Homepage News Sports Business Entertainment Shopping Jobs Cars Homes Place an ad

BY JAMES T. MADORESTAFF WRITER

August 4, 2005

Doing time may be a good thing, if you are Martha Stewart.

As the homemaking expert prepares to end more than five months of home confinement on Aug. 31, her company and her reputation with consumers are slowly rebounding.

She is working on eight new projects, all but one of which will debut later this year. Advertisers are returning to Martha Stewart Living magazine. And her company's stock has soared in value, making her a billionaire again.

Still, some experts doubted Stewart would fully recover from the stock-trading scandal that led to her conviction last year on charges of obstructing a federal investigation. Home confinement is the second part of her sentence; earlier, she spent five months in a federal prison in West Virginia.

"Unless she gets very lucky, I don't see her returning to the heights she fell from," said stock analyst Dennis McAlpine, who runs McAlpine Associates in Scarsdale. "The problem is there is much more competition today than there was before," he said, referring to magazines Real Simple and O, The Oprah Magazine, along with a host of "how-to" books that rival Stewart's offerings.

"And then she's going to be doing a lot of television, which may or may not work," McAlpine added.

TV will consume a lot of Stewart's time in the immediate future.

Six weeks from now, on Sept. 12, her new daytime talk show, "Martha," begins on NBC with a rebroadcast in the early evenings on The Learning

Will Martha's planning pay off?

She's got her list for a media blitz, but experts doubt a total comeback

Grover Home Headquarters

Grover Home Headquarters

Suffolk County Deck and Fence

Suffolk County Deck And Fence

Suffolk County Deck And Fence

Suffolk County Deck and Fence

Barkley Shades and Blind

Gentle Touch Laser

Rainbow Chimes

Rainbow Chimes

8/8/05 1:37 PMNewsday.com: Will Martha's planning pay off?

Page 1 of 3http://www.newsday.com/entertainment/news/ny-bzmart0804,0,3027656,print.story?coll=ny-top-headlines

Channel. Filming will take place three mornings and two afternoons per week on a set built in Manhattan to resemble Stewart's kitchens, greenhouse and crafts room at her farm in Bedford, N.Y.

On Sept. 21, "The Apprentice: Martha Stewart," a reality show, premieres, also on NBC. This program, although sure to generate publicity, has received less attention from investors and business experts because it's temporary and not tied to her core business.

Promotional spots for "Martha" offer a glimpse of the star's image makeover, courtesy of producer Mark Burnett, who created the popular "Survivor" reality series.

Video clips, available at www.martha stewart.com, show Stewart being pushed to the ground by a cow wearing a straw hat, attempting to put out a stove fire and dropping a glass dish on the floor while the narrator mocks her famous perfectionism.

The spots have alarmed some fans and experts. "I was kind of mortified," said Melissa A. Click, a doctoral student at the University of Massachusetts in Amherst who has spent the past six years studying Stewart's relationship with fans. "I understand they are trying to soften Martha's image, but don't make her into a buffoon."

Click was more optimistic about a home improvement program planned for 2006, in which experts from Stewart's company seek to help six women who are recovering from addiction, leaving welfare or having financial problems. "People want her to reflect her prison experience on TV, and the Discovery show is more along those lines," said Click, who teaches media studies at the University of Missouri in Columbia.

Filming for the program starts this fall, according to a spokeswoman for Discovery Communications, which will air the 13 episodes on one of its cable channels. She said, "Martha will be featured in the show. She also will be an executive producer."

Stewart and her public relations team have been mum on how she will mark the end of home confinement, which has entailed wearing a monitoring anklet and working only 48 hours per week. Spokeswoman Samantha Schabel sidestepped the question, saying only that "when Martha's home confinement ends, she will continue to work on the many new programs and products launching this fall." Stewart was unavailable to comment for this story.

Her home confinement has been extended three weeks because she violated the rules. But a source close to her company downplayed any fallout, saying she had managed to film 16 episodes of "The Apprentice," write magazine columns, film "field segments" for the new daytime show and do other work. "She's been enormously productive, and she can continue to work," the source said.

Experts advised Stewart to forgo the ankle-bracelet-removal parties being pushed by some fan Web sites. "People were really excited to see her leave prison in March, but I don't think they want to see her emerge with a bare ankle," Click said.

Robert Passikoff, an expert in consumer brands, agreed, saying attitudes about Stewart improved when she was out of the media spotlight during her imprisonment. No further gains have been recorded since her high-profile release from jail March 4.

Passikoff's most recent survey, conducted in June, of people who bought more than $25 worth of Stewart's magazines and home goods found they were 4 percent less loyal to her than to the typical

8/8/05 1:37 PMNewsday.com: Will Martha's planning pay off?

Page 2 of 3http://www.newsday.com/entertainment/news/ny-bzmart0804,0,3027656,print.story?coll=ny-top-headlines

brand. That's a resurgence from March 2004, when Stewart's brand was 38 percent below the average after her guilty verdict.

"You do your time, and people are actually willing to forgive you," said Passikoff, president of Brand Keys Inc. in Manhattan. "But her brand will never come back to where it was, and I find that sad."

In the June survey, only fashion designer Ralph Lauren, golfer Tiger Woods and businessman Donald Trump approached the brand loyalty once reserved for Stewart.

Still, improved consumer perception is only one measure of how the homemaking guru has benefited from serving her sentence instead of first exhausting the appeals process. She has maintained her innocence all along -- but also stanched the bleeding at Martha Stewart Living Omnimedia Inc.

The Manhattan-based company recently reported its first year-over-year increase in revenue since 2002. The gain was largely due to a 42 percent jump in advertising pages in the flagship Martha Stewart Living magazine, which has been battered by negative publicity surrounding its namesake. The amount of money those pages generated rose 10 percent, according to chief financial officer James Follo.

Chief executive Susan Lyne estimated 60 advertisers had returned to the magazine, matched by an equal number of newcomers. She expressed cautious optimism about 2006 ad sales, which seek to closely tie the company's print products to its TV and Internet ventures.

"The momentum is building and our results, while still below where I would like them, were slightly ahead of our expectations," she told stock analysts last week.

Martha Stewart Living Omnimedia had been expected to return to profitability later this year, but the cost of stock warrants given to Burnett, the TV producer, will cause losses of $26 million in the July-September period and $2 million in October-December.

In addition, the company's stock has more than doubled since Stewart's tearful announcement on Sept. 15, 2004, that she would start her jail time. But analysts attributed the increase to speculation more than anything she has done. "Despite improved business prospects, most investors should avoid Martha Stewart Living Omnimedia shares, given the company's unprofitability," said Charles W. Noh of The Value Line Investment Survey.

Stewart's decision to serve her sentence early was unusual. But experts maintained she had little choice if she wanted to put an end to what she called her "nightmare."

Steven Cohn, editor in chief of Media Industry Newsletter, a Manhattan trade journal, said, "She wanted closure, and I think personally and professionally it was a very smart move. ... They don't have the stigma of Martha being in jail when trying to sell advertisers and consumers on the business."

Copyright 2005 Newsday Inc.

8/8/05 1:37 PMNewsday.com: Will Martha's planning pay off?

Page 3 of 3http://www.newsday.com/entertainment/news/ny-bzmart0804,0,3027656,print.story?coll=ny-top-headlines