Too Good To Fail?

It’s funny how sometimes you will see a company launch and hear everybody talking about it like it’s foolproof – as if there is nothing that could bring it down, no way it could fail. For example, when Martha Stewart launched her “Martha Stewart Living Omnimedia” (hereinafter MSLO) a few years back, the initial public offering brought in over a billion dollars, and everyone was saying that with Martha’s name recognition, visual recognition, huge television and magazine audience, and many lucrative endorsement deals, there was no way her company could possible fail…

Which makes this week’s article in Slate.com truly amazing, considering that its title is “Martha Stewart's Company is Doomed!” It turns out that most of Martha Stewart Living’s income doesn’t come from the magazine, the television show, or any of the other media it manages. Despite the name, MSLO gets most of its money from merchandising deals, and in fact the bulk of that is coming from their contact with K-Mart. Unfortunately, the K-Mart contract only guaranteed huge payments through the year ending this past January. From here on out, MSLO will only be getting its agreed-upon share of the action, not a guaranteed minimum that is not pegged to sales figures…

To make matters worse, those sales have been declining rapidly. K-Mart has not been doing well in recent years, and the merger with Sears (another stricken retailer) has really not helped. With the ongoing mortgage crisis and the decline in the economy in general, fewer and fewer people are buying new house ware products in the first place, and those who do are being drawn away by other vendors and other endorsers. In particular, Rachael Ray is drawing away a lot of Martha’s younger viewers with her more accessible projects and activities, and her much more upbeat style. Ms. Ray has her own cooking show, despite having no formal training as a chef; does interviews and exposition in a folksy, common-woman style, and generally connects well with younger professional women who may not identify so much with the 67-year-old Stewart…

So what can MSLO and its iconic founder do about the situation? Some of the obvious measures are already in place, or being finalized, such as the new merchandising deals with Macy’s, Costco and KB Home, and it may be possible for the company to explore new retail channels, as well. They could also explore new media concepts, new celebrity endorsements for Martha herself, and collaborative projects with manufacturers and food processors, much like Ms. Ray and some of the other television competitors of the Martha Steward Show have done. They can start looking for new directions to expand their operations (preferably ones in which the market is healthier than anything connected to the Real Estate industry), and even possibly introducing new media products and new media personalities – assuming Martha can handle that…

The main lesson to all of the rest of us, though, is about not putting all of our freshly-collected eggs in our hand-made baskets. The single biggest problem MSLO has is that its entire operation is based around Martha Stewart herself, and when she began to lose popularity the company had nowhere else to go. The potential for new and innovative media creations (as well as the more obvious merchandising deals) is clearly there, but the company was thinking solely about promoting Martha, not about things Martha could present, promote, and make money off of, and thus painted itself into a corner…

There’s still time for MSLO to pull out of this tailspin, and I hope they do, but it’s going to take more than just looking for a new place sell products and new stations to carry a single television show…