Martha's $30 Million Sirius Deal


By Diane Brady Investors have a lot to like about Martha Stewart's deal to launch a 24-hour radio channel on Sirius Satellite Radio (SIRI). It's certainly a financial plus, with the satellite radio network guaranteeing fees of $30 million spread over the next four years, MSO Vice-Chairman Charles Koppelman told BusinessWeek Online following the deal's Apr. 18 announcement. That doesn't include the extra fees that MSO will draw from advertising, plus a potential share of subscription revenues once the numbers reach a certain threshold.

But the real boon is that satellite radio could allow Martha Stewart Living Omnimedia (MSO) to leverage the brand's best aspects without requiring the constant presence of its famous founder. Sure, she may spend some mornings calling in from her Bedford (N.Y.) estate to answer listeners' questions, or she may help develop new radio shows. But the bulk of the programming will rely on other talent. MSO can also draw on its extensive library of archived content to fill air time on the channel, which should launch as a basic offering to all Sirius subscribers this summer.

OUTSIDE TALENT, TOO. "It will definitely allow us to introduce new voices," MSO Chief Executive Susan Lyne told BusinessWeek Online. Lyne cites MSO contributors such as pet-care guru Marc Morrone, magazine editor and gardening expert Margaret Roach, and even Andrew Weil, whose health newsletter is now part of MSO, as some of the outfit's insiders interested in doing radio programs. Moreover, she says, MSO plans to feature outside talent as well.

That contrasts with Stewart's recent forays back into the TV realm, where she's preparing to host a daily syndicated TV show this fall, as well as a version of the prime-time reality-TV hit The Apprentice. With the exception of its lower-profile Everyday Food show, which runs on the PBS network, MSO's TV offerings have generally relied on the presence of Martha Stewart herself.

Such reliance proved disastrous during Stewart's recent legal battles and imprisonment for lying to the government about a stock sale. Martha Stewart Living was forced off the air, with reruns appearing on the Style Network. Although a triumphant Stewart emerged from prison last month with her two new TV deals in hand, investors have been skittish about having the brand go back to being all about Martha.

With good reason. Even if she has no further altercations with the law, Stewart is now 63 years old. The brand has to move beyond her to be truly sustainable.

MEATLOAF A LA STERN. Of course, extending Martha Stewart into radio presents challenges. For one thing, Sirius seems to skew more toward male listeners with its emphasis on sports and celebrities like Howard Stern. Moreover, as Standard & Poor's equity analyst Gary McDaniel points out, much of her how-to content is visual in nature -- from cooking turkeys to designing rooms. While he has a sell recommendation on the stock, believing that investors are too euphoric about Stewart's release and the benefits of the Sears-Kmart (SHLD) merger, he doesn't think Sirius will hurt the brand. For him, the issue is that "they're in a much more competitive business now."

Sirius, however, may provide a forum for MSO to branch beyond Martha. MSO's Koppelman, who suggested the Sirius partnership to Stewart and Lyne after listening to the network one weekend, jokes that fellow Sirius celebrity Howard Stern is known to make a good meatloaf. While the shock jock's cooking talents may not prove to be much of a boost, guests like Stern and development of MSO's own on-air celebrities can only help the fledging channel.

Stewart's marquee appeal is what drew Sirius to the deal. But it will be MSO's rich library and ability to nurture other talent that will make it work. Brady is a senior writer for BusinessWeek in New York


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