Revenues for MSO's publishing division fell to $29.1 million compared with $46.5 million in the third quarter of 2002. The company said the results reflected lower advertising and circulation revenue from Martha Stewart Living magazine, as well as investment spending for its new Everyday Food magazine.
Despite a downgrade in the lineups of stations carrying MSO's syndicated "Martha Stewart Living" series, third quarter TV revenues were up modestly from the previous year. However, both the company's merchandising and Internet/direct commerce divisions - some of its cash cows in recent years - took a hit during the quarter due to a combination of problems, including turmoil surrounding lead licensed retailer Kmart.
MSO also said online revenues were hurt by lower advertising sales in the quarter.
Company executives told analysts they expected a "positive resolution" to Ms. Stewart's criminal trial on federal insider trading and obstruction of justice charges to contribute to positive results in 2004, but CFO James Follo warned that the trial itself, which begins in January, would put further "pressure on early part 2004 ad pages."
In response to questions from analysts, MSO management said they had contingency plans for an unfavorable outcome to Ms. Stewart's trial, but they declined to disclose them.
Primedia also reported weak third quarter advertising sales, which fell 3.2% to $323.7 million, largely on its languishing B-to-B titles. Primedia's B-to-B segment sales declined to $59.2 million, down 16.4 percent from $70.8 million in the third quarter of 2002.
Primedia has been liquidating key assets in an effort to reduce its debt and boost investor confidence. It recently sold Sprinks to Google and currently has flagship New York magazine on the block. Its Kagan World Media unit also is said to be for sale.