UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                                

MARTHA STEWART LIVING OMNIMEDIA, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		52-2187059
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
601  West 26th Street, New York, New York		10001
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (212) 827-8000

Title of Each Class		Name of Each Exchange on Which Registered
Class A Common Stock, Par Value $0.01 Per Share		New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 of Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the number of shares outstanding and using the price at which the stock was last sold on June 30, 2009, was $79,080,458.*

*		Excludes 2,194,423 shares of our Class A Common Stock, and 26,690,125 shares of our Class B Common Stock, held by directors, officers and our founder, as of June 30, 2009. Exclusion of shares held by any person should not be construed to indicate that such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the Company, or that such person controls, is controlled by or under common control with the Company.

Documents Incorporated by Reference.
Portions of Martha Stewart Living Omnimedia, Inc.’s Proxy Statement for
Its 2010 Annual Meeting of Stockholders are Incorporated
by Reference into Part III of This Report.

 

 

TABLE OF CONTENTS

PART I
Item 1. Business			3
Overview			3
History			4
Publishing			4
Broadcasting			6
Internet			7
Merchandising			8
Intellectual Property			11
Available Information			11
Item 1A. Risk Factors			11
Item 1B. Unresolved Staff Comments			18
Item 2. Properties			18
Item 3. Legal Proceedings			18
Item 4. Reserved			18
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			19
Item 6. Selected Financial Data			21
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			22
Item 7A. Quantitative and Qualitative Disclosure About Market Risk			37
Item 8. Financial Statements and Supplementary Data			38
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			38
Item 9A. Controls and Procedures			38
Item 9B. Other Information			41
PART III
Item 10. Directors, Executive Officers and Corporate Governance			41
Item 11. Executive Compensation			41
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			41
Item 13. Certain Relationships and Related Transactions, and Director Independence			42
Item 14. Principal Accountant Fees and Services			42
PART IV
Item 15. Exhibits and Financial Statement Schedules			43
Signatures			47
Index to Consolidated Financial Statements, Financial Statement Schedules and Other Financial Information			F-1
Report of Independent Registered Public Accounting Firm			F-2
Consolidated Statements of Operations for the years ended December 31, 2009, 2008 and 2007			F-3
Consolidated Balance Sheets at December 31, 2009 and 2008			F-4
Consolidated Statements of Shareholders’ Equity and Comprehensive Loss for the years ended December 31, 2009, 2008 and 2007			F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007			F-6
Notes to Consolidated Financial Statements			F-7
Financial Statement Schedule: II — Valuation and Qualifying Accounts for the years ended December 31, 2009, 2008 and 2007			F-28
Exhibit Index
Exhibit 10.8.2
Exhibit 10.9.3
Exhibit 10.11.1
Exhibit 10.11.2
Exhibit 10.22
Exhibit 10.26
Exhibit 21
Exhibit 23.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32

In this Annual Report on Form 10-K, the terms “we,” “us,” “our,” “MSO” and the “Company” refer to Martha Stewart Living Omnimedia, Inc. and, unless the context requires otherwise, Martha Stewart Living Omnimedia LLC (“MSLO LLC”), the legal entity that, prior to October 22, 1999, operated many of the businesses we now operate, and their respective subsidiaries.

FORWARD-LOOKING STATEMENTS

All statements in this Annual Report on Form 10-K, except to the extent describing historical facts, are “forward-looking statements,” as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent our current beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of our control. These statements often can be identified by terminology such as “may,” “will,” “should,” “could,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “potential” or “continue” or the negative of these terms or other comparable terminology. Our actual results may differ materially from those projected in these statements, and factors that could cause such differences include those factors discussed in “Risk Factors” in Item 1A of this Annual Report on Form 10-K and those discussed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7, as well as other factors. Forward-looking statements herein speak only as of the date of filing of this Annual Report on Form 10-K. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our reports to the Securities and Exchange Commission (the “SEC”).

PART I

Item 1.  Business.

OVERVIEW

We are an integrated media and merchandising company providing consumers with inspiring lifestyle content and well-designed, high-quality products. Our Company is organized into four business segments with Publishing, Broadcasting and Internet representing our media segments that are complemented by our Merchandising segment, a combination that enables us to cross-promote our content and products.

Our growth strategy is three-pronged:

•

Strengthen and expand our media business by building new brands, exploring new distribution opportunities for our assets, and further capitalizing on our ability to offer cross-platform programs to advertisers

•

Grow our merchandising business by leveraging our brand equity to expand established businesses and by diversifying into new categories and distribution channels; and

•

Expand internationally

The media and merchandise we create generally encompasses eight core areas:

•

Cooking and Entertaining (recipes, techniques, and indoor and outdoor entertaining)

•

Holidays (celebrating special days and special occasions)

•

Crafts (how-to projects)

•

Home (decorating, collecting and renovating)

•

Whole Living (healthy living and sustainable practices)

•

Weddings (all aspects of planning, celebrating and commemorating a wedding)

•

Organizing (homekeeping, petkeeping, clotheskeeping, restoring and other types of domestic maintenance)

•

Gardening (planting, landscape design and outdoor living)

As of March 1, 2010, we had approximately 620 employees. Our revenues from foreign sources were $10.8 million, $13.4 million and $12.3 million in 2009, 2008 and 2007, respectively. Substantially all of our assets are located within the United States.

HISTORY

Martha Stewart published her first book, Entertaining, in 1982. Over the next eight years she became a well-known authority on the domestic arts, authoring eight more books on a variety of our core content areas. In 1991, Time Publishing Ventures, Inc. (“TPV”), a subsidiary of Time Inc., launched Martha Stewart Living magazine with Ms. Stewart serving as its editor-in-chief. In 1993, TPV began producing a weekly television program, Living, hosted by Ms. Stewart. In 1995, TPV launched a mail-order catalog, Martha by Mail, which made available products featured in, or developed in connection with, the magazine and television program. In late 1996 and early 1997, a series of transactions occurred resulting in MSLO LLC acquiring substantially all Martha Stewart-related businesses. Ms. Stewart was the majority owner of MSLO LLC; TPV retained a small equity interest in the business. On October 22, 1999, MSLO LLC merged into MSO, then a wholly owned subsidiary of MSLO LLC. Immediately following the merger, we consummated an initial public offering.

BUSINESS SEGMENTS

Our four business segments are described below. Additional financial information relating to these segments may be found in Note 16 to our Consolidated Financial Statements.

PUBLISHING

In 2009, our Publishing segment accounted for 53% of our total revenues, consisting of operations related to magazine and book publishing. Revenues from magazine advertising and circulation represented approximately 58% and 39%, respectively, of the segment’s revenues in 2009.

Magazines

Martha Stewart Living.  Our flagship magazine, Martha Stewart Living, is the foundation of our publishing business. Launched in 1991 as a quarterly publication with a circulation of 250,000, we currently publish Martha Stewart Living on a monthly basis with a rate base of 2.025 million, effective with the January 2009 issue. The magazine appeals primarily to the college-educated woman between the ages of 25 and 54 who owns her principal residence. Martha Stewart Living offers lifestyle ideas and original how-to information in a highly visual, upscale editorial environment. The magazine has won numerous prestigious industry awards and generates a substantial majority of our magazine revenues, primarily from advertising revenue.

Martha Stewart Weddings.  We launched Martha Stewart Weddings in 1994, originally as an annual publication. In 1997, it went to semi-annual publication and became a quarterly in 1999. Martha Stewart Weddings targets the upscale bride and serves as an important vehicle for introducing young women to our brands. Martha Stewart Weddings is distributed primarily through newsstands. In addition to quarterly publications, we have issued special publications including, most recently, Martha Stewart’s Destination Weddings & Dream Honeymoons, which was on sale in the fourth quarter of 2009.

Everyday Food.  We launched Everyday Food in September 2003 after publishing four test issues. This digest-sized magazine featuring quick, easy recipes was created for the supermarket shopper and the everyday cook. Everyday Food targets women ages 25 to 49, and is intended to broaden our consumer audience while developing a new brand and diversifying our revenue.

Body + Soul.  In August 2004, we acquired certain assets and liabilities of Body + Soul magazine and Dr. Andrew Weil’s Self Healing newsletter (“Body & Soul Group”), which are publications featuring “natural living” content. The magazine generates both advertising and circulation revenue, while the newsletter generates substantially all of its revenue from subscriptions. Body & Soul Group also sells a limited line of merchandise related to “natural living,” which we record as publishing revenue attributed to Body + Soul. In 2008, we increased the frequency of Body + Soul to 10 issues from 8 issues in 2007. We have recently discontinued our relationship with Dr. Andrew Weil and in 2010 will no longer publish Dr. Andrew Weil’s Self Healing newsletter or any Dr. Weil special interest publications. There will be some residual sales from merchandising products that are still in inventory, but no new inventory will be added. Effective with the June 2010 issue, we plan to change the name of Body + Soul/Whole Living magazine to Whole Living in an attempt to more effectively integrate with our corresponding website, wholeliving.com, and to broaden the editorial coverage of the magazine, which we believe may provide opportunities to increase consumer and advertising demand.

Blueprint: Design Your Life.  In 2006, we began testing a new magazine called Blueprint: Design Your Life. Geared to women ages 25-39, Blueprint targeted a different demographic than our core consumer, while maintaining our distinctive “how-to” approach, covering home, fashion, and beauty. After two test issues in 2006 and six in 2007, we decided to discontinue publishing the title on a stand-alone basis after the January/February 2008 issue.

Magazine Summary

Certain information related to our subscription magazines is as follows:

		2008				2008				2009				2009				2010
Title		Frequency				Rate Base *				Frequency				Rate Base *				Rate Base *
Martha Stewart Living			12				2,000,000				12				2,025,000				2,025,000
Martha Stewart Weddings			5	**			N/A	***			5	**			N/A	***			N/A	***
Everyday Food			10				900,000				10				1,000,000				1,000,000
Body + Soul			10				550,000				10				600,000				650,000

Special Interest Publications.  In addition to our periodic magazines, we occasionally publish special interest magazine editions. Our special interest publications provide in-depth advice and ideas around a particular topic in one of our core content areas, allowing us to leverage our distribution network to generate additional revenues. Our special interest publications are generally sponsored by multiple advertisers and are sold at newsstands. In 2009, we published Halloween and Holiday Sweets, and three Body + Soul special interest publications. The Body + Soul specials were published under the Dr. Weil brand and, at this time, we have no plans to continue producing Body + Soul special interest publications.

Magazine Production, Distribution and Fulfillment.  We print most of our domestic magazines under agreements with R. R. Donnelly and currently purchase paper through an agreement with Time Inc. While paper used in our magazines is widely available, volatility in the paper market resulted in decreased paper manufacturing capacity during 2008 and 2009. During 2009, we realized the first decreases in paper prices in 18 months because of decreasing market demand. We expect paper market pricing to stabilize in 2010 after experiencing declines throughout 2009. Increased fuel costs in 2009 impacted our costs for magazine distribution and ink. We use no other significant raw materials in our businesses. Newsstand distribution of the magazines is handled by Time Warner Retail Sales and Marketing (“TWRSM”), an affiliate of Time Inc., under an agreement that expires with the December 2010 issue of Martha Stewart Living. In early 2009, two of the four major logistics providers (“wholesalers”) used for newsstand distribution announced price increases. TWRSM ceased using one of these companies for distribution and was subsequently able to reach an agreement with the other to retain its earlier pricing structure. It is possible that the other wholesalers may also seek price increases. Subscription fulfillment services for our magazines are provided by Time Customer Service, another affiliate of Time Inc., under an agreement that expires in June 2014.

Books

In the second quarter of 2007, we announced a multi-year agreement with Clarkson Potter/Publishers to publish 10 Martha Stewart branded books. Subsequent amendments ultimately increased the number of books to be delivered to 16. In 2009, three books were published under this agreement — Martha Stewart’s Cupcakes, Martha Stewart’s Encyclopedia of Crafts and Martha Stewart’s Dinner at Home — all of which were on The New York Times bestseller list.

In August 2008, we announced a multi-year agreement with Harper Studio to publish 10 Emeril Lagasse branded books. Two books, Emeril at the Grill and Emeril 20-40-60 were published under this agreement in 2009 and were both on The New York Times bestseller list.

Through our efforts in the books business and the rights we acquired related to Emeril’s book backlist, we now have a library of approximately 80 books.

Competition

Publishing is a highly competitive business. Our magazines, books and related publishing products compete with other mass media and many other types of leisure-time activities. Competition for advertising dollars in magazine operations is primarily based on advertising rates, as well as editorial and aesthetic quality, the desirability of the magazine’s demographic, reader response to advertisers’ products and services and the effectiveness of the advertising sales staff. Martha Stewart Living competes for readers and advertising dollars with women’s service, decorating, cooking and lifestyle magazines and websites. Everyday Food competes for readers and advertising dollars with women’s service and cooking magazines and websites. Martha Stewart Weddings competes for readers and advertising dollars primarily with wedding service magazines and websites. Body + Soul competes for readers and advertising dollars primarily with women’s lifestyle, health, fitness, and natural living magazines and websites. Our special interest publications can compete with a variety of magazines depending on the focus of the particular issue. Please also look to our risk factors in Item 1A for further information on competitive pressures in our Publishing segment.

Seasonality

Our Publishing segment can experience fluctuations in quarterly performance due principally to publication schedule variations from year to year, timing of direct mail expenses, delivery schedule of our long-term book contracts, and other seasonal factors. Not all of our magazines are published on a regularly scheduled basis throughout the year. For example, Martha Stewart Weddings was published 5 times in 2009: 2 issues in the second quarter and 3 issues in the fourth quarter. Additionally, the publication schedule for our special interest publications can vary and lead to quarterly fluctuations in the Publishing segment’s results.

