securities and Exchange Commission lawsuit, she was unable to lead the company in any significant way (her shares had been put in the control of her daughter Alexis while Stewart was in prison). Stewart was, however, front and center in several new television development deals, two of which paired her with Survivor and Apprentice producer Mark Burnett. Not only would Stewart host an hour-long live program featuring cooking and decorating, but she would also star in a new version of The Apprentice made famous by Donald Trump.

Other new ventures included a deal with Sirius satellite radio for a Martha Stewart Living radio program, and the cable television Style Network acquiring the rights to run previously-aired episodes of the Emmy-winning Martha Stewart Living twice daily along with a few newly produced specials. By the middle of 2005 both Stewart and her company were regaining lost confidence and making strides in all of MSLO's business segments. The television, publishing, merchandising, and Internet/direct commerce divisions were touting new products and partnerships. Though Stewart's legal problems were not over, she was more than ready to move forward and to once again make her empire "a good thing."

Principal Operating Units

Television; Publishing; Merchandising; Internet/Direct Commerce.

Principal Competitors

Advance Publications; Crate & Barrel; Home Depot, Inc.; Pottery Barn; Target Stores, Inc.; Wal-Mart Inc.; Williams Sonoma, Inc.

Further Reading

Brady, Diane, et al., "Sorting Out the Martha Mess," Business Week, July 2, 2002, p. 44.

Byrnes, Nanette, "Propping Up the House That Martha Built," Business Week, June 16, 2003, p. 38.

Creswell, Julie, "Will Martha Walk?," Fortune, November 25, 2002, p. 112.

David, Grainger, "Martha's New TV Boss Makes a Mint," Fortune, February 21, 2005, p. 28.

Dugan, I. Jeanne, "Someone's in the Kitchen with Martha," Business Week, July 28, 1997, p. 58.

Frank, Jackie, "Martha Stewart May Spin Off Retail Stores," Reuter Business Report, November 12, 1996.

Goldsmith, Jill, "Stewart's Stock in a Stew," Variety, June 17, 2002, p. 4.

Granastein, Lisa, "MSLO Eyes New Growth Phase," Brandweek, November 15, 2004, p. 8.

Hays, Constance L., "Company Says Stewart's Woes Are Taking Toll," New York Times, July 25, 2002, p. C1.

——, "Is There Life for Martha Stewart Living Omnimedia Without Martha?," New York Times, September 5, 2002, p. C5.

——, "Martha Stewart Indicted by U.S. on Obstruction," New York Times, June 5, 2003, p. A1.

——, "Stewart Found Guilty of Lying in Sale of Stock," New York Times, March 6, 2004, p. A1.

Kasindorf, Jeanie Russell, "Martha, Inc.," Working Woman, June 1995, pp. 26–35.

Kelly, Keith J., "On Her Own, Martha Stewart Eyes IPO," Advertising Age, February 10, 1997, p. 1.

"Martha Stewart Thriving," Business Week, March 25, 2002, p. 56.

McMurdy, Dierdre, "A Brand Called Martha," MacLean's, December 12, 2000, p. 49.

Naughton, Keith, et al., "Martha Breaks Out," Newsweek, March 7, 2005, p. 36.

Pogrebin, Robin, "Master of Her Own Destiny," New York Times, February 8, 1998, p. 1C.

Pollack, Judann, and Alice Z. Cuneo, "Multitude of Deals Could Hurt Martha," Advertising Age, November 18, 1996, p. 26.

Rozhon, Tracie, "Stewart Quits As Director of Big Board," New York Times, October 4, 2002, p. C1.

Sellers, Patricia, "Designing Her Defense," Fortune, June 23, 2003, p. 27.

Thottam, Jyoti, "Martha's Endgame," Time, July 26, 2004, p. 47.

——, "Why They're Picking on Martha," Time, June 16, 2003, p. 44.

