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Some Take Wait-and-See Approach to New TV Shows; Others Cite High Ad Rates

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NEW YORK ( -- While Martha Stewart loyalists plan to celebrate the end of her house arrest with ankle-bracelet-removal parties, some big marketers are weighing whether they want to associate their brands with the former prison inmate.
One media-buying agency reports several clients required approval at the CEO level before they could even begin discussions about whether they would buy into the new Martha Stewart TV shows.
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Martha Stewart Living Omnimedia needs marketers who believe an endorsement from Ms. Stewart is a good thing as it works to turnaround the company. While Kraft’s coffee machine Tassimo and General Electric Co. have signed on for the TV shows, others, such as Procter & Gamble Co. and Clorox, are considering the pros and cons of a relationship with Ms. Stewart. While they still support the magazine, they haven’t yet signed on to the TV shows, insiders said.

CEO approval required
One media-buying agency reports several clients required approval at the CEO level before they could even begin discussions about whether they would buy into the shows.

“There are people who ask the question when considering The Apprentice or Martha daytime, what’s her equity? At the same time we have clients who have stood by her and maintained their presence and association with Omnimedia throughout the trial and prison,” said a buyer at that agency.

“This is a very tricky one. If you’re trying to hit a home run, you’ll always get on first or second base with Martha Stewart. Will you hit it out of the park? She’s a huge unknown. I’m cautiously optimistic she’ll pull it off. But I reserve enough skepticism that she’s not surrounded by enough advisers to pull it off,” said Brian Terkelsen, senior vice president and director of entertainment at MediaVest USA.

Less afraid
Another media buyer said, “We have clients who are very interested and [feel] there’s no residual damage and some others who are uncomfortable. It’s mixed. Some people don’t want to talk about it, but there are some who are more comfortable that she’s on TV. They are less are afraid than a couple of months ago.”

Other media buyers simply think MSLO is overpricing the TV offerings. “It’s aggressive. They’re selling a limited inventory supply. Maybe 14 30-second spots per episode. The pricing is more analogous to an Ellen than a Tony Danza,” said one media buyer, referring to the daytime syndicated Ellen DeGeneres Show and Tony Danza Show. The ad rate, or the cost per thousand viewers, on MSLO's daytime syndicated show Martha is between $18 to $22, according to one media buyer. “That’s too rich for our blood,” said the executive.

“All indications are the brand is really stronger than ever,” said Susan Lyne, MSLO president-CEO, who's quick to say the past is past and that the company is “looking toward the future. ... There is momentum here.”

50 million Martha supporters
MSLO contracted Austin-based political pollsters Public Strategies in May to survey women’s thoughts on Ms. Stewart. As projected onto the U.S. population, the survey determined about 50 million women would describe themselves as Martha supporters, 75 million women believe she influences how we think about organizing and managing our homes and 43 million said they would be willing to consider a product endorsed by Martha.

But Robert Passikoff, president of consumer-loyalty-tracking firm Brand Keys, New York, believes a large fan base may not be enough to rejuvenate profitability.

“Looking at the situation three years ago, there was a positive reinforcement to being associated with the Stewart brand. Of course Ms. Stewart lost so much strength and efficacy over the three years, what’s happened is that what she brought to those vehicles has also weakened.”

Mr. Passikoff argues that despite the potentially high interest in the TV shows, that might not necessarily translate into returns, at least initially. While the buoyant MSLO stock price -- hovering at $26 last week up from a 52-week low of $10.22 -- gives some indication of support for the brand, Standard & Poor Equity Research July 13 downgraded MSLO, saying that the current price was “unrealistically high.” S&P is expecting a loss of 75 cents a share with earnings per share of 1 cent in 2006. MSLO is due to report second-quarter earnings July 27.

Revenue down for print and TV
For the first quarter of 2005, MSLO’s revenue was $38.7 million, down from $44.5 million for the same period last year, with losses at $14.9 million. Prospects are perhaps brightest at the flagship magazine, Martha Stewart Living. Ad pages in June were up 27% to 64 vs. 50 for the same month in 2004, according to the Publishers Information Bureau. Total ad pages, though, for the January-June period are down 6%. In the TV division revenue was down from $25.7 million to $10 million in 2004.

The daytime show, Martha, is more likely to generate revenue for the company than the Mark Burnett/Donald Trump owned The Apprentice: Martha. MSLO is in charge of Martha ad sales and integration partners must commit to a media buy. Martha, one buyer was told, will also get a second airing on cable channel TLC.

MSLO views The Apprentice: Martha as an unrivaled promotional vehicle for the company’s other endeavors including the various merchandising lines, a DVD line -- based on the archive -- and the Martha-branded Sirius Satellite Radio Channel. (Other MSLO shows air on PBS and Style Network.)

Patti Ganguzza, president of AIM Productions, a New York product-placement agency that has brands in the new Martha shows, said she thinks there is no replacement for Ms. Stewart’s endorsement: While agencies can buy steak anywhere, she compares Ms. Stewart to Kobe beef. “Martha has always been able to illustrate that she’s not just spouting off as an expert. Research shows that when Martha endorses a product people go out and buy it.”

Ms. Stewart’s TV shows will also offer a natural platform for the companies she’s already in business with. Paint manufacturer Sherwin-Williams, based in Cleveland, sells the MSLO’s Signature color palette and has already painted the loft where The Apprentice was shot. Ms. Stewart will also star in an ad campaign for the branded line of paints come fall.

Martha's post-prison poncho
Also thrilled with its Martha association is Lion Brand Yarn, a small New Jersey company that witnessed the power of her fan base first hand. Twelve days after Ms. Stewart wore her knitted poncho as she left prison, half a million people had downloaded the pattern from its Web site. To date, a million people have downloaded it, resulting in a 30% sales spike in wool sales. MSLO contacted the firm to help enlist people who made the poncho for the audience of the Sept. 13 episode of Martha.

“We did get some negative comments from customers when we first posted the pattern. But the attention has changed. ... The difference between when she was in prison and she just got out is tremendous. She is back on top,” said Ilana Rabinowitz, director of consumer marketing for Lion Brand.

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