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LIVE FROM THE HEADLINES

Advertisers Abandoning Martha Stewart's Magazines

Aired August 26, 2003 - 19:23   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

ANDERSON COOPER, CNN ANCHOR: Let's talk about money now for a couple minutes.
The federal government is awash in red ink and will be for some time. According to the new congressional budget office study, issued today, the analysts say the government is looking for at least eight more years of deficits, including a record $480 billion shortfall next year.

All right. Want to talk about money and Martha Stewart a little bit.

The advertisers seem to be on the run away from Martha Stewart's flagship magazine. The magazine, "Martha Stewart Living," was down -- get this -- over 30 percent in ad pages through July of this year, and more troubles may be on the horizon.

With us is John Fine, the media reporter for "Advertising Age" magazine.

John, good to be with you.

JOHN FINE, "ADVERTISING AGE" MAGAZINE: Good to be with you, as well.

COOPER: How bad is it for Martha right now? I mean, what companies are backing out? Avon, Home Depot, what, they'd just not buying ad pages?

FINE: Well, you can roll out a pretty impressive list of advertisers who last year spent more than a million dollars in ads there and this year have spent nothing so far. Among them, Avon, Apple Computer, Toyota, Home Depot, Pfizer.

COOPER: Because they think it's not worst the investment or they just don't want somehow their brand, in their opinion, tarnished?

FINE: Well, basically advertisers are chasing readers. They're chasing eyeballs. And one of the problems that this scandal has brought to "Martha Stewart Living," the magazine, is that readers are deserting.

The metric for sort of judging heat among titles is newsstand cells, and those have been dropping severely, off 23 percent for the last six months of '02 and up another 18 percent for the first half of this year. COOPER: And I mean, looking on the horizon doesn't look like it's going to get any better any time soon. I mean, the trial is scheduled for January. So that's -- Her name is just going to be in the news even more.

FINE: Exactly. I mean, you mentioned ad pages are down 30 percent for the second quarter. The company executives in their last communication with stock analysts said that they expect the ad pages to be off 40 percent next quarter.

Sharon Patrick, the CEO, told "Advertising Age" that basically the situation is going to continue until about April, she figures, when there's going to be some sort of a decision made. And of course, it's possible the decision can't be a good one for the company.

COOPER: Clearly, it seems like the strategy that Sharon Patrick, the CEO, is taking is to, you know, not downsize but sort of de- Marthasize the company. I mean, basically, they've launched a new magazine. I think it's called, like, "Every Day Foods" or something like...

FINE: Yes. "Every Day Foods." If you look on the...

COOPER: You don't see Martha anywhere on the cover.

FINE: Well, if you look on the cover, it says in this big type, you know, "from the kitchens of Martha Stewart Living."

COOPER: Is that -- I mean, that clearly seems to be their strategy. Is it going to work?

FINE: Well, I mean, the things is no one really knows for sure because we're really on unchartered ground here.

I mean, one conceivable example is Steve Madden and the shoe designer, who actually did go to jail. His company is all right but Martha's role in the company, even though she stepped down from chairman and CEO, is vastly different. We're talking about someone who's the founder, who's the guiding spirit and who also is the face that people associate...

COOPER: Well, yes. Most people could not pick Steve Madden out of a lineup.

FINE: Exactly. Neither can I, for that matter.

COOPER: Right. But there are others who have been associated with brand. I mean, Gianni Versace is associated with his brand; Perry Ellis, who passed away as well.

FINE: That's true, but I mean, are they really the face the way that Martha Stewart is? I mean, I think not.

COOPER: Right. So it remains to be seen whether or not this company can survive.

FINE: Well, they've said that...

COOPER: They've got a lot of cash on hand. I mean, they're not...

FINE: They're not in any immediate Danger. And there's over $100 million in the bank. But the business fundamentals are softening. I mean, the analysts are worried.

They've spoken of trying to, as you mentioned, de-emphasize the brand name. They're rolling out shows -- and one on pets -- that doesn't have Martha's name on it anywhere, really. The question is, I mean, do people want Martha or do someone else representing the Martha brand? We're not really sure how that plays out yet.

COOPER: Right. And the new CEO, Sharon Patrick, by the way, says things aren't as bad as sort of the naysayers are saying. They're saying they' their any their 11th season of the TV show. They've got some new products they're launching out. So it remains to be seen.

FINE: All true, all true. But there's a lot of troubling metrics on the ad side and the consumer side and even she admits that we're talking a minimum of six months before things could get better.

COOPER: All right. John Fine, thanks very much.

FINE: Good to be here.

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