BROADCASTING

Our Broadcasting business segment accounted for 19% of our total revenues in 2009. The segment consists of operations relating to the production of television programming, the domestic and international distribution of our library of programming in existing and repurposed formats, revenue derived from the provision of talent services, and the operations of our satellite radio channel. We generally own the copyrights in the programs we produce for television and radio distribution.

We recently announced that in September 2010, season 6 of The Martha Stewart Show will air on cable on the Hallmark Channel. Alongside The Martha Stewart Show will be an additional hour and one-half of daily original programming specifically produced for the Hallmark Channel as companion programs. Additionally, we will produce periodic holiday and interview specials that will air in prime time on the channel. The Martha Stewart Show launched in September 2005 as a syndicated daily lifestyle series hosted by Martha Stewart and it generates the majority of the Broadcasting segment’s revenue. Filmed in front of a studio audience, the show consists of several segments, each featuring inspiring ideas and new projects from one or several of our core content areas. NBC Universal Domestic Television Distribution currently distributes the program domestically. The Broadcasting segment previously produced the Living show, which ceased airing in September 2004. Revenues for The Martha Stewart Show currently are mostly comprised of advertising, licensing and product integrations.

We began to offer, in October 2007, access to segments from our library of programming through an advertising-supported, free video-on-demand service. Martha Stewart On Demand is currently available to Comcast, Cablevision, Direct TV and Cox digital cable customers. We provide a total of 3.5 hours of content which is updated monthly with 50% refreshed content.

In 2008, the “Whatever Girls,” a popular duo on the Martha Stewart Living Radio channel on Sirius XM Satellite Radio, debuted a new show called Whatever Martha! The program currently airs on the Fine Living cable channel and includes original commentary on classic clips of Living.

Everyday Food, a half-hour original series inspired by the magazine of the same name, airs weekly on PBS stations nationwide. Unlike revenues for The Martha Stewart Show, revenues for the Everyday Food series are provided by underwriters. In 2008, we added a spin-off companion show, Everyday Baking from Everyday Food, which also aired weekly on PBS stations. In 2009, we decided not to produce an additional season of Everyday Baking from Everyday Food and have no plans, at this time, to resume production.

We recently announced a new television series, The Emeril Lagasse Show, which will be broadcast on ION Television. The hour-long weekly primetime program will star Emeril Lagasse as host and will feature interviews with celebrity and non-celebrity guests, music performances and cooking segments. Scheduled to launch in the second quarter of 2010, The Emeril Lagasse Show will be co-financed by us and ION Media, ION Television’s parent company, with revenues from advertising and integrations, as well as production expenses, to be split.

During 2008, we entered into an agreement with Discovery Talent Services LLC pursuant to which Emeril Lagasse provides talent services for the television series Emeril Green currently airing daily on Discovery’s Planet Green channel. Additionally, we acquired certain television agreements in connection with our April 2008 acquisition of specific Emeril Lagasse assets and entered into additional agreements related thereto. Pursuant to these agreements, we receive talent fees for Emeril Lagasse’s services provided for the Television Food Network (“TVFN”) series Essence of Emeril and license fees for the exploitation of the series Emeril Live, as well as fees for ongoing consulting services to TVFN.

In November 2009, we renewed our agreement with Sirius XM Satellite Radio for an additional two years. The Martha Stewart Living Radio channel launched on Sirius Satellite Radio, now known as Sirius XM Satellite Radio, in November 2005 providing programming 24 hours a day, seven days a week. Under the terms of the new agreement, Emeril Lagasse is creating a twice weekly show – adding to the complement of MSLO experts that create 65 hours of original programming each week. We receive licensing and advertising revenues from this arrangement.

Competition

Broadcasting is a highly competitive business. Our television programs compete directly for viewers, distribution and/or advertising dollars with other lifestyle and how-to television programs, as well as with general programming on other television stations and all other competing forms of media. Overall competitive factors in this segment include programming content, quality and distribution as well as the demographic appeal of the programming. As in our other media, competition for television and radio advertising dollars is based primarily on advertising rates, audience size and demographic composition, viewer response to advertisers’ products and services and effectiveness of the advertising sales staff. Our radio programs compete for listeners with similarly themed programming on both satellite and terrestrial radio. Please also look to our risk factors in Item 1A for further information on competitive pressures in our Broadcasting segment.

Seasonality

Our Broadcasting segment can experience fluctuations in quarterly performance due to, among other things, seasonal advertising patterns and seasonal influences on people’s viewing habits. Because seasons run 12 months beginning and ending in the middle of September, the 2009 results include a large portion of season 4 and the first 16 weeks of season 5, currently still airing in syndication. Original episodes typically run September to May with repeat episodes airing over the summer. Original episodes command higher ratings and consequently higher revenues.

INTERNET

In 2009, revenues from the Internet segment accounted for 7% of our total revenues. Advertising is the primary source of revenue for our Internet segment, principally advertising sales on our website, marthastewart.com.

marthastewart.com

The marthastewart.com website offers recipes, articles and video, integrated across the Martha Stewart brands in the following categories: food, entertaining, holidays, home and garden, crafts, weddings, pets and whole living. In 2007, we relaunched the site as a content-focused media site. The site relaunch and subsequent releases included the development of a community platform and blog network. In 2008, we spun off two channels of marthastewart.com into standalone websites, marthastewartweddings.com and wholeliving.com.

marthastewartweddings.com

In 2008, we launched marthastewartweddings.com to guide brides-to-be through the planning and designing of their weddings, with a strong emphasis on identifying and developing each bride’s personalized wedding style.

wholeliving.com

In 2008, we also launched wholeliving.com, a website designed to help women achieve their goals for living better lives, with a focus on wellness and beauty, healthy recipes, green living, fitness, and personal happiness.

WeddingWire

In the first quarter of 2008, we entered into a series of transactions with WeddingWire, a localized wedding platform that combines an online marketplace with planning tools and a social community. In exchange for a cash payment of $5.0 million, we acquired approximately 43% of the equity in WeddingWire. We also entered into a commercial agreement related to software and content licensing, and media sales. The addition of WeddingWire’s planning tool set to our site expands our wedding’s franchise and further builds our interactive community by adapting WeddingWire’s technology for other digital content areas.

pingg

In the fourth quarter of 2008, we entered into an agreement with pingg, an online invitation and event management site. In exchange for a cash payment of $2.2 million, we acquired approximately 21% of the equity in pingg. We also entered into a commercial agreement related to software, design licensing and media sales. Some of the most popular searches on marthastewart.com relate to entertaining, including baby and bridal showers, birthday parties and graduation parties. Visitors to the pingg site can conveniently create online invitations for their events by incorporating the beautiful imagery and photography for which the Martha Stewart brand is known.

Ziplist

In May 2009 we entered into an agreement with Ziplist, which provided us with the technology to power our new ‘Martha’s Everyday Food’ App for the iPhone and Ipod touch. This application became available in the first quarter of 2010. Ziplist is a customizable, multiplatform digital grocery planning and shopping list service in which MSLO has taken a minority equity stake (approximately 10%) for a cash payment of under $1.0 million. Ziplist allows our customers to add any recipe’s ingredients to their grocery lists with one click and those lists can then be synced and shared online.

Martha Stewart Flowers

Originally launched in 1999 as marthasflowers.com, the website marthastewartflowers.com operated under the business model of providing fresh floral products shipped directly from farms to consumers. This business model enabled customers to ship floral gifts overnight, delivering Martha Stewart–inspired designs with superior freshness. In 2007, we decided to end our direct-to-consumer flowers business and instead chose to partner with 1-800-Flowers to create an exclusive co-branded floral, plant and gift-basket program beginning in 2008. This new, higher-margin licensing agreement provides an opportunity to participate in the same-day delivery of the fresh flowers market. Martha Stewart Flowers, under this agreement, is managed by and reported in the Merchandising segment as of the second quarter of 2008 as a licensed retail partnership.

Competition

The online advertising sales business is highly competitive. marthastewart.com competes with other how-to, food and lifestyle websites. Our challenge is to attract and retain users through an easy-to-use and content-relevant website. Competition for advertising rates is based on the number of unique users we attract each month, the demographic profile of that audience and the number of pages they view on our site. Please also look to our risk factors in Item 1A for further information on competitive pressures in our Internet segment.

Seasonality

Revenues from our Internet segment can vary significantly from quarter to quarter. Advertising revenue on marthastewart.com is tied to audience and traffic, among other key factors, and is typically highest in the fourth quarter of the year due to higher consumer demand in our holiday content areas, and corresponding higher advertiser demand to reach our audience demographic with their marketing messages.

MERCHANDISING

Our Merchandising segment contributed 21% of our total revenues in 2009. The segment consists of operations related to the design of merchandise and related packaging, promotional and advertising materials, and the licensing of various proprietary trademarks, in connection with retail programs conducted through a number of retailers and manufacturers. Pursuant to agreements with our retail and manufacturing partners, we are typically responsible for the design of all merchandise and/or related packaging, signage, advertising and promotional materials. Our retail partners source the products through a manufacturer base and are mostly responsible for the promotion of the product. Our manufacturing partners source and/or produce the branded products together with other lines they make or sell. Our licensing agreements do not require us to maintain any inventory nor incur any meaningful expenses other than employee compensation. We own all trademarks for each of our branded merchandising programs and generally retain all intellectual property rights related to the designs of the merchandise, packaging, signage and collateral materials developed for the various programs.

Select Licensed Retail Partnerships

Martha Stewart Living at Home Depot

In September 2009, we announced a partnership with The Home Depot and our plans to launch multiple categories of products under the Martha Stewart Living brand name in both the United States and Canada. The Martha Stewart Living program at The Home Depot will encompass a broad range of home décor, seasonal and outdoor living products, including paint, storage and organization, and outdoor furniture. Certain products under this program began rolling into stores in early 2010.

Martha Stewart Collection at Macy’s

In September 2007, we launched the Martha Stewart Collection exclusively at Macy’s. The Martha Stewart Collection line encompasses a broad range of home goods, including bed and bath textiles, housewares, casual dinnerware, flatware and glassware, cookware, holiday decorating and trim-a-tree items. In the spring of 2010, we will be expanding our offerings to include a line of branded mattresses.

Martha Stewart Flowers with 1-800-Flowers

In 2007, we announced our partnership with 1-800-Flowers to create an exclusive, new, co-branded floral, plant and gift baskets program. This licensing agreement allows us to participate in the same-day delivery of the flowers market. The co-branded floral and plant program launched in April 2008 and the co-branded gift baskets program launched in October 2008.

Sandals^® Weddings by Martha Stewart

In September 2009, we announced a partnership with Sandals Resorts International to create an exclusive line of Martha Stewart themed destination weddings available at any of the 18 Luxury Included^® Sandals Resorts and Beaches Resorts across the Caribbean. Sales of the Sandals^® Weddings by Martha Stewart program began in October 2009 with the first traveled bookings in January 2010.

Martha Stewart Everyday at Kmart and Sears Canada

In the United States, we had an exclusive license agreement with Kmart Corporation in the mass-market channel that ended in January 2010. In 2009, Kmart represented 47% of total revenues in our Merchandising segment and 10% of total Company revenues. Kmart’s contribution to both total Merchandising revenues and total Company revenues decreased materially from 2007 to 2008 mostly as the result of a decrease in the annual minimum royalties due from Kmart and the continued diversification of our business. (See “Management’s Discussion and Analysis – Executive Summary” for details regarding our contract with Kmart). In Canada, we had an exclusive license agreement with Sears Canada for Martha Stewart Everyday from September 2003 to August 2008.

Digital Photography Products

The financial results from the sales of digital photography products were reported in the Internet segment through December 31, 2007. Beginning in 2008, the digital photography product business was managed by and reported in the Merchandising segment as a licensed retail partnership.

Select Licensed Martha Stewart Manufacturing Partnerships

Martha Stewart Crafts

In May 2007, we launched Martha Stewart Crafts products at over 900 Michael’s stores, and in August 2007, we began distributing product to certain independent craft stores across the United States. Our crafts partnerships are through a licensing agreement with EK Success, LTD (“EK Success”), as well as a licensing agreement with Wilton Industries. In addition to these agreements, we hold a small interest in the entity that owns Wilton Industries, Inc., Dimensions Holding, LLC and EK Success.

Martha Stewart Clean with The Hain Celestial Group

In November 2009, we launched a line of natural, fragrance-free home cleaning liquids under the Martha Stewart Clean brand in partnership with The Hain Celestial Group. This program, comprised of dish and hand soaps, all-purpose cleaners, window and floor cleaners, as well as laundry detergent, is currently available at The Home Depot and select grocery chains nationwide, as well as online.

Martha Stewart Food Programs with The Hain Celestial Group

In October 2009 we announced an expanded partnership with The Hain Celestial Group, Inc. and its affiliate Hain Pure Protein Corporation to introduce new Martha Stewart-branded food lines at retail, including whole turkeys, baking mixes, and dried pastas using all natural, healthy ingredients. The new Martha Stewart branded products launched with a limited distribution of fresh and frozen vegetarian-fed and antibiotic-free turkeys from Hain Pure Protein’s Plainville Farms for Thanksgiving 2009. The product lines are expected to be distributed in supermarkets, mass-market retailers and warehouse clubs starting in the second half of 2010.

Martha Stewart Pets with Age Group

In October 2009, we announced a multi-year relationship with Age Group Ltd. to manufacture, market and sell pet-care products, which will be sold initially through PetSmart, Inc. The line will include a wide range of pet accessories, including apparel, collars, leashes, bedding, grooming supplies, toys and more. The first products are expected to be introduced in the second quarter of 2010.