—Susan Windisch Brown

—update: Nelson Rhodes

Martha Stewart Living Omnimedia, Inc.

founded: 1982 variant name: mslo

Contact Information:

headquarters: 20 w 43rd st., 25th fl.
new york, ny 10036 phone: (212)827-8000 fax: (212)827-8204 email: [email protected] url: http://www.marthastewart.com

OVERVIEW

Martha Stewart Living Omnimedia, Inc. (MSLO) is one of today's foremost authorities on the domestic arts for homemakers and lifestyle aficionados. The company is a media and merchandising firm that provides how-to content and related products to create a beautiful home and garden environment. MSLO pioneered the lifestyle category, combining what had previously been small niche markets into one power genre. MSLO cross-promotes and distributes the brand across a wide spectrum of media and retail outlets, providing consumers with an array of how-to home décor options. Led by celebrated style arbiter Martha Stewart, the familiar brand is synonymous with tasteful entertaining and home decorating. Through the award winning magazine, Martha Stewart Living, best-selling books, an Emmy-Award winning top-rated television show, Web site, syndicated newspaper column, national radio show, mail order catalog, and product lines, Martha Stewart shares the ideas that have made her brand one of the highest-profile names in home arts.

MSLO has eight core content areas: Home, Cooking and Entertaining, Gardening, Crafts, Holidays, Baby, Keeping, and Weddings. The creative experts at MSLO continuously strive to develop innovative ideas to maintain the high quality image the ever-expanding brand is known for. The company has two business objectives. The first objective is providing original, detailed information to the wide target audience. The second objective is turning audiences into "doers" by providing an array of products and projects. MSLO distributes its content over what is referred to as an "omnimedia" platform, which includes Martha Stewart Living magazines, the television show, books, a radio show, a newspaper column, and a Web site. MSLO distributes its products over what is referred to as an "omnimerchandising" platform, which includes the mass market discount channel in the United States and Canada, the national department store channel, craft and fabric stores, the Martha by Mail catalog, and bluelight.com.

COMPANY FINANCES

Martha Stewart Living Omnimedia, Inc. is comprised of four business segments: publishing, television, merchandising, and Internet. Publishing accounts for 60 percent of revenue, television makes up 10 percent, and merchandising's tally is 14 percent. The Internet segment accounts for the remaining 16 percent.

In 2001, retail sales of the Martha Stewart Everyday brand reached $1.6 billion worldwide, up 26 percent from the prior year. Revenues for the fourth quarter of 2001 were $85.1 million, compared to $85.5 million in the previous year's quarter. Fourth quarter earnings fell 3.3 percent and operating income was off 9 percent due to a harsh advertising and retail climate. The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) for the fourth quarter increased 21 percent to $13.2 million, compared to $10.9 million in the same period the year before. Earnings per share were $.12 for both 2000 and 2001 quarters. For the year ending December 31, 2001, revenues increased 4 percent to $295.6 million, up from $285.8 million in 2000. MSLO stock ranged from a low of $12 to a high of $25 over a 52-week period, and the company's price-earnings ratio was 44.38.

The company is closely evaluating its exclusive merchandising deal with Kmart, since the Troy, Michigan-based retailer filed for bankruptcy protection on January 22, 2002. MSLO's accounts receivable totaled $13 million at the time of the filing, and the company will make adjustments to their fourth quarter and full year balance sheets, as necessary.

ANALYSTS' OPINIONS

Martha Stewart Living Omnimedia, Inc. reports that prospects continue to develop for 2002 and beyond as they build on the solid foundation that their brand has established and as they develop new alliances and product launches. MSLO is a well-established, diversified, and financially strong multimedia company. In 2001, MSLO delivered fourth quarter results that matched expectations but warned it expects 2002 earnings per share to be at the low end of Wall Street estimates. Net income for fourth quarter 2001 was $5.73 million, or $.12 a share. For 2002 the company is forecasting revenue growth of 10 percent and earnings per share of $.50 to $.55, below analyst EPS' expectations of $.61; that outlook is based on an estimate that Kmart will close 284 underperforming stores.

HISTORY

Martha Stewart was born in Nutley, New Jersey, a suburb near New York City, on August 3, 1941. Upon graduation from Barnard College, Martha pursued a successful career as a stockbroker on Wall Street. In 1972, Martha, along with her husband and daughter Alexis, moved to Westport, Connecticut, where she turned her considerable talents to a new venture, a catering business. The recipes and unique visual presentations for her business became the basis for her landmark book, published in 1982 Entertaining.

