Martha Stewart Hands Off Magazines' Business Operations to Meredith

About 40 Martha Stewart Staffers Will Lose Their Jobs

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Meredith will handle ad sales and other non-editorial duties for Martha Stewart Living.
Meredith will handle ad sales and other non-editorial duties for Martha Stewart Living.

Martha Stewart is getting out of the business of magazines -- mostly.

Her company, Martha Stewart Living Omnimedia, has struck a 10-year licensing agreement with Meredith Corp., owner of Better Homes and Gardens and Every Day With Rachael Ray, to handle the advertising sales, marketing, circulation, production and "other non-editorial functions" for Martha Stewart Living and Weddings magazines, their websites and video libraries, the companies said Wednesday. Living and Weddings are Martha Stewart's remaining two magazines after it closed Whole Living in 2012 and shifted Everyday Food to a supplement for Living.

MSLO will continue to produce the content for Living and Weddings, all the way down to determining the type of paper stock for the magazines.

The agreement, which begins Nov. 1, lasts 10 years and extends to the U.S. and Canada only.

Meredith will absorb some of MSLO's sales and marketing staff, including Amy Wilkins, head of advertising, sales and marketing, according to a Meredith spokesman. About another 40 people at MSLO will be laid off, people familiar with the matter said. This round of job cuts comes less than a year after a layoff claimed about 80 positions at MSLO.

The publicly traded MSLO swung to a quarterly profit in the three-month period ending June 30, thanks largely to cost-cutting measures. Revenue was $37.6 million, an 11% decline from the previous year.

The bulk of MSLO's revenue, about $22.2 million, came from its publishing arm, but sales have dropped because advertisers have steered their print budgets to larger publishers -- like Meredith -- where they can achieve scale by placing ads in multiple magazines instead of just one or two. Print budgets have also tightened as marketers earmark more dollars for digital media.

But MSLO also makes money selling Martha Stewart-branded merchandise, which pulled in nearly $15 million in revenue. Broadcasting revenue from the creation of "Martha Stewart's Cooking School," which airs on PBS, drew another $672,000 during the quarter.

The agreement with Meredith does not affect the merchandising or broadcasting divisions, though content from "Martha Stewart Cooking School" can feed into the video library Meredith will be selling ads against.

Meredith will pay MSLO a fee for content for Martha Stewart Living, according to documents filed with the Securities and Exchange Commission. The companies will share profits from producing and distributing the magazine and share revenue from digital advertising sales, the documents said. Dollar amounts and percentages were redacted in the SEC documents.

MSLO declined to comment.

In a press release issued Wednesday afternoon, Meredith said the agreement "will not have a material effect on Meredith's fiscal 2015 second-quarter financial performance, but will be accretive to Meredith's earnings for the second half of fiscal 2015 and in fiscal 2016."

Revenue for Meredith's National Media Group, which includes its magazines, declined 5% to nearly $280 million during the three-month period that ended June 30. Ad revenue fell 8.5% to about $122.7 million.

"The change will be invisible to the consumer, and strengthen the Martha Stewart brand in the advertising marketplace," said Meredith Chairman-CEO Stephen M. Lacy in a statement.

"Our editorial team can focus entirely on what we do best," Ms. Stewart added in the statement, "the creation of inspirational, original, practical, useful, and trusted content for our superb publications and digital properties -- content that continually enhances and improves consumers' lives."

The financial agreement with Meredith comes as Martha Stewart has landed in a war of words with actress Gwyneth Paltrow, who founded the lifestyle website Goop. Ms. Stewart has said Ms. Paltrow "just needs to be quiet" and, in the November issue of Martha Stewart Living, included a pie spread with the headline "conscious coupling," an apparent dig at Ms. Paltrow's term – "conscious uncoupling" – to describe her split from husband Chris Martin.

Goop, meanwhile, recently hired former MSLO President-CEO Lisa Gersh to serve as its chief executive officer.

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