MSLO’s Lyne Sees Good Things Ahead

Dec 12, 2005  •  Post A Comment

It may not be your classic predicament, but it was Susan Lyne’s predicament nonetheless: how to revive your brand when the primary component of that brand is just out of prison.

“Martha was enormously valuable to us in jump-starting the company’s business again,” said Ms. Lyne, president and CEO of Martha Stewart Living Omnimedia, which publishes Martha Stewart Living magazine. She said that while the magazine remains “the nucleus of the company in that everybody takes from Martha Stewart Living what is valuable to their piece of the business,” the comeback was hinged on getting back on TV.

Ms. Stewart was back on TV with two shows mere months after her release from the federal pen nicknamed “Camp Cupcake” in an inmate-made poncho that instantly became a best-seller.

Ms. Lyne works for a company that produces 40 shades of gray paint and is emerging from a very dark time that included its namesake’s endlessly chronicled trial, prison stint and house arrest for lying to federal investigators. But Ms. Lyne has a decidedly rosy outlook. Even as she focuses intently on her evolving list of things to do-including tasks such as aggregating and mining the Martha Stewart libraries on the Internet, expanding and upscaling Martha Stewart’s merchandising options and catering to increased interest in a broader definition of crafts-Ms. Lyne ticks off short-term goals achieved in the year since she took over MSLO.

“We had to bring advertisers back. We had to get back on television. I had to bring in some strong management because there were some jobs that had not been filled. And we had to leverage our assets to jump-start some new businesses,” said Ms. Lyne, who also said that if MSLO were a sunburst, Martha Stewart Living magazine is the central core.

While analysts “look at it as a barometer, they don’t realize the impact it has on all the other businesses,” Ms. Lyne said.

So it’s important, as well as telling, that “renewal rates are the highest they’ve ever been, and direct mail response rates are the highest they’ve ever been and above the industry norms. It’s amazing to have single-copy sales up. So clearly the reader is deeply satisfied with what they’re getting-and we’ve raised the subscription price to $24.95,” Ms. Lyne said. “I think that’s partly the reason advertisers came back.”

For the third quarter of 2005, MSLO reported that publishing revenues were up 24 percent, largely because of increased advertising, increased advertising rates and increased circulation; TV revenues were up 54 percent; and merchandising revenues were up 4 percent.

In daytime, “Martha” debuted live in September. According to Nielsen Media research data, it averaged a 1.9 weighted household rating in metered markets for the last full week of the November sweeps, the best showing since the premiere, increasing 20 percent over the previous week and hitting a season high 1.2 rating among women 25 to 54.

“I think we can get it to a 2. That will make it a nicely profitable show for us,” Ms. Lyne said.

In prime time this year, “The Apprentice: Martha Stewart” did not boost its star’s star, drawing only 6.6 million viewers on average and notice that it will not return for a sophomore season.

“It’s absolutely true that we never anticipated an extension. It was going to be valuable to us to jump-start the business. But even if it had been very successful, Martha’s time is better spent on the business and not on a prime-time television show,” Ms. Lyne said. “That said, I think that the combination of built-up expectations for the show and a performance that didn’t meet those expectations clearly hurt us in some public relations [sense].”

Nevertheless, Ms. Lyne encounters young women who are clamoring to see Ms. Stewart these days and said, “I think that in the long run that [“Apprentice”] exposure to a new audience will be very valuable to the company. Those are people I know were turned on to Martha by ‘The Apprentice.'”

Reality king Mark Burnett is executive producer of “Martha” (which is a property of MSLO) and “The Apprentice” (in which MSLO has no financial stake or voice). Mr. Burnett was granted 2.5 million shares of MSLO stock. According to MSLO’s third-quarter report, 1.7 million of those shares will have vested by the end of this year.

Ms. Lyne said she could not say whether the rest will vest in 2006 or 2007.

Ms. Lyne said Mr. Burnett’s role on “Martha” will not be diminished by her recent hiring of former ABC and NBC daytime executive Sheraton Kalouria. As president of television for MSLO, Mr. Kalouria will oversee MSLO’s current programming, but he also will be responsible for MSLO’s program development (already in preproduction is a 13-episode series about women making over their lives and homes, and a commitment from Style network for four original wedding specials) and DVD business.

“The Internet is a huge priority for us. We know the opportunities we have on the Internet we’ve barely tapped,” Ms. Lyne said. “Given where ad dollars are going and where consumers’ time is going, it has to be a huge priority for the company. We are better positioned to create the ultimate site for home and lifestyle than anybody.”

She said MSLO has unfettered rights to all of its print, TV and design libraries, except for some photography, an element that “is a little tricky because we don’t want to buy things we might not use. Also, we can tie video to all our stuff too,” said Ms. Lyne, who suggested that “a year from now, look again at our Internet site and our Internet business. It will be very different.”

While the spread of broadband clearly will be key to MSLO’s Internet plans, the current craze for pay-per-view video-on-demand is not.

“The vast majority of it is going to be free,” Ms. Lyne said. She believes it is more important to “position ourselves well and become a destination and develop a strong community around our space.”

“The most important thing for us to do is to bring [the TV] audience to our site, get them to use our site to store their photographs, to store their recipes, to keep everything that’s important to them on our site as well as accessing all the information we have.”

When Wall Streeters ask-as they continually do-where and how much can MSLO grow, Ms. Lyne points to merchandising. “Right now 90 percent of our

revenues-merchandise revenues-come from our Kmart deal. There are vast opportunities to build a higher level or higher price-point business in all the same categories we are in at Kmart.”

MSLO’s deal to build a Martha Stewart aesthetic into houses built by KB Home is seen as “a laboratory to be able to get into kitchen cabinets, doors and windows, decorative molding and all of that,” Ms. Lyne said.

Ms. Lyne sees MSLO as a company with more opportunity than where she previously worked, in the television industry. She spent six years at ABC, where she rose to president of ABC Entertainment.

These are areas in which Ms. Lyne has a long and abiding interest.

“I had a lot more bad days in television, although I’ve said it before: I loved every day I spent at ABC. I loved the business. I loved seeing something created from an idea and I loved all the moving parts of the television business, the scheduling and the sales pitch. All of it,” Ms. Lyne said. “But I did feel like it was, in the long run, a shrinking business; and that’s tough. [In the broadcast network business] if you are a success, you are probably losing audience every year.

“This,” Ms. Lyne said, with a sweep of her arm in the fashionably gray-walled conference room attached to her office in Midtown Manhattan, “is a growth business.

“There are good days and there are great days and there are the occasional tough days; but I think we’re on a path where I can see where we need to go.”

Channeling Martha Stewart

Martha Stewart’s brand of television can be found around the dial. Shows produced by Martha Stewart Living Television and current
ly on the air include:

  • “Martha,” an hour-long freshman syndicated show distributed by NBC Universal Domestic Television Distribution, seen on TV stations reaching 98 percent of the country. It also appears at 6 p.m. (ET) weeknights on The Learning Channel and twice on weekdays on Canada’s Life Network.

  • “Martha Stewart Living,” the now-defunct Emmy-winning program with which she first ventured into daytime syndication, seen twice-weekly on the Style network.

  • “Everyday Food,” a weekly half-hour modeled after Martha Stewart Living Omnimedia’s popular 2-year-old magazine of the same title, produced with Washington’s WETA-TV for public television stations.

  • “Petkeeping With Marc Morrone,” a twice-weekly syndicated show distributed by Tribune Entertainment, which grew out of Mr. Morrone’s cuddly appearances on “Martha Stewart Living.”