The first issue of her trademark magazine Martha Stewart Living rolled off the presses in 1999 when Stewart joined with Time Publishing Ventures, Inc. The monthly lifestyle magazine offers the company's particular brand of homestyle panache to readers, gaining a loyal audience of 2.1 million. The Martha Stewart Living syndicated television show premiered in September 1993 as a half-hour weekly series. In September 1997, the show became a daily program with a weekend edition. Hosted by Stewart, Martha Stewart Living covers a wide variety of subjects and projects for the home and garden. Her guest list includes experts in various fields, including chefs, gardeners, and artisans. The show expanded to an hourly program in January 1999, featuring new segments like "Cookie of the Week," "Cooking 101," and her trademark "Good Things." Stewart's state-of-the-art Connecticut studio provides the backdrop for her detailed and visually appealing presentations. The show is produced by Stewart and distributed by King-World Productions, Inc., boasting domestic viewership of 88 percent of households. The family-oriented, educational format has netted Stewart 6 Daytime Emmy Awards and 29 Emmy nominations since the show's premiere. In May 1998, Martha Stewart Living garnered the prestigious James Beard Foundation Award for the Best National Cooking Segment. Martha Stewart Omnimedia, Inc. was formed in 1997 and became a publicly-owned company in 2000.

In 1997, marthastewart.com was little more than a fledgling enterprise but, in the past five years, it has become a major dot-com destination that boasts more than 1 million viewers per month who can filter through MSLO content from television shows, newspaper columns, and magazines. Viewers can also buy gifts and housewares from MSLO's burgeoning merchandising business—Martha By Mail. With a registered user file of 1.6 million viewers and revenues exceeding $33 million in 2000, Internet and direct commerce are the fastest growing segments of the MSLO media empire.

MSLO has had a business relationship with Kmart since they approached Stewart in 1987. MSLO has exclusive merchandise contracts with Kmart in the United States and Zellers in Canada. MSLO also designs various other products for such retailers as: Sears, Kmart, Canadian Tire, specialty paint stores, Jo-Ann Fabrics, and Crafts and Calico Corners. In September 1999, HFN's Brand Awareness Survey named Martha Stewart the number one brand in the Textile area. Martha Stewart Everyday/Sherwin Williams were honored with Edison Awards for Best New Products in 1998.

STRATEGY

MSLO developed the "omni" business model. The company believes that this plan effectively distributes talent and investment across multiple platforms for maximum economic efficiency. In the center of the model are MSLO's eight core content areas, which produce original how-to content. They then distribute the cost of research and development across their 3 business platforms, Omnimedia (publishing and television), Omnimerchandising, and Omni Internet/Direct Commerce. Through the Omnimedia platform, MSLO offers their how-to information to educate, inspire, and create demand. The Omnimerchandising platform supplies a wide array of products to satisfy consumer demand. Finally, the Omni Internet/Direct Commerce platform supplies high-end merchandise in an interactive setting for their loyal core audience.

FAST FACTS: About Martha Stewart Living Omnimedia, Inc.

Ownership: Martha Stewart Living Omnimedia, Inc., is a publicly owned company traded on the New York Stock Exchange.

Ticker Symbol: MSO

Officers: Martha Stewart, Chmn. and CEO, 60, 2001 base salary $2.7 million; James Follo, CFO, 41; Suzanne Sobel, EVP, Marketing and Sales; Sharon Patrick, Pres. and COO, 58, 2001 base salary $1.3 million; Lori Riordan, Director of HR

Employees: 585

Chief Competitors: Martha Stewart Living Omnimedia, Inc. is a multimedia content and commerce company with a variety of competition including retail merchandising stores, such as Wal-Mart and Target; series television programs, such as how-to and home decorating shows; and book and magazine publishers, including those producing decorating, lifestyle, and cooking magazines.

INFLUENCES

MSLO creates growth strategies through spinoffs and extensions. The company creatively cross-promotes their brand across multiple media vehicles. Their publications include: Martha Stewart Living, Martha Stewart Weddings, and a continuing special issue series including Martha Stewart Baby, Martha Stewart Holiday, more than 30 books, continuity programs, and the askMartha newspaper column and radio show. Each venture is separate but consistent with the familiar Martha Stewart brand formula. The company's objective is to be available in all mediums to teach, inspire, and generate consumer demand.

