Reckoning at Hand for Stewart Empire

Nov 24, 2003  •  Post A Comment

Are Martha Stewart’s television programs due for a makeover?
Ms. Stewart will stand trial early next year on obstruction of justice and investor fraud charges, bringing to a head a string of legal troubles that has damaged her reputation, pummeled the stock of the company that bears her name, eroded a huge chunk of her personal wealth and called into question whether a brand so inextricably linked to its founder will survive regardless of the trial’s outcome.
Since December 2001, when Ms. Stewart sold the 4,000 ImClone Systems shares that set into motion the well-publicized legal chain of events, Omnimedia stock has tumbled more than 40 percent. The company has reported losses in two of the last three quarters, thanks to a weak advertising market and the dark cloud hanging over the company’s founder.
“The bloom is definitely off the rose,” said Dennis McAlpine, a principal of McAlpine Associates, a media stock research firm in Scarsdale, N.Y., who suggests Omnimedia could go private to weather the storm, thus avoiding the scrutiny it faces as a public company.
While much of the attention is focusing on whether Ms. Stewart’s company, Martha Stewart Living Omnimedia, can survive a criminal conviction of the grande dame of domesticity, some observers suggest a more profound threat lurks around the corner, particularly for the television franchise. That threat is relevancy.
“She had this segment all to herself, but she faces continued competition [as newcomers] chip away at that product,” one syndication veteran said.
Regardless of the outcome of her obstruction of justice trial, some TV industry sources said Ms. Stewart’s television franchise-which includes nationally syndicated “Martha Stewart Living” as well as “From Martha’s Kitchen” on Food Network and “From Martha’s Garden,” which ends its run on Home & Garden Television this year-could face a double whammy unrelated to her legal troubles. A growing number of imitators and new competitors are flooding the airwaves, and much of the most popular lifestyle and domestic programming is evolving away from the strictly instructional and toward fare that focuses more on interaction and entertainment. Aside from individual shows, cable networks, including Fine Living, Style, Home and Garden, Food Network, Do It Yourself Network and Bravo, are now offering programming that appeals to the same audience.
Omnimedia executives challenge that view, saying the company’s television franchise has remained competitive and still attracts an audience.
“The one thing about the Martha Stewart brand and in our various media endeavors is the heavy interactive component with our consumers, who are noted for the ferocity of their loyalty,” said Omnimedia President and CEO Sharon Patrick. “Our key strength is our ability to keep generating new ideas. Our customers’ allegiance is to the how-to ideas, and Martha is the ultimate authority and best teacher.”
By most measures, Ms. Stewart’s syndicated show has been a solid performer and has held its own in the ratings, even against the backdrop of a federal investigation and later an indictment, according to another syndication veteran. But he wondered what impact a trial might have.
“That could put a different light on the show and create controversy for a show that has been a good, solid utility player,” he said. “It might get stations to start thinking about whether they have other options.”
Said Robert Thompson, director of Syracuse University’s Center for the Study of Popular Television: “Martha Stewart used to have the home-improvement neighborhood to herself. Now there are new, hip shows such as `Trading Spaces’ and `House Rules’ that add an entertainment element,” compared with the more traditional instructional format that Ms. Stewart generally uses in her shows.
For their part, Omnimedia executives say they understand emerging trends and in fact have adopted more interactive approaches to their programming when it’s appropriate. Heidi Diamond, president of Omnimedia’s television operation, cited occasions when the syndicated show has filmed the makeover of a room in a viewer’s home, but noted that the 11-year-old show is less about following trends than staying true to its roots of what she called “pristine expert information.”
Omnimedia for years depended almost completely on Ms. Stewart, who remains very much a presence on all her television shows. But the new thinking at the company is that its strength lies less with Ms. Stewart as a personality than with the expertise and authoritative way the shows impart information on topics from cooking to furniture restoration to gardening.
In recent months, a number of moves have been made to create a separate identity. The company has begun launching products that don’t even have Ms. Stewart’s name attached, such as its newest magazine, Everyday Food, as well as the new syndicated TV series “Petkeeping with Marc Marrone”-which is executive produced by Ms. Stewart.
Ms. Diamond said all they are doing is an extension of what built the company. “Martha was a pioneer of this specialty-type programming,” she said. “We’ve always stuck to our knitting. That’s what resonates with viewers and makes our brands so strong.”