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Martha Stewart Living inks Meredith deal

Professional advice-giver Martha Stewart has advice for other publishers struggling in a difficult market for print ads: Let somebody else do it.

In a move that ends its once-prominent role as a print-magazine publisher and reinforces the value of scale in a crowded media marketplace, Martha Stewart Living Omnimedia Inc. has licensed its flagship Martha Stewart Living and Martha Stewart Weddings brands to Meredith Corp. for a 10-year period starting Nov. 1.

Martha Stewart Living Omnimedia will provide editorial content for Martha Stewart Living and Martha Stewart Weddings, and benefit from revenue and profit-sharing provisions.

Meredith, based in Des Moines, owns 14 magazines including Better Homes and Gardens, Family Circle, Parents, and More, plus 15 TV stations.

Martha Stewart's publishing arm has struggled to sell advertising at time when larger rivals such as Hearst Corp., and Condé Nast, a unit of Advance Publications Inc., offer advertisers access to far more consumers. The pact covers the U.S. and Canada.

The partnership will enable Martha Stewart Living Omnimedia to slash its publishing losses while focusing on its profitable merchandising arm, from which it receives royalties on products such as bedding, outdoor furniture and housewares that carry the licensed Martha Stewart brand name. An undetermined number of layoffs will likely result, according to a person familiar with the matter.

"The Martha Stewart magazines have very loyal consumer audiences and fit well in our portfolio," said Stephen Lacy, Meredith's CEO, in an interview. "They've been challenged from an advertiser perspective, something we think we can address by taking them to market with our portfolio of national brands."

Terms call for Meredith to assume responsibilities for sales, marketing and such other traditional publishing functions as circulation and production for the two magazines, as well as their related websites and digital assets. Martha Stewart Living is published 10 times a year, while Martha Stewart Weddings is issued quarterly.

Meredith also will handle sales of Martha Stewart's video library. Many publishers, including Time Inc., Hearst, and Condé Nast are seeking to increase their share of the online video advertising business.

Meredith came close to acquiring much of Time Inc.'s magazine group before talks ended in early 2013. Mr. Lacy, who said he was disappointed when the Time deal didn't go forward, said scale matters in today's marketplace. He said that is why he is partnering with Martha Stewart.

Martha Stewart Living Omnimedia has been paring back its print publishing commitment in recent years, closing healthy-eating magazine Whole Living and cooking magazine Everyday Food as stand-alone titles amid declining advertising sales.

For the six months ended June 30, Martha Stewart's publishing business reported an operating loss of $4.5 million, narrowing from a $6.7 million operating loss in the same six month period a year earlier. Print ad revenue and circulation revenue fell during the first six months of 2014, with total publishing revenue declining 14.3%.

By contrast, the licensing business for the Martha Stewart name has been profitable. For the six months ended June 30, the merchandising arm generated $20.3 million in operating profit, up 16.7%. Merchandising revenue for the period was basically flat.

By

JEFFREY A. TRACHTENBERG