CURRENT TRENDS

MSLO saw across-the-board expansion in 2000. The company expanded their content library, increased products at mass market and online, added Baby and Kids as a new core content area, and continued international growth. In merchandising, MSLO added a new major product line, Martha Stewart Everyday Kitchen. In publishing, Martha Stewart Living magazine reached record sales and a millennium milestone, their tenth anniversary issue featuring the "Best of the Past Decade." This issue also signaled a move to a 12-issue yearly frequency. Another special issue of Martha Stewart Holiday, for Halloween, topped newsstand sales at 430,000 copies and is now to be extended into a comprehensive Holiday series. In television, Martha Stewart Living won its sixth Emmy Award for Outstanding Service Show. Rounding out the menu, From Martha's Kitchen, a compilation show, began airing in the United States and Canada, and the Martha Stewart Living television show entered the international markets in Brazil and Japan. In March 2002, a new daily half-hour television show From Martha's Garden premiered weekdays on Home & Garden Television (HGTV). In Internet commerce, there has been steady growth in product sales and ad and royalty revenue. The introduction of new features like Recipe Finder, Encyclopedia of Plants, and marthascards, an online greeting/holiday card service, has helped MSLO double their buyer file in 2000.

PRODUCTS

MSLO designs products that are manufactured by their business partners, Kmart in the United States and Zellers in Canada. These retailers distribute Martha Stewart Everyday Home, Martha Stewart Everyday Garden, Martha Stewart Everyday Baby, and Martha Stewart Everyday Kitchen. MSLO launched a multitude of products successfully in 2001. MSLO introduced a major new product line for mass market distribution, Martha Stewart Everyday Kitchen, which includes dinnerware, flat-ware, beverageware, cookware, bakeware, and utensils. The Martha Stewart Everyday Garden collection was expanded to include 1,300 garden and outdoor products, including assorted seeds and live plants. The company introduced the Martha Stewart Signature Color Palette with coordinating punch-out cards at Sherwin Williams stores, as well as a new line of paint to the Martha Stewart Everyday collection. A fourth collection of specialty fabrics was added to the Martha Stewart Home collection in the specialty channel. In 2001 the company expanded the Martha Stewart Everyday line to include products from the Keeping and Home categories. In publishing, MSLO's tenth anniversary cookbook topped the New York Times and L.A. Times cookbook bestseller lists.

CHRONOLOGY: Key Dates for Martha Stewart Living Omnimedia, Inc.

1972:

Martha Stewart develops catering business in Westport, Connecticut

1982:

Martha Stewart publishes landmark volume Entertaining

1991:

Martha Stewart and Time Publishing Ventures Inc. publish flagship lifestyle magazine Martha Stewart Living

1993:

Martha Stewart Living syndicated television show premieres

1996:

MSLO strikes its first international media and merchandising deal

1998:

Martha Stewart named one of the "50 Most Powerful Women" by Fortune magazine

2000:

Martha Stewart Living television show honored with sixth Daytime Emmy Award for Outstanding Service Show

2000:

MSLO partners with GloboSat TV to air the Martha Stewart Living program in Brazil

2001:

MSLO signs media and merchandising deal with Japanese retail giant, The Seiyu Limited

2002:

The company celebrates the 100th issue milestone of Martha Stewart Living magazine

Martha by Mail has evolved from a magazine insert to a high-end consumer direct business. The catalog includes finished products such as patio furniture, bedding, and home furnishings, as well as craft kits and marthasflowers. Available through marthastewart.com, marthasflowers is a full-service florist, providing monthly selections, seasonal arrangements, grower's bunches, and fresh roses. The catalog was originally created to coordinate with the how-to projects presented by MSLO's other divisions. Other accomplishments for 2000 included adding 1,500 Martha by Mail products, and the introduction of the Martha Stewart Everyday microsite on Blue-Light.com, which links to marthastewart.com, offering 4,000 bed, bath, garden, and kitchen products.

CORPORATE CITIZENSHIP

As chairman and chief executive officer of MSLO, Martha Stewart is a regular speaker on the lecture circuit in support of various charities including the National Chapter of the March of Dimes and the Lupus Foundation. In the past, MSLO has donated furniture and house-wares to furnish Habitat for Humanity built houses. To celebrate the tenth anniversary of Martha Stewart Living magazine, MSLO donated a portion of the advertising proceeds to three children's charities: Campaign for America's Children, Help's Mentoring USA, and The Children's Hearing Institute. MSLO also promotes education about the health and welfare of animals in television segments featuring animal expert Mark Marrone.

