Tuesday, June 23, 2015

Sale of Martha Stewart empire is the end of a 25-year publishing saga

The announced sale of Martha Stewart Living Omnimedia for $353 million to a retail licensing company marks the dwindling end of a 25-year magazine publishing saga. Sequential Brands Group paid about 18% of what the company was worth when MSLO went public only 15 years ago. The transaction includes two magazines; the iconic flagship Martha Stewart Living, the foundation of the whole enterprise, and Martha Stewart Weddings, plus a number of branded home and lifestyle products, associated websites and various television extensions. 

The reasons for the sale are congruent with the problems that many large lifestyle and shelter publishers are facing. MSLO had been trying to morph from a publisher into a merchandising company, which (along with its knock-down price) probably made it attractive to the buyer. Declining publishing revenue in the first quarter of 2015 fell to $5.7 million from $19.5 million in the same quarter of 2014. 

The company had offloaded all of its publishing business operations to Meredith Corporation (Better Homes & Gardens etc.) last October, meaning that it handles all circulation marketing, single copy sales and ad sales (digital and print). Meredith has a deal that stretches out 10 years, during which MSLO is to continue to produce content. It's not clear what the new ownership will mean to Martha Stewart's role as chief creative officer or to the Meredith deal. 

The trajectory of Martha Stewart Living has been an interesting, if jagged, one. She first developed it for Time Publishing Ventures in 1990 and its soaring popularity, upwards of 2 million circulation by 2002, gave her a platform from which to launch a television career and a robust online presence as well as moving into merchandising deals. In 1997, she and a minority partner, Sharon Patrick, consolidated all the print, merchandising and television into MLSO, promising synergies and opportunities for line extensions, such as an online catalogue business, even selling flowers to consumers. Her dream and vision caught investor's attention when, in 1999 the company went public, making Martha Stewart a billionaire. She was lauded, and appropriately, for having built an empire from scratch, an empire for which she, her image, her style, her flair were the most important products. That was the top of the curve, at least as far as publishing goes.

Stewart's star began to fall when she was convicted in 2003 of securities fraud and obstruction of justice for selling all her shares in an unrelated company, using insider information from her broker. She sent to prison for 5 months. When she got out, she concentrated her energy on a television and merchandising comeback but it proved largely unprofitable. New York magazine reported in 2011 that MSLO had only made a profit in one of the previous 8 years. 

She remains a widely recognized brand but has, with this sale, been reduced to mostly a figurehead, albeit a very wealthy one The boom times of the lifestyle magazine are behind it, but as a mature product it has held steady with a circulation of about 2 million, making it the 33rd title by circulation in the US.  It's the kind of base which Meredith may be able to capitalize on. And even if MSL and its spinoffs suffer from the conflicting demands of the marketplace and their new owners, 25 years in the magazine business is a good run. 



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