Martha Stewart’s conviction last week on multiple federal charges will likely spell an end to King World’s long-running daytime hit “Martha Stewart Living.”
Ms. Stewart’s contract contains a standard morals clause that voids the contract in cases such as this, probably ending the daytime hostess’ tenure on broadcast television even if she doesn’t receive jail time for her crimes, according to insiders with knowledge of Ms. Stewart’s previous negotiations with King World.
A King World spokesperson had no comment Friday after the verdict in which Ms. Stewart was convicted of obstruction of justice, conspiracy and lying to the government about her ImClone stock sale, but numerous sources said the show is all but done.
The conviction is also expected to chase away most of her remaining advertisers. Even before her legal problems began last fall, some national TV advertisers had begun pulling out of her television shows as ratings fell for both the flagship “Martha Stewart Living” and her Food Network show, “From Martha’s Kitchen.” That exodus accelerated as allegations damaged her pristine image.
“It was a brand that was already tarnished,” said Jason Maltsby, senior partner and managing director of national TV, MindShare USA, New York. “When you have a brand that’s built on a personality, there is a rub-off effect. With a guilty verdict, those advertisers that haven’t already distanced themselves from the brand are going to have to think long and hard about whether they want to retain that relationship and association.”
Food Network will continue to air “From Martha’s Kitchen” in its regular time slots, 6:30 p.m. on weekdays and noon on weekends, as it evaluates the situation, said a spokesperson for Scripps Networks, Food Network’s parent.
Bill Carroll, VP and director of programming at Katz Television Group, said it is likely “Martha Stewart Living” will finish out its current season but will not return in the fall.
“Everyone was-as they should have been-giving [Ms. Stewart] the benefit of the doubt and assuming she would be found not guilty, but if she were found guilty people assumed the show would not continue,” Mr. Carroll said. “All of us were prepared for this contingency.”
“Martha Stewart Living” has averaged a 1.2 national household rating in the show’s seventh season among strips and 11th among all syndicated shows, according to Nielsen Media Research. The series faced a number of downgrades this season to make way for fellow King World strip “Living It Up! With Ali & Jack” in the 9 a.m. time slot on several big-market CBS owned-and-operated stations. Disappointing ratings for “Living It Up!” had syndication pundits buzzing that “Stewart” might return to some slots this fall.
Stations were not alone in expecting a not-guilty verdict. Wall Street also was surprised by the outcome. In the moments leading up to the reading of the verdict, shares in Ms. Stewart’s company, Martha Stewart Living Omnimedia, surged as much as 16 percent to $16.27 a share on the anticipation of a not-guilty verdict. Trading was eventually halted before the verdict was read. When trading resumed, shares in the company sank 23 percent to close at $10.86 a share.
The charges against Ms. Stewart centered on why she suddenly dumped about $228,000 worth of ImClone Systems stock on Dec. 27, 2001, just a day before the Food and Drug Administration announcement that it had rejected ImClone’s application for approval of a cancer drug, which sent ImClone’s stock plummeting.
The verdict, reached by eight women and four men, came on the third day of deliberations and could result in Ms. Stewart facing up to the maximum prison term and a fine as high as $90 million, though it is unlikely she will face such stiff penalties. The sentencing phase is scheduled to begin June 17.
Specifically, Ms. Stewart was found guilty of two counts of making false statements, one count of conspiracy and a single count of obstruction.
Ms. Stewart said she would appeal. The charges carry up to 20 years in prison but the sentence could be as little as probation. Analysts felt she would spend one to two years in jail.
The verdict is expected to cast an even darker shadow over the company. “The company has a serious problem,” said Dennis McAlpine, a principal at McAlpine & Associates. “Obviously, if she does jail time, it’s going to be a problem. You can’t do a TV show from jail. But my feeling has always been that the verdict didn’t matter. The company was already in trouble because it lost a lot of its cachet.”
Mr. McAlpine noted that the termination of Ms. Stewart’s TV show won’t hurt the company as much as advertisers abandoning the flagship magazine Martha Stewart Living. Indeed, the revenue generated by the company’s television operations accounts for just 8 percent of the company’s overall revenue pie.
The company reported Thursday that it swung to a fourth-quarter profit despite a revenue decline. It said that it continued to suffer under the cloud of Ms. Stewart’s legal troubles and that it developed a series of contingency plans.
Already, the company has attempted to distance itself from the doyenne of domesticity by developing products that rely less on the Martha Stewart name. Ms. Stewart had stepped down as chairman, taking the title of chief creative officer.
Wayne Friedman and Jon Lafayette contributed to this report.