GLOBAL PRESENCE

MSLO continues to increase their global presence. In January 1996, MSLO signed its first international media and merchandising deal. The Martha Stewart Living cable television program debuted in Canada on the Life Network, a division of Your Channel Television Inc. MSLO distributes merchandise in Canada through Zellers and Canadian Tire. In May 2000, MSLO partnered with Globo-Sat TV Network. The Martha Stewart Living program, dubbed in Portuguese, airs in 2 million cable households in Brazil. In October 2000, MSLO entered the Japanese market through an agreement with Jupiter Programming Co. The show is dubbed in Japanese and shown three times daily and twice on weekends on LaLa TV, a women's cable channel. MSLO also has merchandising deals with Japan's Shop Channel and Home ShoppingNetwork, and several MSLO books are to be translated into Japanese.

MARTHA STEWARTMARTHA—It's a Good Thing

In July 2001 Martha Stewart Living Omnimedia, Inc. announced that they had inked a deal with Japanese retailer The Seiyu Ltd. to debut Martha Stewart Everyday brand merchandise, as well as a publishing venture, in Japan. The brand will be carried in 226 Seiyu stores and include 1,500 home, cooking, and entertaining products. MSLO formed a jointly owned company and premiered its first issue of Martha Stewart Martha, the name of the Japanese edition of MSLO's trademark magazine, which is read from the back page to the front. Stewart said of the magazine's unusual title, "the Japanese people like repetition."

EMPLOYMENT

MSLO employs a variety of creative experts who research and develop all of the company's editorial content. Experts in each of their eight core areas create original material to support the high standards and unique look required by the MSLO brand. Once developed, ideas and projects are presented by writers, art directors, and stylists who work together for a seamless presentation. MSLO likens their employee training system to a university. Their core content experts and their deputies are like professors who teach new classes of employees about their fields the "Martha brand" way. These employees then become teachers for the next group of students. Moreover, the company teaches employees "brand standards," a technique that applies to all areas of the company, enabling future cross-development in other areas.

SOURCES OF INFORMATION

Bibliography

"about mso." martha stewart living omnimedia, inc., march 2002. available at http://www.marthastewart.com.

driver, anna. "martha stewart net falls; sales not hurt by kmart." reuters, 20 february 2002.

kilgore, tomi. "martha stewart hits q4, to miss 2002 est." cbs marketwatch, 20 february 2002. available at http://www.cbs.marketwatch.com.

"mslo, inc. announce fourth quarter and full-year results." prnewswire—firstcall, 20 february 2002.

perman, stacy. "e-business the martha stewart way." ecompany now, january 2000.

sellers, patricia. "the 50 most powerful women in business." fortune, october 2000.

——. "first: kmart, it's not a good thing, kmarts woes threaten to taint martha stewart's image—and business." fortune, 4 february 2002.

shrage, michael. "martha stewart." adweek eastern edition, 14 february 2000.

wells, melanie. "overcooked." forbes, 19 march 2001.

For an annual report:

on the internet at: http://www.marthastewart.comor write: martha stewart living omnimedia, inc., 20 w 43rd st., 25th fl., new york, ny 10036

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. martha stewart living omnimedia, inc.'s primary sics are:

2721 periodicals publishing & printing

3952 lead pencils and art goods

5023 home furnishings

also investigate companies by their north american industryclassification system codes, also known as naics codes. marthastewart living omnimedia, inc.'s primary naics codes are:

339942 lead pencil and art good manufacturing

421220 home furnishing wholesalers

511120 periodical publishers

Martha Stewart Living
Omnimedia, Inc.

20 West 43rd Street, 25th Floor
New York, NY 10036
(212) 827-8000
www.marthastewart.com

When Martha Stewart began a small catering business in her Westport, Connecticut, kitchen she had no idea that it would grow into a worldwide home-and-garden information empire. A former stockbroker turned suburban housewife, Stewart first cooked for friends and local organizations. Today, her company, Martha Stewart Living Omnimedia, Inc., produces books, magazines, and television and radio shows, all of which share the taste and tips of founder, Martha Stewart. The company helps millions of consumers eat, entertain, and decorate the "Martha" way.