Martha Stewart Furniture with Bernhardt

We have had a Martha Stewart furniture program with the Bernhardt Furniture Company since 2003 and renewed that relationship at the end of 2007. Currently, merchandise produced under this relationship includes furniture for the living room, bedroom, and dining room that is sold at furniture and department stores nationwide, including certain Macy’s stores.

KB Home / Martha Stewart Homes

We have had a relationship with KB Home for the development of a Martha Stewart Homes program since 2005 for the design and style of interior and exterior components of homes at KB communities. The Martha Stewart Homes program is now available at multiple communities in California, Colorado, Texas, North Carolina and Florida. We also offer a range of design options, featured exclusively at KB Studios nationwide.

Select Licensed Emeril Lagasse Manufacturing Partnerships

We acquired certain licensing agreements in connection with our April 2008 acquisition of specific Emeril Lagasse assets. These licensing agreements are primarily associated with partnerships with various food and kitchen preparation manufacturers that produce products under the Emeril Lagasse brand.

Emerilware by All-Clad

Launched in August 2000, Emerilware by All-Clad consists of lines of high-quality, gourmet cookware and barbeque tools available at department stores and specialty retail outlets across the United States, as well as through the Home Shopping Network.

Emerilware by T-Fal

Launched in November 2006, Emerilware by T-FAL is a line of small kitchen appliances available at department stores and specialty retail outlets across the United States, as well as through the Home Shopping Network.

Emeril’s Original with B&G Foods

In September 2000, Emeril Lagasse introduced with B&G Foods, Emeril’s Original, a signature line of seasonings, salad dressings, basting sauces and marinades, mustards, salsas, pasta sauces, pepper sauces, spice rubs, cooking sprays and stocks available at supermarkets and specialty markets across the United States, as well as through the Home Shopping Network.

Emeril’s Gourmet Coffee with Timothy’s World Coffee

Launched in September 2007, Emeril’s Gourmet Coffee with Timothy’s World Coffee is a single-cup coffee program comprised of flavored coffees inspired by Emeril Lagasse. The program is available in department and specialty stores nationwide, as well as certain national hotel chains.

Competition

The retail business is highly competitive and the principal competition for all of our merchandising lines consists of mass-market and department stores that compete with the mass-market and department stores in which our Merchandising segment products are sold, including Bed Bath & Beyond, BJ’s, JC Penney, Kmart, Kohl’s, Lowe’s, Sam’s Club Target, and Wal-Mart. Our merchandising lines also compete within the mass-market and department stores that carry our product lines with other products offered by these stores in the respective product categories. Competitive factors include numbers and locations of stores, brand awareness and price. We also compete with the internet businesses of these stores and other websites that sell similar retail goods. Competition in our flower business includes other online sellers as well as traditional floral retailers. Please also look to our risk factors in Item 1A for further information on competitive pressures in our Merchandising segment.

Seasonality

Revenues from the Merchandising segment can vary significantly from quarter to quarter due to new product launches and the seasonality of many product lines. In addition, we historically recognized a substantial portion of the revenue resulting from the difference between the minimum royalty amount under the Kmart contract and royalties paid on actual sales in the fourth quarter of each year, when the amount could be determined.

INTELLECTUAL PROPERTY

We use multiple trademarks to distinguish our brands, including Martha Stewart Living, Martha Stewart Everyday, Martha Stewart Collection, Everyday Food, Martha Stewart Weddings, marthastewart.com, Martha Stewart Flowers, Body + Soul, wholeliving.com, Emeril’s and Bam! These and numerous other trademarks are the subject of registrations and pending applications filed by us for use with a variety of products and other content, both domestically and internationally, and we continue to expand our worldwide usage and registration of related trademarks. We file copyrights regarding our proprietary designs and editorial content on a regular basis. We regard our rights in and to our trademarks and materials as valuable assets in the marketing of our products and vigorously seek to protect them against infringement and denigration by third parties. We own and license the rights to many of these marks pursuant to an agreement between us and Ms. Stewart, the description of which is incorporated by reference into Item 13 of this Annual Report on Form 10-K.

AVAILABLE INFORMATION

Our website can be found on the Internet at www.marthastewart.com. Our proxy statements, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and any amendments to these documents, as well as certain other forms we file with or furnish to the SEC and can be viewed and downloaded free of charge as soon as reasonably practicable after they have been filed with the SEC by accessing www.marthastewart.com and clicking on Investor Relations and SEC Filings. Please note that information on, or that can be accessed through, our website is not deemed “filed” with the SEC and is not incorporated by reference into any of our filings under the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), irrespective of any general incorporation language contained in such filing.

Item 1A. Risk Factors

A wide range of factors could materially affect our performance. Like other companies, we are susceptible to macroeconomic downturns that may affect the general economic climate and our performance, the performance of those with whom we do business, and the appetite of consumers for products and publications. Similarly, the price of our stock is impacted by general equity market conditions, the relative attractiveness of our market sector, differences in results of operations from estimates and projections, and other factors beyond our control. In addition to the factors affecting specific business operations identified in connection with the description of those operations and the financial results of those operations elsewhere in this report, the factors listed below could adversely affect our operations. Although the risk factors listed below are the risk factors that Company management considers significant, additional risk factors that are not presently known to Company management or that Company management presently considers insignificant may also adversely affect our operations.

Our success depends in part on the popularity of our brands and the reputation and popularity of Martha Stewart, our founder, and Emeril Lagasse. Any adverse reactions to publicity relating to Ms. Stewart or Mr. Lagasse, or the loss of either of their services, could adversely affect our revenues, results of operations and our ability to maintain or generate a consumer base.

While we believe there has been significant consumer acceptance for our products as stand-alone brands, the image, reputation, popularity and talent of Martha Stewart and Emeril Lagasse remain important factors.

 Ms. Stewart’s efforts, personality and leadership have been, and continue to be, critical to our success. While we have managed our business without her daily participation at times in the past, the repeated diminution or loss of her services due to disability, death or some other cause, or any repeated or sustained shifts in public or industry perceptions of her, would have a material adverse effect on our business.

In addition, in 2008 we acquired the assets relating to Emeril Lagasse’s businesses other than his restaurants and foundation. The value of these assets is largely related to the ongoing popularity and participation of Mr. Lagasse in the activities related to exploiting these assets. Therefore, the continued value of these assets could be materially adversely affected if Mr. Lagasse were to lose popularity with the public or be unable to participate in our business, forcing us potentially to write-down a significant amount of the value we paid for these assets.

The difficulty in the financial markets and sustained weakness in the economy could significantly impact our business, financial condition, results of operations and cash flows, and could adversely affect the value of our assets, hamper our ability to refinance our existing debt or our ability to raise additional funds.

The economy experienced extreme disruption in 2008 and 2009, including extreme volatility in securities prices, severely diminished liquidity and a drastic reduction in credit availability. These events have led to increased unemployment, declines in consumer confidence and declines in personal income and consumer spending, particularly discretionary income and spending. This economic downturn has also resulted in extraordinary and unprecedented uncertainty and instability for many companies, across all industries, and has severely impacted and could still in the future impact many of the companies with which we do business. We cannot predict the future health and viability of the companies with which we do business and upon which we depend for royalty revenues, advertising dollars and credit.

These economic conditions and market instability also make it difficult for us to forecast consumer and product demand trends and companies’ willingness to spend money to advertise in our media properties. We have experienced a decline in advertising revenues. An extended period of reduced cash flows could increase our need for credit at a time when such credit may not be available due to the conditions in the financial markets. A reduction in cash flows and the inability to collateralize our term loan with cash also could cause us to be in violation of certain debt covenants. We are not able to predict the likely duration and severity of the current disruption in the financial markets and the economic recession. If these economic conditions worsen or persist for an extended period of time, it is likely that our results of operations and cash flows will be negatively impacted leading to deterioration in our financial condition.

In addition, we have significant goodwill, intangible and other assets recorded on our balance sheet. We have already incurred impairment charges with respect to goodwill and certain intangible assets, and with respect to our investments. We will continue to evaluate the recoverability of the carrying amount of our goodwill, intangible and other assets on an ongoing basis, and we may in the future incur additional, and possibly substantial, impairment charges, which would adversely affect our financial results. Impairment assessment inherently involves the exercise of judgment in determining assumptions about expected future cash flows and the impact of market conditions on those assumptions. Although we believe the assumptions we have used in testing for impairment are reasonable, significant changes in any one of our assumptions could produce a significantly different result. Future events and changing market conditions may prove assumptions to be wrong with respect to prices, costs, holding periods or other factors. Differing results may amplify impairment charges in the future.

The effects of the current financial crisis are difficult to forecast and mitigate. As a consequence, our operating results will be difficult to predict and prior results will not likely be indicative of results to be expected in future periods. Any of the foregoing effects could have a material adverse effect on our business, results of operations, and financial condition and could adversely affect our stock price.

Our Merchandising business and licensing programs may suffer from the continued downturns in the health and stability of the general economy and housing market.

Reduction in the availability of credit, a downturn in the housing market, and other negative economic developments, including increased unemployment, have occurred and may continue, recur or become more pronounced in the future. Each of these developments has and could further limit consumers’ discretionary spending or further affect their confidence. These and other adverse consumer trends have led to reduced spending on general merchandise, homes and home improvement projects — categories in which we license our brands. Further, downturns in consumer spending adversely impact consumer sales overall, resulting in weaker revenues from our licensed products. These trends also may affect the viability and financial health of companies with which we conduct business. Continued slowdown in consumer spending, or going-concern problems for companies with which we do business could materially adversely impact our business, financial condition and prospects.

Our business is largely dependent on advertising revenues in our publications, broadcasts, and online operations. The market for advertising has been adversely affected by the economic downturn. Our failure to attract or retain advertisers would have a material adverse effect on our business.

We depend on advertising revenue in our Publishing, Broadcasting, and Internet businesses. We cannot control how much or where companies choose to advertise. We have seen a significant downturn in advertising dollars generally in the marketplace, and more competition for the reduced dollars, which has hurt our publications and advertising revenues. As a result, fewer advertisers represent a greater proportion of our advertising revenue. We cannot assure how or whether this trend might improve. If advertisers continue to spend less money, or if they advertise elsewhere in lieu of our publications, broadcasts or website, our business and revenues will be materially adversely affected.

We face significant competition for advertising and consumer demand.

We face significant competition from a number of print and website publishers, some of which have greater financial and other resources than we have, which may enhance their ability to compete in the markets we serve. As advertising dollars have diminished, the competition for advertising dollars has intensified. Competition for advertising revenue in publications is primarily based on advertising rates, the nature and scope of readership, reader response to the promotions for advertisers’ products and services and the effectiveness of sales teams. Other competitive factors in publishing include product positioning, editorial quality, circulation, price and customer service, which impact readership audience, circulation revenues and, ultimately, advertising revenues. Because some forms of media have relatively low barriers to entry, we anticipate that additional competitors, some of which have greater resources than we do, may enter these markets and intensify competition.

Acquiring or developing additional brands or businesses, and integrating acquired assets, poses inherent financial and other risks and challenges.

In 2008, we acquired certain assets of Chef Emeril Lagasse. Failure to manage or integrate those assets, or exploit the Emeril brand, could adversely affect our results of operations and our ability to acquire other brands.

The process of consolidating and integrating acquired operations and assets takes a significant period of time, places a significant strain on resources and could prove to be more expensive and time consuming than we predicted. We may increase expenditures to accelerate the integration process with the goal of achieving longer-term cost savings and improved profitability. We also may be required to manage multiple relationships with third parties as we expand our product offerings and brand portfolio. These developments may increase expenses if we hire additional personnel to manage our growth. These investments require significant time commitments from our senior management and place a strain on their ability to manage our existing businesses.

We continue to evaluate the acquisition of other businesses. These transactions involve challenges and risks in negotiation, execution, valuation, and integration. Moreover, competition for certain types of acquisitions is significant, particularly in the field of interactive media. Even if successfully negotiated, closed, and integrated, certain acquisitions may not advance our business strategy and may fall short of expected return on investment targets.

Our Merchandising business has relied heavily on revenue from a single source, the reduction of revenue from which has hurt and continues to hurt our profitability.

Our agreement with Kmart ended in January 2010. For the twelve months ended January 31, 2010, the minimum guaranteed royalty payment from Kmart was $14.0 million, plus we recognized an additional $10.0 million in previously deferred royalties as non-cash revenue. For the twelve months ended January 31, 2009 and 2008, the minimum guaranteed royalty payments from Kmart totaled $20.0 million and $65.0 million, respectively. We have not yet earned royalties from other sources in sufficient scope to recoup the loss in guaranteed payments from Kmart. While we continue to diversify our merchandise offerings in an effort to build up alternative royalty streams, we may not be able to earn revenue that will compensate for this shortfall, which has and may continue to adversely affect our operating results and business.

We are expanding our merchandising and licensing programs into new areas and products, the failure of any of which could diminish the perceived value of our brand, impair our ability to grow and adversely affect our prospects.

Our growth depends to a significant degree upon our ability to develop new or expand existing retail merchandising programs. We have entered into several new merchandising and licensing agreements in the past few years and have acquired new agreements through our acquisition of the Emeril Lagasse assets. Some of these agreements are exclusive and have a duration of many years. While we require that our licensees maintain the quality of our respective brands through specific contractual provisions, we cannot be certain that our licensees, or their manufacturers and distributors, will honor their contractual obligations or that they will not take other actions that will diminish the value of our brands. Furthermore, we cannot be certain that our licensees are not adversely impacted by general economic or market conditions, including decreased consumer spending and reduced availability of credit. If these companies experience financial hardship, they may be unwilling or unable to pay us royalties or continue selling our products, regardless of their contractual obligations.

