Martha Stewart Magazine Suffers as Trial Rumbles On

04 February 2004

With the trial of lifestyle guru Martha Stewart in its second week, new figures have underlined the effect of the case on her media properties.

Stewart propagates her homemaking lore through Martha Stewart Living magazine. However, with the style maven on trial for alleged obstruction of a federal investigation, there are signs advertisers are reducing the amount they spend via the title.

Data from Media Industry News reveal that MSL suffered a 34.6% slump in ad pages during 2003 -- the biggest fall among America's top hundred magazines.

And with the trial now in full swing, this decline has continued into 2004, with ad pages down 29.9% over the first two issues of the year.

Moreover, figures from TNS Media Intelligence/CMR suggest that many big advertisers have been switching their spend to competitors.

For example, Johnson & Johnson slashed its 2003 spend in MSL by more than half to $2 million; at the same time it almost tripled its outlay in rival Real Simple and hiked spend on Better Homes & Gardens by 66.1%. Similarly, clothing firm Jones Apparel Group, which paid $2.2m for ads in Stewart's title in 2002, reduced its spend to zero last year while doubling its investment in Real Simple.

Newsstand sales are also down, falling 3% year-on-year in the last half of 2003, after a 21.8% slump in the final six months of 2002. And Stewart's syndicated TV show is suffering too, with household ratings down from 1.3 to 1.1 according to Nielsen Media Research.

Whether these media properties can recover may depend on the outcome of Stewart's trial. Prosecutors allege that the domestic guru lied to cover up the reasons for her sale of shares in biotech firm ImClone one day before the stock slumped. They claim Merrill Lynch broker Peter Bacanovic informed Stewart via his assistant Douglas Faneuil that the Waksal family (who controlled ImClone) was disposing of its shares.

Stewart, however, insists there was no such tip-off, arguing that there was a pre-existing arrangement to offload the stock once its price fell below $60 (€48; £33).

Among the latest developments from the courtroom:

• Merrill Lynch employee Brian Schimpfhauser declared that the share sales by Stewart and the Waksals set off "bells and whistles" in his head. Schimpfhauser alerted his superiors that the disposals were "suspicious".

• A Merrill Lynch administrator revealed Bacanovic raised Faneuil's pay in April 2002. Prosecutors allege that the broker tried to bribe his assistant so he would support the $60 story.

• Talkshow host Rosie O'Donnell turned up to lend her support to Stewart. O'Donnell -- herself no stranger to the courtroom after a lengthy legal battle with Gruner + Jahr -- accused the government of pursuing Stewart for her celebrity value.

***STOP PRESS*** (February 4, 0830 GMT)
Faneuil "Ordered" to Warn Stewart on ImClone Stock

Jurors were told yesterday (Tuesday) that Peter Bacanovic, the former Merrill Lynch stockbroker and co-defendant with Martha Stewart, ordered his assistant Douglas Faneuil to issue an "improper tip" to America's style queen.

Specifically that shares in ImClone were set to dive after the Food and Drug Administration refused a license to the company's trumpeted anti-cancer drug Erbitux. Faneuil testified that when he challenged the order, Bacanovic reiterated: "You must! You've got to!"

The jury heard that Faneuil called Bacanovic, at the time vacationing in Florida, to inform him that Sam Waksal, ImClone's founder and a fellow Merrill client, had (with his daughters) inundated him [Faneuil] with requests to sell their shares in the company.

According to Faneuil, Bacanovic first calmed his assistant before himself panicking. "Suddenly, Peter said: Oh, my God! Get Martha on the phone." Both men then left a message for Stewart, at that time en route to Mexico. Later that same morning, Faneuil averred, Bacanovic called him back to say: "Martha's going to call and you're going to have to tell her what's going on."

"Well, what should I say?" responded Faneuil. "Can I tell her about Sam? Am I allowed to?" His [then] boss allegedly replied: "Of course. You must! You've got to!"

Data sourced from:; additional content by WARC staff