Food Came First

After Martha Stewart left her career as a New York stockbroker in 1973, she took several years before deciding what she wanted to do next. Finally, in 1976, she began a catering business, drawing on two of her long-time loves: food and organizing parties and other events. Stewart and her friend Norma Collier ran a company called Uncatered Affair, but conflicts between them ended the partnership. Stewart then ran a small gourmet food store, the Market Basket, in her hometown of Westport, a wealthy suburb of New York City. Local residents included such celebrities as actor Paul Newman (1925-), and Stewart often catered their lavish parties. Her reputation for providing good food and carefully planned events steadily grew.

Stewart became such a success that she was written up in several national food and women's magazines, and in 1979 she was named a food editor for House Beautiful. A few years later, she caught the attention of publisher Alan Mirken, who attended a party Stewart catered for her husband Andy, also in publishing. Mirken said in Just Desserts, a biography of Stewart by Jerry Oppenheimer, "It was an extraordinary party.… The food was very good, very different looking, and the whole package of the party was incredible. So I felt she had book potential in her."

With Mirken's backing, Stewart released her first book in 1982. Entertaining featured recipes Stewart used in her catering business, along with color photographs and stories from her childhood in Nutley, New Jersey. Across the United States, interest in cooking was booming, and Stewart's book found a huge audience. Entertaining became a best-seller and marked the real start of Martha Stewart, Inc., a company devoted to helping average Americans eat—and live—well.

Martha Stewart Living at a Glance

• Employees: 585
• CEO: Martha Stewart
• Major Competitors: Meredith Corporation; Home & Garden Television; Hachette Filipacchi New Media; Oxygen Media
• Notable Enterprises: Martha Stewart Living magazine; Martha Stewart Weddings magazine; Martha Stewart Living television show; From Martha's Kitchen television show; "Ask Martha" radio show and newspaper column; Martha Stewart Everyday products; Martha by Mail catalog

New Fields to Conquer

Stewart followed up Entertaining with another successful book, then began to write one every year. She also turned her attention to television. Stewart made her first TV appearances on NBC. Willard Scott (1934-), weatherman for the morning news show "Today," sometimes broadcast from Turkey Hill Farm, Stewart's home. Viewers saw her prepare a Thanksgiving turkey and learned her entertainment tips. In 1986, Stewart had her own show, a special called "Holiday Entertaining with Martha Stewart." Along with writing books and appearing on television, Stewart taught seminars on entertaining, charging up to $1,500 per person.

The next year, Stewart's name appeared on retail products for the first time. Under a deal with discount giant Kmart Corporation (see entry), Stewart became a consultant and the store sold sheets under her name. While still writing her books, Stewart turned to magazine publishing. With Time Warner's financial backing, she launched Martha Stewart Living in November 1990; a TV show with the same name soon followed. Jane Heller, Stewart's banker, told People magazine in 1999 that Stewart once said "I want to be rich and famous." The success of her growing company helped her reach that goal.

Timeline

1976:

Former model and stockbroker Martha Stewart starts a catering business in her Westport, Connecticut, home.

1979:

Stewart launches Martha Stewart, Inc. and serves as food editor of House Beautiful.

1982:

Stewart's first book, Entertaining, becomes a best-seller.

1986:

Stewart appears in her own holiday television show.

1987:

A deal with Kmart puts Stewart's name on products sold by the discount retailer.

1990:

Time Warner tests Martha Stewart Living magazine.

1997:

Stewart buys Martha Stewart Living from Time Warner and launches Martha Stewart Living Omnimedia, Inc. (MSO).

1999:

MSO offers shares to the public.

2001:

The company announces plans for a new magazine, Martha Stewart Kids.

Through the 1990s, Stewart's popularity continued to rise. Sales of her magazine reached more than one million copies per month, and her show won several Emmys, television's highest award. Stewart, however, was not happy with having MarthaStewart Living financially tied to Time Warner. In 1997, she bought the magazine from the company for $75 million. At the same time, she formed Martha Stewart Living Omnimedia, Inc. (MSO) and launched a Web site, www.marthastewart.com. By 2001, 1.2 million people were logging on to the site each month.