There is also a risk that our extension into new business areas will meet with disapproval from consumers. We have limited experience in merchandising in some of these business areas. We cannot guarantee that these programs will be fully implemented, or if implemented, that they will be successful. If the licensing or merchandising programs do not succeed, we may be prohibited from seeking different channels for our products due to the exclusive nature and multi-year terms of these agreements. Disputes with new or existing licensees may arise which could hinder our ability to grow or expand our product lines. Disputes also could prevent or delay our ability to collect the licensing revenue that we expect in connection with these products. If such developments occur or our merchandising programs are otherwise not successful, the value and recognition of our brands, as well as our business, financial condition and prospects, could be materially adversely affected.

If The Martha Stewart Show fails to maintain a sufficient audience, if adverse trends continue or develop in the television production business generally, or if Martha Stewart were to cease to be able to devote substantial time to our television business, that business could be adversely affected. We also derive value from Emeril Lagasse’s television shows, the popularity of which cannot be assured.

Our television production business is subject to a number of uncertainties. Our business and financial condition could be materially adversely affected by:

Failure of our television programming to maintain a sufficient audience

Television production is a speculative business because revenues derived from television depend primarily upon the continued acceptance of that programming by the public, which is difficult to predict. Public acceptance of particular programming depends upon, among other things, the quality of that programming, the strength of stations on which that programming is broadcast or the strength of the cable channels on which that programming is carried, promotion of that programming and the quality and acceptance of competing television programming and other sources of entertainment and information. The Martha Stewart Show television program has experienced a decline in ratings that reflects both the general decline in daytime broadcast television viewers discussed below, as well as the decision by some major market stations to shift the airing of the show. These developments have negatively impacted our television advertising revenues. In addition, moving the show from syndication to the Hallmark Channel could result in lower ratings as cable channels typically have a smaller household universe of viewers from which to draw, and The Martha Stewart Show will no longer be able to be seen in broadcast- only homes whose residents might be a portion of the show’s current audience. If ratings for the show were to further decline, it would adversely affect the advertising revenues we derive from television. A ratings decline further than we anticipate could also make it economically inefficient to continue production of the show. If production of the show were to cease, we would lose a significant marketing platform for us and our products, and it would cause us to write down our capitalized programming costs. Additionally, a decline in ratings or cessation of The Martha Stewart Show would negatively impact our website, marthastewart.com, since the show is an important driver of audience to our website. The amount of any write down would vary depending on a number of factors, including when production ceased and the extent to which we continued to generate revenues from the use of our existing program library.

While we have not historically produced television shows featuring Emeril Lagasse, Emeril’s failure to maintain or build popularity could result in the loss of a significant marketing platform for us and our products, as well as the loss of anticipated revenue and profits from his television shows.

Adverse trends in the television business generally

Television revenues may also be affected by a number of other factors, most of which are not within our control. These factors include a general decline in daytime television viewers, pricing pressure in the television advertising industry, the strength of the stations on which our programming is broadcast or the strength of the cable channel on which our programming is carried, general economic conditions, increases in production costs, availability of other forms of entertainment and leisure time activities and other factors. Any or all of these factors may quickly change, and these changes cannot be predicted with certainty. There has been a reduction in advertising dollars generally available and more competition for the reduced dollars across more media platforms. While we currently benefit from our ability to sell advertising on our television programs, if adverse changes occur, we cannot be certain that we will continue to be able to sell this advertising or that our advertising rates can be maintained. Accordingly, if any of these adverse changes were to occur, the revenues we generate from television programming could decline.

We have placed emphasis on building an advertising-revenue-based website, dependent on a large consumer audience and resulting page views. Failure to fulfill these undertakings could adversely affect our brand and business prospects.

Our growth depends to a significant degree upon the continued development and growth of our Internet business. We have had failures with direct commerce in the past, and only limited experience in building an advertising-revenue-based website. When initial results from the relaunch of the marthastewart.com site in the second quarter of 2007 were below expectations, we made changes to the site. We cannot be certain that those changes will enable us to sustain growth for our website in the long term. In addition, the competition for advertising dollars has intensified. In order for our Internet business to succeed, we must, among other things:

	•		significantly increase our online audience and advertising revenue;
	•		attract and retain a base of frequent visitors to our website;
	•		expand the content, products and interactive experiences we offer on our website;
	•		respond to competitive developments while maintaining a distinct brand identity;
	•		attract and retain talent for critical positions;
	•		maintain and form relationships with strategic partners to attract more consumers;
	•		continue to develop and upgrade our technologies; and
	•		bring innovative product features to market in a timely manner.

We cannot be certain that we will be successful in achieving these and other necessary objectives or that our Internet business will become profitable. If we are not successful in achieving these objectives, our business, financial condition and prospects could be materially adversely affected.

If we are unable to predict, respond to and influence trends in what the public finds appealing, our business will be adversely affected.

Our continued success depends on our ability to provide creative, useful and attractive ideas, information, concepts, programming, content and products that strongly appeal to a large number of consumers. In order to accomplish this, we must be able to respond quickly and effectively to changes in consumer tastes for ideas, information, concepts, programming, content and products. The strength of our brands and our business units depends in part on our ability to influence tastes through broadcasting, publishing, merchandising and the Internet. We cannot be sure that our new ideas and content will have the appeal and garner the acceptance that they have in the past, or that we will be able to respond quickly to changes in the tastes of homemakers and other consumers.

New product launches may reduce our earnings or generate losses.

Our future success will depend in part on our ability to continue offering new products and services that successfully gain market acceptance by addressing the needs of our current and future customers. Our efforts to introduce new products or integrate acquired products may not be successful or profitable. The process of internally researching and developing, launching, gaining acceptance and establishing profitability for a new product, or assimilating and marketing an acquired product, is both risky and costly. New products generally incur initial operating losses. Costs related to the development of new products and services are generally expensed as incurred and, accordingly, our profitability from year to year may be adversely affected by the number and timing of new product launches. For example, we had a cumulative loss of $15.7 million in connection with Blueprint, which we ceased publishing in 2007. Other businesses and brands that we may develop also may prove not to be successful.

Our principal Publishing vendors are consolidating and this may adversely affect our business and operations.

We rely on certain principal vendors in our Publishing business, and their ability or willingness to sell goods and services to us at favorable prices and other terms. Many factors outside our control may harm these relationships and the ability and willingness of these vendors to sell these goods and services to us on favorable terms. Our principal vendors include paper suppliers, printers, subscription fulfillment houses and national newsstand wholesalers, distributors and retailers. Each of these industries in recent years has experienced consolidation among its principal participants. Further consolidation may result in all or any of the following, which could adversely affect our results of operations:

	•		decreased competition, which may lead to greater dependence on certain vendors and increased prices; and
	•		interruptions and delays in services provided by such vendors

We may be adversely affected by fluctuations in paper and postage costs.

In our Publishing business, our principal raw material is paper. Paper prices have fluctuated over the past several years. We generally purchase paper from major paper suppliers who adjust the price periodically. We have not entered, and do not currently plan to enter, into long-term forward price or option contracts for paper. Accordingly, significant increases in paper prices could adversely affect our future results of operations.

Postage for magazine distribution is also one of our significant expenses. We primarily use the U.S. Postal Service to distribute magazine subscriptions. In recent years, postage rates have increased, and a significant increase in postage prices could adversely affect our future results of operations. We may not be able to recover, in whole or in part, paper or postage cost increases.

We may face increased costs for distribution of our magazines to newsstands and bookstores.

Distribution of magazines to newsstands and bookstores is conducted primarily through companies known as wholesalers. Wholesalers have in the past advised us that they intended to increase the price of their services. We have not experienced any material increase to date; however some wholesalers have experienced credit and on-going concern risks. It is possible that other wholesalers likewise may seek to increase the price of their services or discontinue operations. An increase in the price of our wholesalers’ services could have a material adverse effect on our results of operations. The need to change wholesalers could cause a disruption or delay in deliveries, which could adversely impact our results of operations.

We may be adversely affected by a continued weakening of newsstand sales.

The magazine industry has seen a weakening of newsstand sales during the past few years. A continuation of this decline could adversely affect our financial condition and results of operations by further reducing our circulation revenue and causing us to either incur higher circulation expense to maintain our rate bases, or to reduce our rate bases which could negatively impact our revenue.

We may be adversely affected by rebranding our Body + Soul publication.

Effective with the June 2010 issue, we will change the name of Body + Soul magazine to Whole Living in an attempt to more effectively integrate it with our corresponding website, wholeliving.com, and to broaden the editorial coverage of the magazine. Changing the product name and editorial coverage may diminish brand awareness that could adversely impact newsstand sales, and could affect the satisfaction of current subscribers, which could reduce our subscription renewal rates.

Our websites and networks may be vulnerable to unauthorized persons accessing our systems, which could disrupt our operations and result in the theft of our and our users’ proprietary or personal information.

Our Internet activities involve the storage and transmission of proprietary information and personal information of our users, which we endeavor to protect from third party access. However, it is possible that unauthorized persons may be able to circumvent our protections and misappropriate proprietary or personal information or cause interruptions or malfunctions in our Internet operations. We may be required to expend significant capital and other resources to protect against or remedy any such security breaches. Accordingly, security breaches could expose us to a risk of loss, or litigation and possible liability. Our security measures and contractual provisions attempting to limit our liability in these areas may not be successful or enforceable.

Martha Stewart controls our Company through her stock ownership, enabling her to elect our board of directors, and potentially to block matters requiring stockholder approval, including any potential changes of control.

Ms. Stewart controls all of our outstanding shares of Class B Common Stock, representing over 90% of our voting power. The Class B Common Stock has ten votes per share, while Class A Common Stock, which is the stock available to the public, has one vote per share. Because of this dual-class structure, Ms. Stewart has a disproportionately influential vote. As a result, Ms. Stewart has the ability to control unilaterally the outcome of all matters requiring stockholder approval, including the election and removal of our entire board of directors and any merger, consolidation or sale of all or substantially all of our assets, and the ability to control our management and affairs. While her 2006 settlement with the SEC bars Ms. Stewart for the five-year period ending in August 2011 from serving at the Company as a director, or as an officer with financial responsibilities, her concentrated control could, among other things, discourage others from initiating any potential merger, takeover or other change of control transaction that may otherwise be beneficial to our businesses and stockholders.

Our intellectual property may be infringed upon or others may accuse us of infringing on their intellectual property, either of which could adversely affect our business and result in costly litigation.

Our business is highly dependent upon our creativity and resulting intellectual property. We are also susceptible to others imitating our products and infringing our intellectual property rights. We may not be able to successfully protect our intellectual property rights, upon which we depend. In addition, the laws of many foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States. Imitation of our products or infringement of our intellectual property rights could diminish the value of our brands or otherwise adversely affect our revenues. If we are alleged to have infringed the intellectual property rights of another party, any resulting litigation could be costly, affecting our finances and our reputation. Litigation also diverts the time and resources of management, regardless of the merits of the claim. There can be no assurance that we would prevail in any litigation relating to our intellectual property. If we were to lose such a case, and be required to cease the sale of certain products or the use of certain technology or were forced to pay monetary damages, the results could adversely affect our financial condition and our results of operations.

A loss of the services of other key personnel could have a material adverse effect on our business.

Our continued success depends to a large degree upon our ability to attract and retain key management executives, as well as upon a number of key members of our creative staff. The loss of some of our senior executives or key members of our creative staff, or an inability to attract or retain other key individuals, could materially adversely affect us.

We operate in four highly competitive businesses: Publishing, Broadcasting, Internet, and Merchandising, each of which subjects us to competitive pressures and other uncertainties.

We face intense competitive pressures and uncertainties in each of our four businesses.

Our magazines, books and related publishing products compete not only with other magazines, books and publishing products, but also with other mass media, websites, and many other types of leisure-time activities. Competition for advertising dollars in magazine operations is primarily based on advertising rates, as well as editorial and aesthetic quality, the desirability of the magazine’s demographic, reader response to advertisers’ products and services and the effectiveness of the advertising sales staff.

Our Merchandising segment competitors consist of mass-market and department stores that compete with the mass-market and department stores in which our Merchandising segment products are sold, including Bed Bath & Beyond, BJ’s, JC Penney, Kmart, Kohl’s, Lowe’s, Sam’s Club Target, and Wal-Mart. Our merchandising lines also compete within the mass-market and department stores that carry our product lines with other products offered by these stores in the respective product categories. We also compete with the internet businesses of these stores and other websites that sell similar retail goods. Competition in our flower business includes other online sellers as well as traditional floral retailers.

Our websites compete with other how-to, food and lifestyle websites. Our challenge is to attract and retain users through an easy-to-use and content-relevant website. Competition for adverting is based on the number of unique users we attract each month, the demographic profile of that audience and the number of pages they view on our site.  

Our television programs compete directly for viewers, distribution and/or advertising dollars with other lifestyle and how-to television programs, as well as with general programming and all other competing forms of media. Overall competitive factors in Broadcasting include programming content, quality and distribution, as well as the demographic appeal of the programming. Competition for television and advertising dollars is based primarily on advertising rates, audience size and demographic composition, viewer response to advertisers’ products and services and the effectiveness of the advertising sales staff. Our radio programs compete for listeners with similarly themed programming on both satellite and terrestrial radio.

Our failure to meet the competitive pressures in any of these segments could negatively impact our results of operations and financial condition.

Item 1B.  Unresolved Staff Comments.

None.

Item 2.  Properties.

