Celebrity Chef Sells His TV Shows and Products to Martha Stewart
The New York Times
February 20, 2008
By BRIAN STELTER
Correction Appended
Is there room in the well-appointed house of Martha for another larger-than-life name brand?
Martha Stewart and her new partner, the television chef Emeril Lagasse, are betting that there is. Several pieces of Mr. Lagasse’s culinary franchise were sold to Martha Stewart Living Omnimedia on Tuesday for $45 million in cash and $5 million in stock, the first major acquisition by Ms. Stewart’s media and merchandising company.
Industry analysts said the deal would enable Mr. Lagasse to “kick it up a notch� by benefiting from Martha Stewart Living’s brand expertise.
In the transaction, Martha Stewart Living will acquire the rights to Mr. Lagasse’s television shows, cookbooks, Web site and licensed products. His 11 restaurants will remain privately owned. In an interview, Ms. Stewart said the two brands would be compatible.
“His tastes are very different from mine, as is his food, and I think that’s good,� she said. “Being complementary and different is better than being competitive.�
Ms. Stewart is thought unlikely to develop an electric grill anytime soon, but it would be a natural brand extension for Mr. Lagasse. In addition, the chef’s brand stands to gain from Martha Stewart Living’s experience developing product lines for Kmart, Macy’s and Costco.
Susan Lyne, the company’s chief executive, said Mr. Lagasse had a profitable business model that would immediately contribute to Martha Stewart Living.David Bank, an analyst with RBC Capital Markets, called the acquisition of Mr. Lagasse’s brand a home run.
“It’s a great brand extension and it diversifies the risk away from pure reliance on the Martha Stewart brand,� Mr. Bank said. “It allows them to exploit another valuable brand in a related space.�
Most of Mr. Lagasse’s revenue comes from his two Food Network television shows and the licensing of his name and likeness for cookware, cutlery, kitchen appliances, sauces and spices.
The older of the two programs, “Essence of Emeril,� went off the air in 1996 and returned in 2000 in a new form. It continues to be produced. The other program, “Emeril Live,� ran from 1997 to 2007. In a statement, the channel said it looked forward to working with him on future projects.
Martha Stewart Living may also pursue international sales of the shows. “We certainly see more TV for him,� Ms. Lyne said.
Mr. Lagasse is also expected to contribute to the company’s Everyday Food magazine.
Separately, Martha Stewart Living announced the acquisition of a 40 percent stake in the Web site WeddingWire.com. The two properties will share content and advertising revenue.
The purchase came on a day that Martha Stewart Living posted disappointing quarterly results and forecast full-year revenue below expectations.
In the fourth quarter, the company’s profit roughly doubled from the period a year earlier, to $33.3 million, or 63 cents a share, slightly below estimates. Its stock closed up $1.06 on Tuesday, or 17 percent, to $7.19, still down sharply from a 52-week high of $19.50 last February.
Aided by publishing and merchandise earnings, the company posted full-year operating income of $7.7 million on revenue of $327.9 million. Excluding any effect from the two deals, it forecast 2008 operating income of $9.5 million to $14.5 million on revenue of $300 million.
Copyright 2008 The New York Times Company
This article has been revised to reflect the following correction:
Correction: February 22, 2008
An article in Business Day on Wednesday about the sale of some parts of the chef Emeril Lagasse’s franchise to Martha Stewart Living Omnimedia misstated which of his two Food Network television programs was older. “Essence of Emeril,� which had its debut in 1994, was Mr. Lagasse’s first program on the cable network — not “Emeril Live,� which ran from 1997 to 2007. (“Essence of Emeril� went off the air in 1996 and returned in 2000 in a new form. It continues to be produced.)
Comments
I first heard of this acquisition while watching (briefly) a segment on Martha's afternoon show. Emeril was her guest for the day and this was his first time publicly acknowledging his decision to sell most of his brand to Martha. What struck me as interesting was his reasoning for pursuing the arrangement and the back story behind it. He is friends with one of Martha's top chefs, and was speaking with the chef to get ideas on how to increase his (Emeril's) market share and presence in the culinary community across the nation. This is similar to Pixar's pursuit of Disney as a distribution channel in the sense that they were using a larger brand (Martha Stewart/Disney) as a means to increased market power.