Stewart's "Good Thing"

By this time, Stewart's empire included a new television show, a newspaper column, and a mail-order catalog business called Martha by Mail. On her shows, Stewart often told viewers that an idea or a project was "a good thing"; the phrase became her trademark. For MSO, the good things continued in 1997, when the company struck a new deal with Kmart. The store began carrying a new line of kitchen and bath items under the brand name Martha Stewart Everyday. Stewart helped design the products and made sure they met her standards of quality. Later, the store introduced gardening and patio items as well. In 1999, yearly sales of Martha Stewart Everyday items totaled $1 billion.

The variety of goods offered under Stewart's name reflected her widening range of interests. MSO did not just offer recipes and tips for hosting a party. The expanding company helped consumers decorate their homes, beautify their lawn and gardens, raise children, and make simple-yet-elegant crafts by hand. To People magazine, Stewart was "the High Priestess of Homemaking." MSO let Stewart provide her "how-to" help through a number of electronic and print media.

One of Martha Stewart's most popular books is Weddings. Published in 1987, the book features photos of lavish weddings and offers tips so readers can plan their own weddings. Even with a $50 price tag, the book sold well. Today, Stewart's company still sells the book, as well as a magazine with the same name.

The next step in MSO's growth came in 1999, when the company went public, selling stock to investors. When trading began on October 19, shares in MSO sold for $18, then quickly doubled in value. Shortly after, Stewart told People, "We don't know of another woman who built a company from the basement, like I did … and is a billionaire on the first day of trading." The price fell after that, however, and in January 2002, Stewart sold three million shares for $15 each.

Looking Ahead

Annual sales for MSO went from $180 million in 1998 to $285 million in 2000, but the rate of growth slowed during 2001 when the United States entered a recession, or economic downturn. Still, Stewart's company continued to expand. The radio feature "Ask Martha" reached twenty-three of the nation's top twenty-five markets that year, and Stewart signed a new agreement with Kmart. Her relationship with the retailer was tested later in the year when Kmart announced slumping sales and massive store closings. Stewart pledged her loyalty to the company, giving its image a boost, but it did not prevent the retailer from filing bankruptcy in January 2002.

In 2001, MSO also announced plans for a new magazine, Martha Stewart Kids, to go along with an existing magazine about babies. In addition, the company reached agreements with other retailers and continued to target foreign audiences. Stewart's next goals included adding more men to her audience and relying more on Internet sales. The Web has accounted for about 18 percent of MSO's income, second only to the company's publishing ventures. In the November 12, 2001 issue of Adweek, an expert on Web sites praised the way MSO used the Internet: "There are things you can do on the site that you can't do watching television or reading a magazine."

Stock Market Troubles

The 1999 public offering of shares in Martha Stewart Living raised more than $129 million for the company; Martha herself owned 60 percent of the shares, worth $1.15 billion. In December 2001, however, there was trouble when a New York law firm accused Stewart's company of using an illegal practice during the early trading of the shares. Investors were allowed to buy shares at the initial $18 price, but only if they promised to buy more shares as the stock rose. MSO dismissed the charge, but the law firm sued on behalf of investors who bought stock in the company between October 1999 and December 2000. As of August 2002, the lawsuit had not been resolved.

Stewart and her company both took another hit, this time in 2002, when various government agencies and a House of Representatives subcommittee began examining her sale of almost four thousand shares of stock in ImClone Sytems, Inc. The company's former chief executive officer, Samuel Waksal, was a personal friend of Stewart's. She sold her shares in ImClone on December 27, 2001, the day before they plunged in value on the stock market. The timing of the sale raised the possibility that she or her broker had illegally obtained insider information about an impending government decision to deny ImClone's application for a new drug. As the controversy grew, Stewart insisted she had done nothing wrong, and at one point her lawyers asked the House subcommittee to clear her name, even before it finished its investigation. On August 12, the committee chairman, Republican James C. Greenwood of Pennsylvania, told the Associated Press, "We can't sweep something like this under the rug because Martha Stewart is a celebrity." In the meantime, shares in Martha Stewart Living fell 60 percent, revenue dropped, and Stewart's competitors gained a chance to steal away some of her customers.

Stewart told Adweek in 2000 that her curiosity fuels her search for new items and ideas that can help her customers live better. She said, "I give people what they want and need. I don't tell them what they want and need. It's a very big difference."