MARTHA IS REMODELING: Martha Stewart is getting out of the publishing game.
This story first appeared in the October 16, 2014 issue of WWD. Subscribe Today.
Weighed down by the cost of printing, Martha Stewart Living Omnimedia has licensed the rights to its flagship Martha Stewart Living magazine, as well as Martha Stewart Weddings, to Meredith Corp., operator of titles such as Parents and Better Homes & Gardens.
The 10-year licensing deal will put Meredith in charge of production, circulation, sales and marketing of the print and digital editions of Living and Weddings. Meredith also will get related assets, including a sizable video library.
While the deal doesn’t mean MSLO is out of the content creation business — it will continue to produce the editorial content for Living and Weddings — it does effectively turn the company into a licensing firm.
According to sources close to MSLO, the Meredith deal, which includes only the U.S. and Canada, gives MSLO a profit share for Living and Weddings in print and a revenue share in digital. The restructuring of the business side at MSLO will produce some layoffs but “not many,” a source said, adding that Meredith likely will absorb many of those jobs on the sales side. It has been rumored that most of MSLO’s digital front-end and back-end staff will be laid off.
MSLO’s decision to license the properties was mainly due to the high costs it incurred from print.
Calling MSLO a “content and design creation company,” chief executive officer Dan Dienst said, “This transaction enables us to remain focused on our core competencies, permitting our company’s resources and management’s attention to be centered on driving growth in our merchandise vertical over the coming months and years.”
Not that the writing hasn’t been on MSLO’s “cool cobalt” walls for some time: In 2013, the company’s publishing division reported a $14.8 million operating loss, which was at least an improvement on the year-ago loss of $62 million. Publishing revenues, which include sales from print and digital advertising, circulation and book sales, fell 21.2 percent, to $96.5 million.
In a filing with the U.S. Securities and Exchange Commission on Wednesday, MSLO said the deal will provide “significant cost savings” and have “an immediate impact” on its operating income. On a normalized basis, its operating income is expected to improve by as much as $10 million to $15 million a year. The agreement will result in a fourth-quarter restructuring charge, principally for severance, of about $2 million to $3 million. MSLO will report earnings in two weeks.
The agreement is effective Nov. 1, and Meredith will begin delivering editions with the February 2015 issue of Martha Stewart Living and the winter 2014 special issue of Martha Stewart’s Real Weddings, the publisher said.
Meredith said the deal “will not have a material effect” on its fiscal 2015 second-quarter financial performance but will be “accretive” to its earnings for the second half of fiscal 2015 and in fiscal 2016. Meredith reports first-quarter earnings on Oct. 23.
Martha Stewart Living is published 10 times a year and has a rate base of 2 million. Martha Stewart Weddings is a quarterly publication.