Cable challenges hurt Martha Stewart quarter

Martha Stewart Living Omnimedia misses Wall Street expectations as cable revenue plummets.

By Kim Peterson Oct 27, 2010 3:50PM
Credit: Charles Sykes/AP
 
Caption: Martha StewartHow bad is Martha Stewart's cable business? Consider that this month, her network decided to substitute some of her shows with reruns of "Little House on the Prairie."

Little. House. On. The. Prairie.

If that wasn't indication enough, today brings confirmation: Broadcast revenue for Martha Stewart Living Omnimedia (MSO) dropped 47% to $5.8 million.

Now, to be fair, this was pretty much expected. The company had forecast a drop in broadcast revenue as Stewart's show moved from TV syndication to The Hallmark Channel.

The transition hasn't been easy. Hallmark rather ambitiously devoted the hours from 10 a.m. to 6 p.m. to a Martha Stewart block. But the syndication audience hasn't followed as expected, leading Hallmark to swap in "Little House on the Prairie" for three hours of the block.

That actually is helping with Martha Stewart's ratings, although Executive Chairman Charles Koppelman acknowledged that more needs to be done.

"At current ratings, we're still a little bit challenged," he said in a conference call with investors, according to The Hollywood Reporter. But he emphasized that the show will become profitable if things move in the right direction. Post continues after video:
The cable business contributed to a greater-than-expected loss for Martha Stewart Living Omnimedia in the third quarter. The company reported a net loss of $8.6 million, or 16 cents a share. That was better than the net loss of $12.1 million, or 22 cents a share, in the year-ago period.

Revenue was $49.7 million, nearly unchanged from the $49.8 million last year. Wall Street was expecting a smaller loss of 14 cents a share and revenue of $49.8 million.

The stock dropped 4% on the news Wednesday to the $4.50 range.

Luckily, other business segments helped offset the problems with cable. Merchandising sales were up 8% to $9.6 million. It helped that Martha Stewart products are now at Home Depot(HD) and PetSmart (PETM) in addition to Macy's (M) and Michael's stores.

And the publishing unit saw an 11% increase in revenue to $30 million.

At least the holidays are approaching. That's always good news for Stewart as customers turn to her more frequently for ideas from Halloween through the New Year.

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