Information concerning the location, use and approximate square footage of our principal facilities as of December 31, 2009, all of which are leased, is set forth below:

				Approximate Area
Location		Use		in Square Feet
601 West 26th Street New York, NY		Product design facilities, photography studio, Merchandising and Internet offices, test kitchens, and prop storage			203,560
		Principal executive and administrative offices; publishing offices; and sales offices
226 West 26th Street New York, NY		Executive and administrative office for television production			22,050
221 West 26th Street New York, NY		Television production facilities			25,800
Satellite Sales Offices in MI, IL & CA		Advertising sales offices			7,904

The leases for these offices and facilities expire between January 2010 and January 2018, and some of these leases are subject to our renewal. The lease for our television production facility at 221 West 26^th Street will expire in June 2010 and is currently in the process of being negotiated for renewal. In 2009, we consolidated certain of our offices by relocating our principal executive and administrative offices, as well as our publishing offices at 11 West 42^nd Street, to 601 West 26^th Street. We entered into a sublease agreement in 2008 for a portion of our office space at 11 West 42^nd Street; we vacated that office space in March 2009.

We also have an intangible asset agreement for various properties owned by Martha Stewart for our editorial, creative and product development processes. These living laboratories allow us to experiment with new designs and new products, such as garden layouts, help generate ideas for new content available to all of our media outlets and serve as locations for photo spreads and television segments. The description of this intangible asset agreement is incorporated by reference into Item 13 and disclosed in the related party transaction disclosure in Note 12 in Notes to Consolidated Financial Statements of this Annual Report on Form 10-K.

We believe that our existing facilities are well maintained and in good operating condition.

Item 3.  Legal Proceedings

The Company is party to legal proceedings in the ordinary course of business, including product liability claims for which we are indemnified by our licensees. None of these proceedings is deemed material.

Item 4.  Reserved

PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market for the Common Stock

Our Class A Common Stock is listed and traded on The New York Stock Exchange (the “NYSE”). Our Class B Common Stock is not listed or traded on any exchange, but is convertible into Class A Common Stock at the option of its owner on a share-for-share basis. The following table sets forth the high and low sales price of our Class A Common Stock as reported by the NYSE for each of the periods listed.

		Q1				Q2				Q3				Q4				Q1				Q2				Q3				Q4
		2008				2008				2008				2008				2009				2009				2009				2009
High Sales Price		$	9.43			$	9.49			$	9.99			$	8.70			$	3.71			$	4.08			$	8.84			$	6.38
Low Sales Price		$	5.22			$	7.13			$	5.63			$	2.51			$	1.60			$	2.37			$	2.70			$	4.40

As of March 2, 2010, there were 8,582 record holders of our Class A Common Stock and one record holder of our Class B Common Stock. This does not include the number of persons whose stock is in nominee or “street name” accounts through brokers.

Dividends

We do not pay regular quarterly dividends.

Our term loan agreement with Bank of America contains certain covenants that limit our ability to pay dividends to an amount (combined with repurchases) no greater than $30 million during the term of the loan agreement, provided no event of default exists or would result and we would be in pro forma compliance with our financial covenants. See Note 7 in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K.

Recent Sales of Unregistered Securities and Use of Proceeds

None.

Issuer Purchases of Equity Securities

The following table provides information about our purchases of our Class A Common Stock during each month of the quarter ended December 31, 2009:

Maximum Number (or

Total Number of

Approximate Dollar

Shares (or Units)

Value) of Shares (or

Total Number of

Purchased as Part of

Units) that May Yet Be

Shares (or Units)

Average Price Paid

Publicly Announced

Purchased under the

Period (1)

Purchased

per Share (or Unit)

Plans or Programs

Plans or Programs

October 2009

44,683

$

5.81

Not applicable

Not applicable

November 2009

2,530

$

5.25

Not applicable

Not applicable

December 2009

217

$

4.59

Not applicable

Not applicable

Total for the quarter ended December 31, 2009

47,430

$

5.44

Notwithstanding anything to the contrary set forth in any of our filings under the Securities Act or the Exchange Act, the following performance graph shall not be deemed to be incorporated by reference into any such filings.

PERFORMANCE GRAPH

The following graph compares the performance of our Class A Common Stock with that of the Standard & Poor’s 500 Stock Index (“S&P Composite Index”) and the stocks included in the Media General Financial Services database under the Standard Industry Code 2721 (Publishing-Periodicals) (the “Publishing Index”*) during the period commencing on January 1, 2005 and ending on December 31, 2009. The graph assumes that $100 was invested in each of our Class A Common Stock, the S&P Composite Index and the Publishing Index at the beginning of the relevant period, is calculated as of the end of each calendar month and assumes reinvestment of dividends. The performance shown in the graph represents past performance and should not be considered an indication of future performance.

Item 6.  Selected Financial Data.

The information set forth below for the five years ended December 31, 2009 is not necessarily indicative of results of future operations, and should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes thereto incorporated by reference into Item 8 of this Form 10-K. The Notes to Selected Financial Data below include certain factors that may affect the comparability of the information presented below (in thousands, except per share amounts).

		2009				2008				2007				2006				2005
INCOME STATEMENT DATA
REVENUES
Publishing		$	128,981			$	163,540			$	183,727			$	156,559			$	125,765
Broadcasting			46,111				47,328				40,263				46,503				16,591
Internet			17,119				15,576				19,189				15,775				11,258
Merchandising			52,566				57,866				84,711				69,504				58,819
Total revenues			244,777				284,310				327,890				288,341				212,433
Operating (loss) income			(11,968	)			(10,857	)			7,714				(2,833	)			(78,311	)
Income (loss) from continuing operations			(14,578	)			(15,665	)			10,289				(16,250	)			(75,295	)
Loss from discontinued operations			—				—				—				(745	)			(494	)
Net income (loss)		$	(14,578	)		$	(15,665	)		$	10,289			$	(16,995	)		$	(75,789	)
PER SHARE DATA
Earnings/(loss) per share:
Basic and diluted — (Loss) income from continuing operations		$	(0.27	)		$	(0.29	)		$	0.20			$	(0.32	)		$	(1.48	)
Basic and diluted — Loss from discontinued operations			—				—				—				(0.01	)			(0.01	)
Basic and diluted — Net (loss) income		$	(0.27	)		$	(0.29	)		$	0.20			$	(0.33	)		$	(1.49	)
Weighted average common shares outstanding:
Basic			53,880				53,360				52,449				51,312				50,991
Diluted			53,880				53,360				52,696				51,312				50,991
Dividends per common share		$	—			$	—			$	—			$	0.50			$	—
FINANCIAL POSITION
Cash and cash equivalents		$	25,384			$	50,204			$	30,536			$	28,528			$	20,249
Short-term investments			13,085				9,915				26,745				35,321				83,788
Total assets			229,791				261,285				255,267				228,047				253,828
Long-term obligations			13,500				19,500				—				—				—
Shareholders’ equity			143,820				150,995				155,529				130,957				160,631
OTHER FINANCIAL DATA
Cash flow (used in) provided by operating activities		$	(9,273	)		$	39,699			$	8,306			$	(6,495	)		$	(34,058	)
Cash flow (used in) provided by investing activities			(9,617	)			(38,856	)			(6,606	)			40,125				(58,300	)
Cash flow (used in) provided by financing activities			(5,930	)			18,825				308				(25,351	)			7,960

NOTES TO SELECTED FINANCIAL DATA

(Loss) / income from continuing operations

2009 results include a net benefit to operating loss of approximately $20 million from certain items including the pro rata portion of the minimum guaranteed royalty payment from Kmart of $14.0 million due for the February 1, 2009 to January 31, 2010 period, the recognition of previously deferred royalties of $10.0 million as non-cash revenue, an incremental $3.9 million from the conclusion of our relationship with TurboChef, a $3.0 million cash receipt related to a make-whole payment and a non-cash impairment charge of $11.4 million related to a cost-based equity investment in United Craft MS Brands LLC recorded in the Merchandising segment.

2008 results include the pro rata portion of the significantly reduced minimum guaranteed royalty payment from Kmart of $20.0 million, as well as a $9.3 million non-cash goodwill impairment charge recorded in the Publishing segment.

2007 results include the pro rata portion of the minimum guaranteed royalty payment from Kmart of $65.0 million, as well as non-cash equity compensation expense of $6.0 million due to the vesting of the final warrant granted to Mark Burnett in connection with the production of The Martha Stewart Show.

2006 results include a net benefit to operating income of approximately $48 million from certain items including the pro rata portion of the minimum guaranteed royalty payment from Kmart of $59.0 million, a one-time newsstand expense reduction adjustment of $3.2 million related to the settlement of certain newsstand-related fees recorded in our Publishing segment, a favorable dispute resolution with a former merchandising licensee of $2.5 million in income, royalty income of $2.8 million related to the successful termination of a home video distribution agreement recorded in our Broadcasting segment, non-cash equity compensation expense of $2.3 million resulting from the vesting of shares underlying a warrant granted to Mark Burnett in connection with his participation in The Martha Stewart Show and a one-time litigation reserve of $17.1 million in connection with the In re Martha Stewart Living Omnimedia Securities Litigation matter, which included incurred and anticipated professional fees, net of insurance reimbursement.

2005 results include the pro rata portion of the minimum guaranteed royalty payment from Kmart of $54.0 million and non-cash equity compensation charges of $31.8 million resulting from the vesting of shares underlying a warrant granted to Mark Burnett in connection with his participation in The Martha Stewart Show.

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

EXECUTIVE SUMMARY

We are an integrated media and merchandising company providing consumers with inspiring lifestyle content and programming, and well-designed, high-quality products. Our Company is organized into four business segments with Publishing, Broadcasting and Internet representing our media platforms that are complemented by our Merchandising segment. In 2009, total revenues decreased approximately 14% from the prior year due primarily to the declines in print and television advertising revenue as well as a decline in our magazine subscription and newsstand revenues.

Our operating costs and expenses were lower in 2009 compared to 2008 primarily due to lower production, distribution and editorial costs in Publishing and our other media segments, as well as lower selling and promotion expenses in our Publishing segment. General and administrative costs were lower due to a combination of Company-wide expense reduction initiatives and certain 2008 one-time items. 2008 includes a Company-wide reorganization that resulted in severance and other one-time compensation-related expenses. 2009 includes the benefit to general and administrative expenses from a cash make-whole payment that we received in October 2009 from our crafts manufacturing partner. Cost savings throughout the segments are partially due to the continued reduction of headcount which was lower by approximately 8% as compared to the beginning of the year.

We ended the year with $38.5 million in cash, cash equivalents and short-term investments. Our overall liquidity decreased from December 31, 2008 due to net operating cash expenses, capital expenditures related to our office relocation and cash used to partially prepay the outstanding principal of our term loan.

Media Update. In 2009, revenues from our media platforms declined from the prior year mostly due to decreased revenues in our Publishing segment as the result of lower advertising revenue, lower circulation revenue and the timing of books revenue. Revenues declined from the prior year in our Broadcasting segment as the result of lower advertising revenue from lower ratings, partially offset by higher integration revenue. The Broadcasting segment also benefited from revenue related to the conclusion of our TurboChef relationship, a marketing and promotional agreement we entered into in 2008. Revenues increased from the prior year in our Internet segment due to higher advertising revenue, partially offset by the inclusion of revenue from Martha Stewart Flowers in the first quarter of 2008, which subsequently transitioned to the Merchandising segment.

Publishing

Advertising revenues declined in 2009 from the prior year mostly due to a decrease in pages. Circulation revenues also declined as subscription revenues decreased due to lower effective rates and higher agent commission expense, partially offset by higher volume of copies served. Additionally, circulation revenues decreased from lower volume of newsstand sales. The decline in revenues was partially offset by decreases in production, editorial, circulation marketing, and advertising costs. These cost savings included savings from lower page volume, lower paper costs and from reduced discretionary spending, as well as lower compensation costs from staff reductions. As we enter the first quarter of 2010, print advertising revenue is expected to stabilize as compared to the prior-year period.

Broadcasting

Broadcasting segment revenues were lower in 2009 as compared to the prior year due to lower ratings and certain one-time payments in the prior-year period related to Emeril Lagasse’s television programming partially offset by revenue related to the conclusion of our TurboChef relationship and higher integration revenue. The Martha Stewart Show continues to maintain its core audience.

Internet

In 2009, advertising revenue increased 19% largely due to an increase in our audience, despite lower effective rates. Our page views increased, on average, approximately 50% from the prior year. While visibility is extremely limited, we expect continued growth in our audience and online advertising revenue for 2010.

Merchandising Update. In 2009, Merchandising segment revenues declined from the prior year mostly due to a decrease in services that we provide to our partners for reimbursable zero-margin creative services projects, as well as the prior-year contribution from Sears Canada, a relationship that expired in 2008. Our Merchandising segment operating income did, however, benefit from a $3.0 million cash make-whole payment that we received in October 2009 from our crafts manufacturing partner in connection with our investment as the result of capital restructuring within their business. Our agreement with Kmart ended in January 2010. In 2009, we recognized the pro rata portion of the $14.0 million minimum guaranteed royalty amount payable for the February 1, 2009 to January 31, 2010 period. In the fourth quarter of 2009, we also recognized $10.0 million in previously deferred royalties related to Kmart recoupment as non-cash revenue.

RESULTS OF OPERATIONS

Comparison for the Year Ended December 31, 2009 to the Year Ended December 31, 2008.