Emeril's brand came with no significant debt to MSO, and appeared to be a very profitable brand on its own. There will be little integration between the two firms. On the TV show, both Martha and Emeril acknowledged that Emeril's products would "not" contain Martha's insignia, allowing Emeril to somewhat retain his independence. At the same time, most of the rights to these products now belong to Martha. It is unclear to me how Emeril will benefit financially from this acquisition, with the exception of increased market power in relation to his private restaurants and potential for new TV shows and syndication.
Profits at Martha Stewart Living nearly doubled this pasty quarter, seeing revenues increase by nearly 22%. The stock immediately rose after the announcement of this acquisition. It will be interesting to see if the "Emeril" extension of Martha's already powerful brand will continue to see exponential growth, and whether or not Emeril will consider breaking off or re-purchasing his own brand as his fame rises (which is what he sought in the first place)
Posted by: Anonymous | February 28, 2008 6:17 AM
I first heard of this acquisition while watching (briefly) a segment on Martha's afternoon show. Emeril was her guest for the day and this was his first time publicly acknowledging his decision to sell most of his brand to Martha. What struck me as interesting was his reasoning for pursuing the arrangement and the back story behind it. He is friends with one of Martha's top chefs, and was speaking with the chef to get ideas on how to increase his (Emeril's) market share and presence in the culinary community across the nation. This is similar to Pixar's pursuit of Disney as a distribution channel in the sense that they were using a larger brand (Martha Stewart/Disney) as a means to increased market power.
Emeril's brand came with no significant debt to MSO, and appeared to be a very profitable brand on its own. There will be little integration between the two firms. On the TV show, both Martha and Emeril acknowledged that Emeril's products would "not" contain Martha's insignia, allowing Emeril to somewhat retain his independence. At the same time, most of the rights to these products now belong to Martha. It is unclear to me how Emeril will benefit financially from this acquisition, with the exception of increased market power in relation to his private restaurants and potential for new TV shows and syndication.
Profits at Martha Stewart Living nearly doubled this pasty quarter, seeing revenues increase by nearly 22%. The stock immediately rose after the announcement of this acquisition. It will be interesting to see if the "Emeril" extension of Martha's already powerful brand will continue to see exponential growth, and whether or not Emeril will consider breaking off or re-purchasing his own brand as his fame rises (which is what he sought in the first place).
Posted by: Anonymous | February 28, 2008 6:18 AM
I first heard of this acquisition while watching (briefly) a segment on Martha's afternoon show. Emeril was her guest for the day and this was his first time publicly acknowledging his decision to sell most of his brand to Martha. What struck me as interesting was his reasoning for pursuing the arrangement and the back story behind it. He is friends with one of Martha's top chefs, and was speaking with the chef to get ideas on how to increase his (Emeril's) market share and presence in the culinary community across the nation. This is similar to Pixar's pursuit of Disney as a distribution channel in the sense that they were using a larger brand (Martha Stewart/Disney) as a means to increased market power.
Emeril's brand came with no significant debt to MSO, and appeared to be a very profitable brand on its own. There will be little integration between the two firms. On the TV show, both Martha and Emeril acknowledged that Emeril's products would "not" contain Martha's insignia, allowing Emeril to somewhat retain his independence. At the same time, most of the rights to these products now belong to Martha. It is unclear to me how Emeril will benefit financially from this acquisition, with the exception of increased market power in relation to his private restaurants and potential for new TV shows and syndication.
Profits at Martha Stewart Living nearly doubled this pasty quarter, seeing revenues increase by nearly 22%. The stock immediately rose after the announcement of this acquisition. It will be interesting to see if the "Emeril" extension of Martha's already powerful brand will continue to see exponential growth, and whether or not Emeril will consider breaking off or re-purchasing his own brand as his fame rises (which is what he sought in the first place)
Posted by: Anonymous | February 28, 2008 6:19 AM