Martha Stewart Living Omnimedia (MSO)

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Martha Stewart Living Omnimedia, Inc., (MSO) founded in 1996 by Martha Stewart, is a leading creator of original how-to content and related products for homemakers and other consumers. The company supplies creative domestic solutions through its published materials, including magazines, books, television programs, and the Internet. It markets the solutions primarily to homemakers between the ages of 25 and 55. Topics covered include: the home, weddings, babies, cooking, housekeeping, entertaining, holidays, gardening, and crafts.

The company divides its business into four reportable segments:

Publishing - 55% of 2006 revenue. Advertising and circulation comprised 53% and 45% of the segment's revenue in 2006, respectively. Martha Stewart Living, the company's flagship monthly magazine, was launched in 1991, targeted at college-educated women between the ages of 25 and 54. Since then, MSO has launched Everyday Food (September 2003, publishes 10x per year), Martha Stewart Weddings (1994, 4x per year), Body Soul (August 2004, 8x per year), and Blueprint (April 2006).

MSO also publishes two types of books: Martha Stewart Living books, a mixture of content previously published in MSO's magazines, and Martha Stewart-authored books. The company's current library consists of 51 titles: 35 are Martha Stewart Living and 16 are Martha Stewart-authored books.

Broadcasting 16% of 2006 revenue. This segment produces Martha (launched in September 2005), replacing the Martha Stewart Living program, which ceased production in September 2004, prior to Ms. Stewart's incarceration. Reruns of Martha Stewart Living currently air on the Style Network. Replays of Martha run on the Discovery Network's TLC channel. MSO also has a deal with Discovery to run From Martha's Home and Martha's Garden. PBS airs MO's Everyday Food. Finally, MSO produces Petkeeping with Marc Marrone, a national syndicated show.

MSO produces a line of theme-based DVDs, produced from existing content (launched October 2005).

MSO launched the Martha Stewart Living Radio channel 112 on SIRIUS Satellite Radio in November 2005 under a four-year contract that pays MSO a fixed revenue stream until expiration in November 2009.

Merchandising - 24% of 2006 revenue. MSO leverages the well-known Martha Stewart brand by licensing it to third-party retailers and manufacturers for a variety of merchandise in the following general categories: Home, Garden, Kitchen, Keeping (organizational products), Decorating, Ready-to-Assemble furniture, Holiday, and Colors (interior home paints).

In the U.S., MSO has an exclusive license deal for its Martha Stewart Everyday brand with Kmart, which represented 82% of revenue of the Merchandising segment and 21% of total revenue in 2006. Since signing the original licensing agreement in June 2001, Kmart has closed roughly 30% of its stores and suffered lower same-store sales, prompting it to amend its contract with MSO. Among other things, the amendment will sharply reduce the guaranteed minimum royalties Kmart pays MSO after January 31, 2008. For the years ended January 31, 2009 and 2010, the guaranteed minimum payment will drop to a maximum of $20 million and $15 million, respectively from $65 million for the year ended January 31, 2008.

In Canada, MSO has an exclusive agreement for its Martha Stewart Everyday brand with Sears Canada, which launched in September 2003.

In 2006, MSO signed an agreement with Kodak Imaging Network to develop a line of branded Martha Stewart personalized photo products. MSO receives a royalty for each sale and is entitled to minimum payments. In 2006, all royalty revenue from Kodak represented a contractual minimum guarantee of roughly $0.8 million.

Internet - 5% of 2006 revenue. Marthastewart.com intends to be a leading "how-to" destination for homemakers, leveraging content across brands from MSO's publishing and broadcasting businesses with recipes, how-to videos, etc. Advertising revenue is expected to provide half the segment's revenue. The company's online catalog business was shut down in early 2005.

The other half of the segment's revenue in 2006 comes from Marthasflowers.com, which provides fresh floral products shipped directly from farms to consumers. On September 20, 2007, MSO and the world's leading florist 1-800-FLOWERS.COM announced their venture to create an exclusive new co-branded floral, plant and gift basket program, Martha Stewart for 1-800-FLOWERS.COM, which will be launched in Spring 2008.

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