PUBLISHING SEGMENT

(in thousands)		2009				2008				Variance
Publishing Segment Revenues
Advertising		$	74,815			$	94,871			$	(20,056	)
Circulation			50,506				62,634				(12,128	)
Books			2,779				4,676				(1,897	)
Other			881				1,359				(478	)
Total Publishing Segment Revenues			128,981				163,540				(34,559	)
Publishing Segment Operating Costs and Expenses
Production, distribution and editorial			74,431				86,018				11,587
Selling and promotion			45,520				55,419				9,899
General and administrative			6,566				5,951				(615	)
Depreciation and amortization			241				379				138
Impairment charge — goodwill and other asset			—				9,349				9,349
Total Publishing Segment Operating Costs and Expenses			126,758				157,116				30,358
Publishing Segment Operating Income		$	2,223			$	6,424			$	(4,201	)

Publishing revenues decreased 21% for the year ended December 31, 2009 from the prior year. Advertising revenue decreased $20.1 million due to the decrease in pages in Martha Stewart Living, Martha Stewart Weddings, Everyday Food and Body + Soul. The decrease in advertising pages was accompanied by a decrease in advertising rates at Martha Stewart Living and Martha Stewart Weddings partially offset by slightly higher advertising rates in Everyday Food and Body + Soul driven in part by a higher circulation rate base. Circulation revenue decreased $12.1 million due to higher agency commissions and lower effective subscription rate per copy for Martha Stewart Living, Everyday Food and Body + Soul, offset in part by a higher subscriber volume. Circulation revenue also decreased as a result of lower newsstand unit volume across all of our titles, as well as the prior year contribution of eight special interest publications as compared to five special interest publications in 2009. Revenue related to our books business decreased $1.9 million primarily due to the timing of delivery and acceptance of manuscripts related to our multi-book agreements with Clarkson Potter/Publishers for Martha Stewart books and Harper Studios for Emeril Lagasse books.

Magazine Publication Schedule
Year ended December 31,		2009		2008
Martha Stewart Living		12 Issues		12 Issues
Martha Stewart Weddings (a)		5 Issues		5 Issues
Everyday Food		10 Issues		10 Issues
Body + Soul		10 Issues		10 Issues
Special Interest Publications		5 Issues		8 Issues

Production, distribution and editorial expenses decreased $11.6 million, primarily due to savings related to lower volume of pages and lower paper costs. Additionally, art and editorial story and staff costs decreased partly due to lower headcount. Selling and promotion expenses decreased $9.9 million due to lower fulfillment rates associated with Martha Stewart Living and Everyday Food, lower marketing program and advertising staff costs and lower circulation marketing costs. These decreases were partially offset by higher newsstand placement expenses for Martha Stewart Living and Everyday Food. General and administrative expenses increased $0.6 million primarily due to higher facilities-related expenses from the reallocation of rent charges to reflect current utilization of office space. The increase in our Publishing segment rent allocation has offsetting decreases in our Merchandising and Corporate segments. The increase in general and administrative expenses was partially offset by lower headcount and related costs. In the fourth quarter of 2008, we recorded a non-cash impairment charge related primarily to the goodwill associated with our 2004 acquisition of the Body + Soul publication group. This charge was the result of our annual impairment testing in connection with the preparation of the 2008 Annual Report on Form 10-K.

BROADCASTING SEGMENT

(in thousands)		2009				2008				Variance
Broadcasting Segment Revenues
Advertising		$	24,454			$	26,666			$	(2,212	)
Radio			7,000				7,500				(500	)
Licensing and other			14,657				13,162				1,495
Total Broadcasting Segment Revenues			46,111				47,328				(1,217	)
Broadcasting Segment Operating Costs and Expenses
Production, distribution and editorial			29,669				31,291				1,622
Selling and promotion			3,028				3,392				364
General and administrative			5,885				7,287				1,402
Depreciation and amortization			1,389				2,578				1,189
Total Broadcasting Segment Operating Costs and Expenses			39,971				44,548				4,577
Broadcasting Segment Operating Income		$	6,140			$	2,780			$	3,360

Broadcasting revenues decreased 3% for the year ended December 31, 2009 from the prior year. Advertising revenue decreased $2.2 million primarily due to the decline in household ratings for The Martha Stewart Show and lower Everyday Food PBS sponsorship revenue of $0.5 million as the result of the decision not to produce an additional season of Everyday Baking from Everyday Food in 2009. This decrease was partially offset by an increase in the quantity of integrations at higher rates, as well as higher advertising rates overall. Radio revenue decreased $0.5 million related to our new agreement with Sirius XM which has the potential to provide for greater advertising opportunity to replace lower licensing fees. Licensing and other revenue increased $1.5 million due to the revenue related to the conclusion of our TurboChef relationship and historical cable retransmission partially offset by lower revenue from Emeril Lagasse’s television programming and lower international distribution of The Martha Stewart Show.

Production, distribution and editorial expenses decreased $1.6 million due to production cost savings related to season 4 of The Martha Stewart Show which ended in September 2009 as compared to the prior year’s season 3, as well as lower distribution fees. Production costs for season 5 are expected to be flat compared to season 4. Selling and promotion expenses decreased $0.4 million primarily due to lower headcount and reduced spending related to the season 5 launch as compared to the prior year’s season 4 launch. General and administrative expenses decreased $1.4 million due to lower headcount and related costs. Depreciation and amortization expenses decreased $1.2 million primarily due to the timing of amortization in connection with the revenue recognition of the content library for Emeril.

INTERNET SEGMENT

(in thousands)		2009				2008				Variance
Internet Segment Revenues
Advertising and other		$	17,119			$	14,472			$	2,647
Product			—				1,104				(1,104	)
Total Internet Segment Revenues			17,119				15,576				1,543
Internet Segment Operating Costs and Expenses
Production, distribution and editorial			7,873				8,984				1,111
Selling and promotion			7,835				6,164				(1,671	)
General and administrative			1,853				3,487				1,634
Depreciation and amortization			1,950				1,737				(213	)
Total Internet Segment Operating Costs and Expenses			19,511				20,372				861
Internet Segment Operating Loss		$	(2,392	)		$	(4,796	)		$	2,404

Internet revenues increased 10% for the year ended December 31, 2009 from the prior year. Advertising and other revenue increased $2.6 million, or 18%, due to an increase in audience and sold advertising volume, despite lower effective rates. Product revenue decreased $1.1 million due to the inclusion of revenue from Martha Stewart Flowers in the first quarter of 2008. Beginning in the second quarter of 2008, we transitioned to a co-branded agreement with 1-800-Flowers.com. Revenue and related earnings for this business are now reported in our Merchandising segment.

Production, distribution and editorial costs decreased $1.1 million due primarily to the prior year transition of our flowers business to 1-800-Flowers.com, which eliminated inventory and shipping expenses, as well as lower compensation costs as compared to the prior year. Beginning in the second quarter of 2008, costs related to our higher-margin 1-800-Flowers.com program are reported in the Merchandising segment. Selling and promotion expenses increased $1.7 million due to higher compensation expenses from increased headcount and higher commissions. General and administrative expenses decreased $1.6 million due to reduced headcount as compared to the prior year as well as lower allocated payroll and benefits and lower non-cash compensation costs.

MERCHANDISING SEGMENT

(in thousands)		2009				2008				Variance
Merchandising Segment Revenues
Kmart earned royalty		$	7,793			$	18,772			$	(10,979	)
Kmart minimum guarantee true-up			6,707				4,978				1,729
Recognition of previously deferred royalties			10,000								10,000
Other			28,066				34,116				(6,050	)
Total Merchandising Segment Revenues			52,566				57,866				(5,300	)
Merchandising Segment Operating Costs and Expenses
Production, distribution and editorial			9,549				10,409				860
Selling and promotion			2,950				6,529				3,579
General and administrative			2,922				7,980				5,058
Depreciation and amortization			62				90				28
Impairment charge — other asset			11,432				0				(11,432	)
Total Merchandising Segment Operating Costs and Expenses			26,915				25,008				(1,907	)
Merchandising Segment Operating Income		$	25,651			$	32,858			$	(7,207	)

Merchandising revenues decreased 9% for the year ended December 31, 2009 from the prior year. Our agreement with Kmart ended in January 2010. The pro-rata portion of revenues related to the contractual minimum amounts from Kmart covering the specified periods is listed separately above as Kmart minimum guarantee true-up. In 2009, we also recognized royalties that were previously received and deferred and were subject to recoupment. No royalties were recouped throughout the Kmart relationship and therefore, we recognized $10.0 million as non-cash revenue in the fourth quarter of 2009. The decrease in other revenues was mostly due to a decrease in services that we provide to our partners for reimbursable zero-margin creative services projects and the prior year revenue true-up from Sears Canada, a relationship that expired in the third quarter of 2008.

Production, distribution and editorial expenses decreased $0.9 million due primarily to lower compensation costs as compared to the prior year due to reduced staffing. Selling and promotion expenses decreased $3.6 million primarily as a result of the corresponding revenue decrease in services that we provide to our partners for reimbursable creative services projects. General and administrative costs decreased $5.0 million primarily due to a $3.0 million cash make-whole payment that we received in October 2009 from our crafts manufacturing partner in connection with our investment as the result of capital restructuring within its business. In addition, general and administrative expenses decreased due to lower facilities-related expenses primarily due to reallocating rent charges among the segments to reflect current utilization. The decrease in our Merchandising segment rent allocation has offsetting increases in our Publishing segment. For the year ended December 31, 2009, we recorded non-cash impairment charges of $11.4 million related to our cost-based equity investment in United Craft MS Brands, LLC.

CORPORATE

(in thousands)		2009				2008				Variance
Corporate Operating Costs and Expenses
General and administrative		$	39,358			$	44,934			$	5,576
Depreciation and amortization			4,232				3,189				(1,043	)
Total Corporate Operating Costs and Expenses			43,590				48,123				4,533
Corporate Operating Loss		$	(43,590	)		$	(48,123	)		$	4,533

Corporate operating costs and expenses decreased 9% for the year ended December 31, 2009 from the prior year. General and administrative expenses decreased largely due to a company-wide reorganization in 2008 that resulted in severance and other one-time expenses as well as charges related to facility expenses in 2008. Expenses also decreased due to reallocating rent charges to reflect current utilization. The decrease in our Corporate segment has an offsetting increase in our Publishing segment. Partially offsetting the decrease in general and administrative expenses was higher bonus expense in 2009 compared to 2008. Depreciation and amortization expenses increased $1.0 million due to accelerated depreciation charges related to the relocation of our office space.

OTHER ITEMS

INTEREST (EXPENSE) / INCOME, NET. Interest expense, net, was $0.1 million for the year ended December 31, 2009, compared to interest income, net, of $0.5 million for the prior year ended December 31, 2008. The decrease in interest income was primarily attributable to lower interest rates on our money market funds and short-term investments, as well as lower average cash balances. The decrease was partially offset by a decline in interest expense in connection with our term loan related to the acquisition of certain assets of Emeril Lagasse due to a lower average outstanding principal balance in 2009 and lower interest rates.

OTHER (LOSS)/INCOME. Other loss was $0.2 million for the year ended December 31, 2009 compared to $0.8 million in the prior year. Certain investments in equity securities, previously accounted for under the equity method, were accounted for under the cost method beginning in the second quarter of 2009.

LOSS ON EQUITY SECURITIES: Loss on equity securities was $0.5 million for the year ended December 31, 2009 compared to a loss of $2.2 million in the prior year. The loss was the result of marking certain assets to fair value in accordance with accounting principles governing derivative instruments. The losses were partially offset by our gain from the sale of certain equity securities.

INCOME TAX EXPENSE. Income tax expense was $1.7 million for the year ended December 31, 2009, compared to a $2.3 million expense in the prior year. The difference is primarily due to the establishment of deferred tax liabilities in 2008 on indefinite lived intangibles with no tax basis.

NET LOSS. Net loss was ($14.6) million for the year ended December 31, 2009, compared to a net loss of ($15.7) million for the year ended December 31, 2008, as a result of the factors described above.

RESULTS OF OPERATIONS

Comparison for the Year Ended December 31, 2008 to the Year Ended December 31, 2007.

PUBLISHING SEGMENT

(in thousands)		2008				2007				Variance
Publishing Segment Revenues
Advertising		$	94,871			$	106,691			$	(11,820	)
Circulation			62,634				71,707				(9,073	)
Books			4,676				3,373				1,303
Other			1,359				1,956				(597	)
Total Publishing Segment Revenues			163,540				183,727				(20,187	)
Publishing Segment Operating Costs and Expenses
Production, distribution and editorial			86,018				93,312				7,294
Selling and promotion			55,419				72,655				17,236
General and administrative			5,951				5,034				(917	)
Depreciation and amortization			379				1,188				809
Impairment — goodwill and other intangibles			9,349				—				(9,349	)
Total Publishing Segment Operating Costs and Expenses			157,116				172,189				15,073
Publishing Segment Operating Income		$	6,424			$	11,538			$	(5,114	)

Publishing revenues decreased 11% for the year ended December 31, 2008 from the prior year. Advertising revenue decreased $11.8 million due to the decrease in pages in Martha Stewart Living, Everyday Food and Martha Stewart Weddings, as well as the inclusion in 2007 of revenue from Blueprint, a publication that we discontinued at the end of 2007. The decrease in advertising pages was partially offset by slightly higher advertising rates across all titles, as well as two extra issues of Body + Soul. Circulation revenue decreased $9.1 million due to lower newsstand unit volume, lower subscription rate per copy and higher agency commissions in 2008 for Martha Stewart Living and Everyday Food. Circulation revenue was negatively impacted by the 2007 contribution of Blueprint. These decreases were partially offset by higher volume of subscription sales for Martha Stewart Living, Body + Soul and Everyday Food as well as the positive impact of the frequency increase in Body + Soul. Revenue related to our books business increased $1.3 million primarily due to the timing of delivery and acceptance of manuscripts related to our multi-book agreement with Clarkson Potter/Publishers. Other revenue decreased due to lower ancillary sales of products related to Body + Soul.

