• by Paul Gough , March 15, 2004

A little more than a week after her felony convictions for lying to regulators about her sale of Imclone stock, Martha Stewart resigned as a director and chief creative officer of the media empire she founded in the 1990s.

Martha Stewart Living Omnimedia Monday confirmed Stewart's immediate resignation, but said she would be taking on another position--that of founding editorial director. This role would presumably keep Stewart's hand in the company, which produces Martha Stewart Living magazine, a half-hour syndicated TV show, and other titles and programs that don't carry the Martha Stewart brand.

In announcing Stewart's resignation, board chair Jeffrey Ubben declared that the company still wanted her around, even with the criminal convictions. "We have decided to create a new, continuing role as founding editorial director--a role that reflects our desire for Martha to continue to make an important contribution to our business," stated Ubben. "The board determined that, notwithstanding the significance of the recent verdict, continuing to have the benefit of Martha's unique creative talents and contributions is in the very best interests of MSO and its shareholders."

It was the latest in a series of moves that have been made regarding the domestic diva since the guilty verdict came back against Stewart and her broker in U.S. District Court in Manhattan. First, CBS and UPN stations in major markets such as New York City decided to pull "Martha Stewart Living."

The show's distributor, King World, has been mum on whether it would stop syndicating the 12-year-old show that runs for a half hour five days a week. It had been televised in 139 markets across about 85 percent of the United States.

Food Network airs "From Martha's Kitchen," a repackaging of the syndicated show, every weekday. Monday's announcement hasn't caused Food Network to pull Stewart's show off as of yet.

"We're keeping her on the air as we evaluate the circumstances and let due process run its course," said Cindy McConkey, a spokeswoman for Scripps Networks. "That's an important addition because she does have an appeal out there."

"Judging from what we've seen, she's got an incredibly strong fan base," said Susan Nathan, senior vice president-director of media knowledge at Universal McCann, which has conducted a series of tracking studies of consumer perceptions of Martha Stewart and her media products. "While they may feel she is guilty, they feel she was charged and handled unfairly."

Nathan said she saw no downside for Omnimedia to retain the Martha Stewart brand name. If anything, she said Universal's research indicates that "it would help to keep her name, and it might possibly hurt to get rid of it."

Scripps doesn't sell spots specific to Martha Stewart Living. But it also hasn't seen a groundswell of support against the show from viewers or advertisers.

"We have not had many advertiser defections; we've had no viewer defections. The Web site is running very much in favor of keeping her on," Judy Girard, president of Food Network, said Monday afternoon. According to Girard, few advertisers have said they don't want to run in the show.

"From the beginning, we've never experienced what her magazine [Martha Stewart Living] is experiencing," she said.

In theory, even if the show did not continue, Food Network could keep running what it has for about a year. But it isn't clear whether that will happen.

Stewart's new position in the company will include a variety of elements--she will provide "creative inspiration for new product design and development," write two pending books, undertake contributing editor and television assignments, and "provide input on the continuing evolution of MSO and its brand and brand labels and on strategic issues." It wasn't clear how much Stewart would be paid in her new position.

Robert Passikoff, president of Brand Keys, said Monday afternoon that it might have been better for the company if Stewart had disappeared.

"They're just trying to meet two constituencies: They're trying not to alienate the folks who were loyal to her and are buying her products, and they're trying to bring back the ones who were disappointed and betrayed by her. Only time will tell [if they will be successful]," Passikoff said.

He said what happened to Stewart and Martha Stewart Living Omnimedia shows the danger of what happens when a brand is invested 100 percent in a person.

"The only real brand solution open to them is to migrate away from the person. They may be doing it slowly, but that's where they're going to end up," he said.