Observers await reaction to MSLO's public offering: 7.2 million shares at $18 per share Oct. 18. The stock closed at $35.6 on its second day of trading.
Sharon Patrick, MSLO's president-chief operating officer, says the company isn't a magazine publisher or a media company -- it's a how-to company. And clearly Martha Stewart Living is crucial to the bottom line.
MUCH SINCE BOOK DEBUT
"There are a number of magazines that think they have the brands to survive in a print-only world, but the advertisers that I talk to are demanding that you have multiple platforms," says James Marsh, an analyst with Prudential Securities.
Since the 1982 book "Entertaining," the launch of Martha Stewart Living as a quarterly magazine in 1991, and the formation of MSLO in 1997, the company's reach has extended to two magazines reaching 9.9 million readers a month; TV shows; 27 books selling 8.5 million copies; "askMartha," a syndicated radio program and newspaper column; a Web site with 925,000 registered users; and the development of 2,800 products sold in stores, a catalog and online.
PUBLISHING LEADS THE WAY
Last year, the publishing group -- magazines and the "askMartha" newspaper column -- and a radio show accounted for 71% of revenues and 75% of operating income, according to documents filed this summer with the Securities & Exchange Commission in advance of the initial public offering. MSLO's 1998 net income rose 70% to $23.8 million over 1997.
For the first six months of this year, publishing accounted for 65.7% of revenue but 72.4% of operating income. TV was 11.5% of revenue and 5.3% of operating income, and merchandising's tally was 10.3% of revenue and 34.4% of operating income. Internet and direct commerce ventures were unprofitable, although they comprised 12.5% of revenues.
Analysts and ad buyers note several strengths in MSLO that set it apart from competitors. Its ability to cross-sell and cross-promote means research and development costs can be spread across the company, so more R&D can go into every idea.
"What sets Martha apart is every piece of her is a quality product," says Jeanne Tassaro, senior VP-director of the Print Edge, a division of Young & Rubicam's New York-based Media Edge.
Another plus is that it is a strategically coordinated effort, a thorn in the side of other companies with long-standing independent business units.
"This was the vision at the beginning," Ms. Patrick says. "MSLO has no silos. It has no business groups per se. Everything is run out of core centers so the art department and sales guys work across the board."
The magazine's importance is reflected in the ad numbers as well.
Of last year's $91.7 million in ad revenues, 77% came from magazine advertisers. This year, MSLO expects 20% of its advertisers and most of its top 50 advertisers to buy ads from two or more components.
Ford Motor Co. buys space in Martha Stewart Living, commercials during the weekday TV program and is a sponsor of the "askMartha" radio program.
The Gap does special event marketing, magazine, TV and Internet ads and is an exclusive sponsor of special interest publications.
TRUST AT CENTER
In the quest to boost the brand, not so much the personality, MSLO plans to decrease its reliance on Ms. Stewart and bring in a new generation of experts.
"Martha was the visionary and the driver of understanding the power of how-to content," Ms. Patrick says. "Martha stands for what this brand is, and is instrumental in presenting it. It's moving from trusted personality to trusted products and services. The branded product becomes the next step."
The same metamorphosis is taking place within other corporate towers. Ziff-Davis has its own cable network ZDTV. Time Inc. draws material from several of its magazine titles for a nightly "CNN Newsstand" segment. Hearst Corp.'s Good Housekeeping has a multimedia deal that includes consumer awareness segments on "PrimeTime Live," radio sports on CBS Radio Network, a weekly syndicated newspaper column and a partnership with Home Shopping Network.
"We're starting to think of magazines less as printed product and more as brand names," Ms. Tassaro says.
TREND IN INFANCY
Still, the industry trend is considered in its infancy and liable to encounter its share of fits and starts. One crucial question to be answered is how many media outlets are needed for an integrated program. Also to be resolved is finding a way to offer advertisers value-added product and not just one-stop shopping.
"The exciting part of this is that magazines, and for that matter, any media company that plunges into this media convergence, can make it a very lucrative opportunity if they pull all their marketing capabilities together and educate their sales staff across all their properties," says Steve Greenberger, senior VP at New York-based Grey Advertising's MediaCom. Right now, "No one's watching