Magazine Publication Schedule
Year ended December 31,		2008		2007
Martha Stewart Living		12 Issues		12 Issues
Martha Stewart Weddings (a)		5 Issues		5 Issues
Everyday Food		10 Issues		10 Issues
Body + Soul(b)		10 Issues		8 Issues
Special Interest Publications		8 Issues		9 Issues
Blueprint (c)		N/A		6 Issues

Production, distribution and editorial expenses decreased $7.3 million in 2008, primarily due to savings related to the discontinuation of Blueprint as well as lower volume of pages and lower art and editorial staff costs, partially offset by higher print order of Body + Soul and higher paper and postage costs. Selling and promotion expenses decreased $17.2 million due to the absence of costs of Blueprint, lower circulation marketing costs, lower fulfillment rates associated with Martha Stewart Living and Everyday Food and lower advertising staff and marketing program costs. Prior year selling and promotion expenses also included non-recurring employee-related separation charges. General and administrative expenses increased $0.8 million primarily due to higher allocation of facilities and administrative costs as well as slightly higher compensation costs. In the fourth quarter of 2008, we recorded a non-cash impairment charge related primarily to the goodwill associated with our 2004 acquisition of the Body + Soul publication group. This charge was the result of our annual impairment testing under generally accepted accounting principles. Depreciation and amortization expenses decreased $0.8 million due to a change in allocation policy. In 2008, we ceased allocating depreciation and amortization to the various business segments for certain general leasehold improvements. This decrease in depreciation and amortization in the Publishing segment was offset by an increase in depreciation and amortization in the Corporate segment.

BROADCASTING SEGMENT

(in thousands)		2008				2007				Variance
Broadcasting Segment Revenues
Advertising		$	26,666			$	21,078				5,588
Radio			7,500				7,500				—
Licensing and other			13,162				11,685				1,477
Total Broadcasting Segment Revenues			47,328				40,263				7,065
Broadcasting Segment Operating Costs and Expenses
Production, distribution and editorial			31,291				34,099				2,808
Selling and promotion			3,392				4,026				634
General and administrative			7,287				7,456				169
Depreciation and amortization			2,578				2,201				(377	)
Total Broadcasting Segment Operating Costs and Expenses			44,548				47,782				3,234
Broadcasting Segment Operating Income / (Loss)		$	2,780			$	(7,519	)		$	10,299

Broadcasting revenues increased 18% for the year ended December 31, 2008 from the prior year. Advertising revenue increased $5.6 million primarily due to the increase in advertising inventory (related to our revised season 3 distribution agreement for The Martha Stewart Show), partially offset lower revenue due to the timing of integrations as well as a decline in household ratings. Licensing revenue increased $1.5 million primarily due to Chef Emeril Lagasse’s television programming including the new original series on Planet Green featuring Emeril Lagasse as well as from the Essence of Emeril on the Food Network and the rebroadcast of Emeril Live! on the Fine Living Network. Licensing and other revenue also increased due to a domestic distribution agreement with the Fine Living Network on cable to air The Martha Stewart Show, increased international distribution of The Martha Stewart Show, a new marketing agreement with TurboChef and the new series Whatever Martha! These increases were partially offset by the exchange of season 3 license fees for additional advertising inventory related to The Martha Stewart Show.

Production, distribution and editorial expenses decreased $2.8 million due principally to a 2007 non-cash charge associated with the vesting of a portion of a warrant granted in connection with the production of The Martha Stewart Show, as well as lower production costs for season 3 of The Martha Stewart Show as compared to season 2. These decreases are partially offset by 2008 distribution costs which were reported net of licensing revenues in 2007 as well as costs related to the new series Whatever Martha! and costs associated with Emeril Lagasse’s television programming. Selling and promotion expenses decreased $0.6 million primarily due to lower marketing costs associated with the launch of season 4 of The Martha Stewart Show as compared to the costs of the season 3 launch and the timing of promotional expenses. Depreciation and amortization increased $0.4 million due to the amortization of the content library for Emeril, which was partially offset by the full depreciation of the set for The Martha Stewart Show in the second quarter of 2007.

INTERNET SEGMENT

(in thousands)		2008				2007				Variance
Internet Segment Revenues
Advertising and other		$	14,472			$	11,779			$	2,693
Product			1,104				7,410				(6,306	)
Total Internet Segment Revenues			15,576				19,189				(3,613	)
Internet Segment Operating Costs and Expenses
Production, distribution and editorial			8,984				14,092				5,108
Selling and promotion			6,164				6,023				(141	)
General and administrative			3,487				3,969				482
Depreciation and amortization			1,737				1,242				(495	)
Total Internet Segment Operating Costs and Expenses			20,372				25,326				4,954
Internet Segment Operating Loss		$	(4,796	)		$	(6,137	)		$	1,341

Internet revenues decreased 19% for the year ended December 31, 2008 from the prior year. Advertising and other revenue increased $2.7 million due to an increase in page views and sold advertising volume. Product revenue decreased $6.3 million due to the transition of our flowers program from Martha Stewart Flowers, which generated sales through Valentine’s Day 2008, to our new, co-branded agreement with 1-800-Flowers.com which began generating revenue in the second quarter of 2008 and reported in the Merchandising segment.

Production, distribution and editorial expenses decreased $5.1 million in 2008 from the prior year due primarily to the transition of our flowers business, which eliminated inventory and shipping expenses, and due to the prior year use of freelancers and consultants as well as technology costs related to the 2007 re-design of marthastewart.com. These savings were partially offset by an increase in headcount and related compensation costs. All costs related to 1-800-Flowers.com are reported in the Merchandising segment. General and administrative expenses decreased $0.5 million due to the transition of our flowers business as described above. Depreciation and amortization expenses increased $0.5 million primarily due to the 2007 launch of the redesigned website and the related depreciation costs.

MERCHANDISING SEGMENT

(in thousands)		2008				2007				Variance
Merchandising Segment Revenues
Kmart earned royalty		$	18,772			$	25,190				(6,418	)
Kmart minimum guarantee true-up			4,978				39,102				(34,124	)
Other			34,116				20,419				13,697
Total Merchandising Segment Revenues			57,866				84,711				(26,845	)
Merchandising Segment Operating Costs and Expenses
Production, distribution and editorial			10,409				13,418				3,009
Selling and promotion			6,529				6,475				(54	)
General and administrative			7,980				7,214				(766	)
Depreciation and amortization			90				375				285
Total Merchandising Segment Operating Costs and Expenses			25,008				27,482				2,474
Merchandising Segment Operating Income		$	32,858			$	57,229			$	(24,371	)

Merchandising revenues decreased 32% for the year ended December 31, 2008 from the prior year. The decrease in segment revenues was due primarily to the reduction of our contractual minimum guarantee from Kmart. Actual retail sales of our products at Kmart declined 25% on a comparable store and total store basis. The pro-rata portion of revenues related to the contractual minimum amounts covering the specified periods, net of amounts subject to recoupment, is listed separately above. Other revenues increased primarily due to contributions from Emeril Lagasse’s brand and our annualized agreement with Macy’s for our Martha Stewart Collection products. The increase in other revenues was also due to our partnership with 1-800-Flowers.com for our newly-launched flowers program and from the expansion of our crafts line with EK Success into Wal-Mart. The increases from these new initiatives were partially offset by the inclusion in 2007 of revenues from an endorsement and promotional agreement with U.S. affiliates of SVP Worldwide, makers of Singer, Husqvarna Viking and Pfaff sewing machines, with no comparable revenue in 2008.

Production, distribution and editorial expenses decreased $3.0 million primarily due to lower compensation costs. General and administrative costs increased $0.8 million reflecting the additional Merchandising segment expenses of our Emeril Lagasse brand, as well as higher allocated facilities costs.

CORPORATE

(in thousands)		2008				2007				Variance
Corporate Operating Costs and Expenses
General and administrative		$	44,934			$	44,841			$	(93	)
Depreciation and amortization			3,189				2,556				(633	)
Total Corporate Operating Costs and Expenses			48,123				47,397				726
Corporate Operating Loss		$	(48,123	)		$	(47,397	)		$	(726	)

Corporate operating costs and expenses increased 2% for the year ended December 31, 2008 from the prior year. General and administrative expenses increased $0.1 million due to cash and non-cash charges of $3.5 million related to a Company-wide reorganization that resulted in severance and other one-time compensation-related expenses and increased costs associated with a new intangible asset agreement. These increases were fully offset by lower non-cash compensation and the reduction of our annual bonus pool. Depreciation and amortization increased $0.6 million due to a change in allocation policy. In 2008, we ceased allocating depreciation and amortization to the various business segments for certain general leasehold improvements. This increase in depreciation and amortization in the Corporate segment was offset by a decrease in depreciation and amortization in the Publishing segment.

OTHER ITEMS

INTEREST INCOME, NET. Interest income, net, was $0.5 million for the year ended December 31, 2008, compared to $2.8 million for the prior year ended December 31, 2007. The decrease was attributable primarily to our 2008 interest expense from our $30 million term loan related to the acquisition of certain assets of Emeril Lagasse. Interest income also decreased due to lower interest rates.

OTHER (EXPENSE) / INCOME. Other expense was $0.8 million for the year ended December 31, 2008 related to our equity investment in WeddingWire. We record our proportionate share of the results of WeddingWire one quarter in arrears. Therefore, this loss represents our portion of prorated results of WeddingWire through September 30, 2008. Other income for the year ended December 31, 2007 was $0.4 million. The prior year income is related to the final legal settlement of the class action lawsuit known as In re Martha Stewart Living Omnimedia, Inc. Securities Litigation.

LOSS ON EQUITY SECURITIES: Loss on equity securities was $2.2 million for the year ended December 31, 2008. The loss is the result of marking certain assets to fair value in accordance with accounting principles governing derivative instruments as well as recognizing an other-than-temporary loss on our shares of TurboChef stock.

INCOME TAX EXPENSE. Income tax expense was $2.3 million for the year ended December 31, 2008, compared to a $0.6 million expense in the prior year. The current year provision includes $1.8 million which is attributable to differences between the financial statement carrying amounts of current and prior-year acquisitions of certain indefinite-lived intangible assets and their respective tax bases.

NET LOSS. Net loss was ($15.7) million for the year ended December 31, 2008, compared to a net income of $10.3 million for the year ended December 31, 2007, as a result of the factors described above.

LIQUIDITY AND CAPITAL RESOURCES

Overview

Our primary source of liquidity has generally been from cash generated by operating activities. Specifically, in 2007, the majority of our cash generation was provided by the collection of Kmart contractual minimums. In 2008, cash from operations was provided by Kmart and from the Emeril Lagasse assets acquired in 2008. In 2009, we used cash for operations due to the significant reduction in cash received related to the Kmart contractual minimums as compared to 2008, as well as the increase in working capital. The increase to working capital was due to the increase in certain receivables and the decrease in deferred subscription revenue. Operating results and cash flows may change due to a variety of factors, including changes in demand for the product, changes in our cost structure and changes in macroeconomic factors. Any such changes in our business can have a significant effect on cash flows.

We believe, as described further below, that our available cash balances and short-term investments will be sufficient to meet our recurring cash needs for working capital and capital expenditures for 2010 including continued prepayments of our debt service obligations.

Sources and Uses of Cash

During 2009, our overall cash, cash equivalents and short-term investments decreased $21.7 million from December 31, 2008 due to net operating cash expenses, capital expenditures related to our office relocation and principal pre-payments of the term loan. Cash, cash equivalents and short-term investments were $38.5 million and $60.1 million at December 31, 2009 and December 31, 2008, respectively.

Operating Activities

Our cash inflows from operating activities are generated by our business segments from revenues, as described above, which include cash from advertising customers, licensing partners and magazine circulation sales. Operating cash outflows generally include employee and related costs, the physical costs associated with producing magazines, including related direct mail expenses, and the cash costs of facilities.

Cash (used in) and provided by operating activities was $(9.3) million, $39.7 million and $8.3 million for the years ended December 31, 2009, 2008 and 2007, respectively. In 2009, cash used in operations reflected our operating loss, as discussed earlier, net of non-cash factors such as the recognition of previously deferred royalties related to Kmart. In addition, cash declined due to lower cash received from Kmart related to lower contractual minimum guaranteed payments and lower 2009 earned royalties. The decline in Kmart earned royalties in 2009 led to an increase in the minimum guaranteed true-up amount which resulted in a higher receivable balance at December 31, 2009. In 2010, we received cash from Kmart which satisfied our December 31, 2009 receivable related to earned royalties and the guaranteed minimum royalty from Kmart. Cash used in operating activities also declined due to lower cash received for new subscriptions during 2009 as the result of higher agency commissions and lower effective subscription rates per copy.

Investing Activities

Our cash inflows from investing activities generally include proceeds from the sale of short-term investments. Investing cash outflows generally include payments for the acquisition of new businesses; short- and long-term investments; and additions to property, plant, and equipment.

Cash used in investing activities was $(9.6) million, $(38.9) million and $(6.6) million for the years ended December 31, 2009, 2008, and 2007, respectively. In 2009, cash flow used in investing activities reflected $8.6 million paid for capital improvements primarily in conjunction with our relocation and consolidation of certain offices. Additionally, we invested $0.8 million predominantly for a non-controlling interest in Ziplist and we had net purchases of short-term investments of $0.2 million.

Financing Activities

Our cash inflows from financing activities generally include proceeds from the exercise of stock options for our Class A Common Stock issued under our equity incentive plans, as well as proceeds from debt financing. Cash outflows from financing activities generally include principal repayment of outstanding debt and debt issuance costs.

Cash flows (used in) and provided by financing activities were $(5.9) million, $18.8 million and $0.3 million for the years ended December 31, 2009, 2008 and 2007, respectively. In 2009, we made $6.0 million in principal pre-payments on our term loan with Bank of America related to the acquisition of certain assets of Emeril Lagasse.

