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Her release from federal prison means Martha Stewart's personal storyline has changed. But changing her company's bottom line will be another matter.

Despite the massive publicity, despite two new higher-profile TV shows, despite some thawing in key marketers' attitudes towards flagship Martha Stewart Living, analysts who track the company say that Ms. Stewart's return will not mean a quick turnaround in ad revenue.

Simply put, the comeback of Martha, the brand, does not automatically mean the same for her company.

Pam McNeely, senior VP-media director at Dailey & Associates, Los Angeles, puts it bluntly. "We advertise in Everyday Food"-the notably non-Martha-branded title. "We didn't have any client resistance at all. We continue to have client resistance for the mother ship."

Still, Martha Stewart Living Omnimedia is banking on the return of the living brand to work her magic, starting with an expected rousing speech to the troops this morning. More than anything else, the return of Ms. Stewart will test how much an injection of celebrity into this celebrity-mad culture can overcome-even if this celebrity will literally wear ankle-weights in the form of an electronic monitoring bracelet for the next five months. The terms of Ms. Stewart's release permit her to leave her Bedford, N.Y., estate (where she will finish her home confinement) for 48 hours each week for work-related business (including parties), but not to socialize with other convicted felons. The Securities & Exchange Commission seeks to bar Ms. Stewart from ever reclaiming the CEO title, but Newsweek reports ongoing negotiations seek to reduce that lifetime ban.

"The company is definitely better off with her out of jail than in jail," said Gary McDaniel, a New York-based Standard & Poor's analyst. "Better off enough to justify the current stock price? I don't think so." MSLO stock closed down 9.4% at $30.75 on March 4. Despite the sudden slump the day she was released, it still is close to its 52-week high. But how much does Ms. Stewart's return to the company and the airwaves help? Mr. McDaniel projects TV revenue at the company in '05 to total $12 million, up from 2004's $10.5 million. In 2006, he expects that figure to grow to $16 million-a nice jump, to be sure, but not one that remakes the revenue mix of a company that had $187 million in revenue last year.

MSLO's net loss topped $59 million in 2004. Mr. McDaniel projected an earnings-before-interest-taxes-and-depreciation loss of $26 million in 2005 and a big swing to EBITDA profit of $67.3 million in 2006, on revenue of $192.4 million. (His optimism for '06 is not unanimously held: Another analyst, who requested anonymity, projected only modest profitability in 2006 and warned "even that might be a stretch.")

The company, however, is adopting a confident stance. "We believe the advertising growth in Martha Stewart Living, continuing consumer demand for our new merchandising programs, strong interest among stations and advertisers for our new syndicated TV program, and Martha's unencumbered return to the company are very promising trends toward recovery," an MSLO spokeswoman said.


Ms. Stewart comes back to a brand new team, having replaced longtime CEO Sharon Patrick with Susan Lyne Nov. 11. Ms. Lyne has set a positive tone since her arrival and has made it clear she wants the company to go on the offensive, emphasizing Martha the brand. In contrast, Ms. Patrick was overseeing a strategy that reduced Ms. Stewart's presence. One casualty of the new direction was Martha Stewart Living Publisher Suzanne Sobel, who left the company last week. Ms. Lyne sought to put her own team in place, according to an insider, and a new position for Ms. Sobel could not be mutually negotiated. Ms. Sobel did not respond to calls.

One wild card in the company's recovery: the role of product-integration deals in her new, syndicated show, which has already been sold into 85% of the U.S.

Since Ms. Stewart's deal with Mark Burnett Productions for her planned version of "The Apprentice" is separate from MSLO, the company's take from the deal was described as "materially insignificant" by an insider. This is too bad, since Conrad Riggs, partner in Mark Burnett Productions, pegged asking prices for integration packages for that show as equaling those for Donald Trump's version, or between $2.5 million and $5 million.

Mr. Riggs said that asking prices for similar packages on the still-untitled syndicated show were over $1 million-and sales would be handled by MSLO. One key caveat: Ms. Stewart "is not going to be hawking products," he said.

"There's interest in both shows," said Guy McCarter, director-entertainment and marketing, OMD. "We'd like to do something across Omnimedia, including a branded presence." Meanwhile, Heidi Diamond, exec VP-television, MSLO, wants to do a global launch of the syndicated show during its fall '05 debut. The company is currently shopping it in Europe-and is looking for other personalities to show up on air with Ms. Stewart, such as "Queer Eye for the Straight Guy" design doctor Thom Filicia.

Still, it would take quite a few big deals to make up for the hurt suffered at Martha Stewart Living, which alone accounted for 32% of company revenue in 2004. In a recent conference call with investors, Ms. Lyne said that the magazine would post an ad-page increase in the second quarter of 2005. This, though, comes after stomach-turning drops of 34.6% in 2003 and 46.6% in 2004, as well as a double-digit drop in the first quarter of `05. (Company Chief Financial Officer James Follo said the company's publishing segment is expected to post operating losses between $6.5 million and $7 million on revenue of $25 million in 1Q '05.)

And, analysts and media buyers note, the market niche Ms. Stewart's magazine once owned has seen a raft of new competitors net significant share, from Time Inc.'s surging (and heavily Martha-influenced) Real Simple to its new launch Cottage Living.

"You will see [advertising] trickle back slowly" in the last quarter of 2005, said George Janson, managing partner-director of print for WPP Group's Mediaedge:cia. "They have nowhere to go but up," he added, but warned "it's not a slam-dunk by any means. I still think there's some negativity among some advertisers."

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