MSLO has retooled its online strategy, abandoning an e-commerce model in favor of ad-supported free content, and forged new merchandising partnerships at a breakneck pace. But the recent rejection of Ms. Stewart's conviction appeal reminded everyone that the company remains inextricably linked to its central human resource. President -CEO Susan Lyne talks about how the company is rebuilding.
ADVERTISING AGE: How do the remnants of Martha's legal battles affect the company?
SUSAN LYNE: There was a lot of focus on it when Martha first returned, both from the press and obviously advertisers. But we don't get questions about it any more. Despite the fact that her appeal was rejected, the stock price went up that day.
AA: Did Martha change during her time away?
MS. LYNE: What surprised me was the energy and dedication that she came back with. I'm not sure I would have had the same focus and willingness to throw myself back into work after a rough couple of years. She did it after a month's vacation, with the sense that she could bring a lot to the rebuilding of the company and that she needed to do it.
AA: How has the culture shifted since Martha returned?
MS. LYNE: Everyone is more on their toes when Martha's here because she notices when a magazine is great as opposed to good or when a product is genuinely fresh as opposed to just well-done. Having her here, there's just a different buzz.
AA: What's going to change?
MS. LYNE: Clearly publishing is deeply important to us as a company. It's where the company began. And we are going to see some new development in that arena. In terms of opportunities for growth, the two places that we've identified and see as really dynamic for 2006 are the Internet and merchandising. If you look at all the trends in Web usage-like personalization, self-expression and community-they're all right in our wheelhouse. And there is a clear economic model-finally-for the Web that is viable and robust. In merchandising, one of our challenges has been to really try to diversify our channels and our product lines more. Currently about 95% of our merchandising dollars come from our Kmart business. We sell a billion dollars' worth at Kmart and Sears Canada. But we also know that it's important to get to people who may not shop at Kmart. So things like the crafts business and the KB Home deal are beginnings of that.
AA: How much of the company's revenue derives from print?
MS. LYNE: Publishing is more than 50% of revenue. We expect publishing to become a profitable contributor again this year. But we have a different mix of businesses now. Our Internet business was a money-loser every year; it also will become a contributor this year.
AA: How does the TV division fit in to the mix?
MS. LYNE: Having "Martha" on the air five days a week in that constant conversation with our customer-we see it lifting single-copy sales. Web traffic is up about 50% since the TV show launched.
AA: Martha's "Apprentice" did not perform as well as either NBC or you had hoped.
MS. LYNE: I can safely say that we're not in the prime-time-TV business. It was undertaken with the idea that it would be useful to reintroduce Martha to her old audience and hopefully to an audience that might not think of Martha or the brand as being for them. It was always conceived of as a one-shot. But it was hyped so much that I think that did hurt us. There was a strong sense that it had failed. It did not fail for us based on what it was we were looking to do. But it was clearly a disappointment for NBC.