Debt

We have a line of credit with Bank of America in the amount of $5.0 million, which is generally used to secure outstanding letters of credit. The line was renewed as of June 30, 2009 for a one-year period. The renewal included certain substantive changes from the prior year’s terms, including a covenant to maintain $5.0 million in liquidity, as that term is defined in the credit agreement, and the reduction of the current ratio requirement from 1.5:1.0 to 1.25:1.0. We were compliant with the debt covenants as of December 31, 2009. We had no outstanding borrowings under this facility as of December 31, 2009 and had letters of credit of $2.8 million.

In April 2008, we entered into a loan agreement with Bank of America in the amount of $30 million related to the acquisition of certain assets of Emeril Lagasse. The loan was originally secured by cash collateral of $28.5 million. In the third quarter of 2008, the cash collateral was replaced by collateral consisting of substantially all of the assets of the Emeril business that were acquired by the Company. During the third quarter of 2009, we amended and restated the loan agreement. As amended and restated, the loan was secured by substantially all of the assets of the Emeril business that we acquired, as well as cash collateral in an amount equal to the outstanding principal balance of the loan. While the loan was secured by the cash collateral, the interest rate was a floating rate of 1-month LIBOR plus 1.50%. Pursuant to a waiver and amendment executed in December 2009, Bank of America released its lien on the cash collateral at our request after we demonstrated that we would have been in compliance with the financial covenants outlined below for the fiscal quarter immediately preceding the requested release date had such financial covenants been applicable for that fiscal quarter. Subsequent to the December 2009 waiver and amendment, the interest rate is equal to a floating rate of 1-month LIBOR plus 2.85%.

Martha Stewart Living Omnimedia, Inc. and most of its domestic subsidiaries are guarantors of the loan. The loan agreement requires equal principal payments and related interest to be paid by the Company quarterly for the duration of the loan term, approximately 5 years. During the year ended December 31, 2009, we prepaid $6.0 million in principal representing the amounts due on March 31, 2010, June 30, 2010, September 30, 2010 and December 31, 2010. Accordingly, the loan payable is characterized as a non-current liability as of December 31, 2009. We expect to pay the principal installments and interest expense with cash from operations.

The loan terms include financial covenants, failure with which to comply would result in an event of default and would permit Bank of America to accelerate and demand repayment of the loan in full. As of December 31, 2009, we were compliant with all the financial covenants. A summary of the most significant financial covenants is as follows:

A summary of the most significant financial covenants is as follows:

Financial Covenant
Tangible Net Worth		At least $40.0 million
Funded Debt to EBITDA (a)		Equal to or less than 2.0
Parent Guarantor (the Company) Basic Fixed Charge Coverage Ratio (b)		Equal to or greater than 2.75
Quick Ratio		Equal to or greater than 1.0

The loan agreement also contains a variety of other customary affirmative and negative covenants that, among other things, limit the Company’s and its subsidiaries’ ability to incur additional debt, suffer the creation of liens on their assets, pay dividends or repurchase stock, make investments or loans, sell assets, enter into transactions with affiliates other than on arm’s length terms in the ordinary course of business, make capital expenditures, merge into or acquire other entities or liquidate. The negative covenants expressly permit the Company to, among other things: incur an additional $15 million of debt to finance permitted investments or acquisitions; incur an additional $15 million of earnout liabilities in connection with permitted acquisitions; spend up to $30 million repurchasing the Company’s stock or paying dividends thereon (so long as no default or event of default existed at the time of or would result from such repurchase or dividend payment and the Company would be in pro forma compliance with the above-described financial covenants assuming such repurchase or dividend payment had occurred at the beginning of the most recently-ended four-quarter period); make investments and acquisitions (so long as no default or event of default existed at the time of or would result from such investment or acquisition and the Company would be in pro forma compliance with the above-described financial covenants assuming the acquisition or investment had occurred at the beginning of the most recently-ended four-quarter period); make up to $15 million in capital expenditures in fiscal year 2008 and $7.5 million in each subsequent fiscal year, provided that the Company can carry over any unspent amount to any subsequent fiscal year (but in no event may the Company make more than $15 million in capital expenditures in any fiscal year); sell one of the Company’s investments (or any asset the Company might receive in conversion or exchange for such investment); and sell assets during the term of the loan comprising, in the aggregate, up to 10% of the Company’s consolidated shareholders’ equity, provided the Company receives at least 75% of the consideration in cash.

Cash Requirements

Our commitments consist primarily of leases for office facilities under operating lease agreements and principal repayments of our loan. Future minimum payments under our operating leases are included in Note 13 to our Consolidated Financial Statements and are summarized in the table below:

		Payments due by period (in thousands)
																		More
						Less than												than
Contractual Obligations		Total				1 year				1-3 years				3-5 years				5 years				Other
Long–Term Debt Obligations *		$	13,500			$	—			$	12,000			$	1,500			$	—			$	—
Operating Lease Obligations **		$	68,011				11,456				16,892				14,969				24,694				—
Unrecognized Tax Benefits ***		$	189				—				—				—				—				189
Total		$	81,700			$	11,456			$	28,892			$	16,469			$	24,694			$	189

In addition to our contractual obligations, in 2010, we expect to use approximately $3.0 million in cash for 2010 capital expenditures due to the continued leasehold improvements related to the consolidation of office space as well as continued upgrades to our corporate information technology. Also in 2010, we expect to use approximately $2.0 million in cash for 2009 capital expenditures.

OFF-BALANCE SHEET ARRANGEMENTS

Our bylaws may require us to indemnify our directors and officers against liabilities that may arise by reason of their status as such and to advance their expenses incurred as a result of any legal proceedings against them as to which they could be indemnified.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

General

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debts, inventories, deferred production costs, long-lived assets and accrued losses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe that, of our significant accounting policies disclosed in this Annual Report on Form 10-K, the following may involve the highest degree of judgment and complexity.

Revenue Recognition

We recognize revenues when realized or realizable and earned. Revenues and associated accounts receivable are recorded net of provisions for estimated future returns, doubtful accounts and other allowances.

In an arrangement with multiple deliverables, Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition (“ASC 605”) provides guidance to determine a) how the arrangement consideration should be measured, b) whether the arrangement should be divided into separate units of accounting, and c) how the arrangement consideration should be allocated among the separate units of accounting. We have applied the guidance included in ASC 605 in establishing revenue recognition policies for our arrangements with multiple deliverables. For agreements with multiple deliverables, including our merchandising licensing contracts and our advertising contracts that cross our media platforms, if we are unable to put forth vendor specific objective evidence required under ASC 605 to determine the fair value of each deliverable, then we will account for the deliverables as a combined unit of accounting rather than separate units of accounting. In this case, revenue is recognized as the earnings process is completed, generally based on the revenue recognition policy applicable to the last deliverable. This policy has historically resulted in straight-line revenue recognition over the service period of that last deliverable.

Advertising revenues in the Publishing segment are generally recorded upon the on-sale dates of the magazines and are stated net of agency commissions and cash and sales discounts. Subscription revenues are recognized on a straight-line basis over the life of the subscription as issues are delivered. Newsstand revenues are recognized based on estimates with respect to future returns and net of brokerage and newsstand-related fees. We base our estimates on our historical experience and current market conditions. Revenues earned from book publishing are recorded as manuscripts are delivered to and/or accepted by our publisher. Additional revenue is recorded as sales on a unit basis exceed the advanced royalty for the individual title or in certain cases, advances on cross-collateralized titles.

Television advertising revenues are generally recorded when the related commercials are aired and are recorded net of agency commission and estimated reserves for television audience underdelivery. Television integration revenues are recognized when the segment featuring the related product/brand immersion is initially aired. Television revenue related to Emeril Lagasse is generally recognized when services are performed. Radio advertising revenues are general recorded when the related commercials are aired and are recorded net of agency commissions. Revenue from our radio licensing operations is recognized evenly over the life of the contract.

Internet advertising revenues are generally based on the sale of impression-based advertisements, which are recorded in the period in which the advertisements are served.

Licensing-based revenues, most of which are in our Merchandising segment, are accrued on a monthly basis based on the specific mechanisms of each contract. Payments are generally made by our partners on a quarterly basis. Generally, revenues are accrued based on actual sales, while any minimum guarantees are earned evenly over the fiscal year. Revenues related to our agreement with Kmart have been recorded on a monthly basis based on actual retail sales, until the last period of the year, when we recognized a substantial majority of the true-up between the minimum royalty amount and royalties paid on actual sales. Not recognizing revenue until the fourth quarter was originally driven in large part by concern about whether the collectability of the minimums was reasonably assured in the wake of the Kmart Chapter 11 filing. Concern about the collectability persisted in subsequent years due to difficulties in the relationship with Kmart and numerous store closings that caused royalties to fall short of the minimums. Accordingly, the true-up payment was recorded in the fourth quarter at the time the true-up amounts were known and subsequently collected.

We maintain reserves for all segment receivables, as appropriate. These reserves are adjusted regularly based upon actual results. We maintain allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances might be required.

Television Production Costs

Television production costs are capitalized and amortized based upon estimates of future revenues to be received and future costs to be incurred for the applicable television product. We base our estimates primarily on existing contracts for programs, historical advertising rates and ratings, as well as market conditions. Estimated future revenues and costs are adjusted regularly based upon actual results and changes in market and other conditions.

Goodwill and Indefinite-Lived Intangible Assets

We are required to analyze our goodwill and other intangible assets on an annual basis as well as when events and circumstances indicate impairment may have occurred. Unforeseen events and changes in circumstances and market conditions and material differences in the value of long-lived assets due to changes in estimates could negatively affect the fair value of our assets and result in an impairment charge. In estimating fair value, we must make assumptions and projections regarding items such as future cash flows, future revenues, future earnings and other factors. The assumptions used in the estimate of fair value are generally consistent with the past performance of each reporting unit and are also consistent with the projections and assumptions that are used in current operating plans. Such assumptions are subject to change as a result of changing economic and competitive conditions. If these estimates or their related assumptions change in the future, we may be required to record an impairment loss for any of our intangible assets. Had the estimated fair values of each of these reporting units been hypothetically lower by 10% as of our annual testing date, the fair values of the reporting units would have exceeded their respective carrying values. Had the estimated fair values of each of these reporting units been hypothetically lower by 20% as of our annual testing date, the fair value of one of our reporting units would not have exceeded its respective carrying value which could result in an impairment charge of less than $1.0 million. The recording of any resulting impairment loss could have a material adverse effect on our financial statements.

Long-Lived and Definite-Lived Intangible Assets

We review the carrying values of our long-lived assets whenever events or changes in circumstances indicate that such carrying values may not be recoverable. Unforeseen events and changes in circumstances and market conditions and material differences in the value of long-lived assets due to changes in estimates of future cash flows could negatively affect the fair value of our assets and result in an impairment charge, which could have a material adverse effect on our financial statements.

Deferred Income Tax Asset Valuation Allowance

We record a valuation allowance to reduce our deferred income tax assets to the amount that is more likely than not to be realized. In evaluating our ability to recover our deferred income tax assets, we consider all available positive and negative evidence, including our operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction by jurisdiction basis. Our cumulative pre-tax loss in recent years represents sufficient negative evidence for us to determine that the establishment of a full valuation allowance against the deferred tax asset is appropriate. This valuation allowance offsets net deferred tax assets associated with future tax deductions as well as carryforward items. In the event we were to determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance which would reduce the provision for income taxes. See Note 10 of the Notes to the consolidated financial statements for additional information.

Non-Cash Equity Compensation

We currently have a stock incentive plan that permits us to grant various types of share-based incentives to key employees, directors and consultants. The primary types of incentives that have been granted under the plan are restricted shares of common stock and stock options. Restricted shares are valued at the market value of traded shares on the date of grant, while stock options are valued using a Black-Scholes option pricing model. The Black-Scholes option pricing model requires numerous assumptions, including expected volatility of our stock price and expected life of the option.

Item 7A.  Quantitative and Qualitative Disclosure about Market Risk.

We are exposed to certain market risks as the result of our use of financial instruments, in particular the potential market value loss arising from adverse changes in interest rates as well as from adverse changes in our publicly traded investment. We do not utilize financial instruments for trading purposes.

Interest Rates

We are exposed to market rate risk due to changes in interest rates on our loan agreement with Bank of America that we entered into on April 2, 2008 under which we borrowed $30.0 million to fund a portion of the acquisition of certain assets of Emeril Lagasse. Interest rates applicable to amounts outstanding under this facility are at variable rates based on the 1-month LIBOR rate plus 2.85%. During the portion of 2009 in which the loan was collateralized by cash, the interest rate was lowered to 1-month LIBOR rate plus 1.50%. A change in interest rates on this variable rate debt impacts the interest incurred and cash flows but does not impact the fair value of the instrument. We had outstanding borrowings of $13.5 million on the term loan at December 31, 2009 at an average rate of 2.95% for the year. A one percentage point increase in the interest rate would have increased interest expense by $0.2 million for 2009.

We also have exposure to market rate risk for changes in interest rates as those rates relate to our investment portfolio. The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. We attempt to protect and preserve our invested funds by limiting default, market and reinvestment risk. To achieve this objective, we invest our excess cash in debt instruments of the United States Government and its agencies and in high-quality corporate issuers (including bank instruments and money market funds) and, by internal policy, limit both the term and amount of credit exposure to any one issuer. As of December 31, 2009, net unrealized gains and losses on these investments were not material. However, in 2009, we recorded approximately $0.7 million in interest income. Our future investment income may fluctuate due to changes in interest rates, or we may suffer losses in principal if forced to sell securities that have declined in market value due to changes in interest rates. A one percentage point decrease in average interest rates would have decreased interest income by $0.6 million for 2009.

Stock Prices

We have a common stock investment in a publicly traded company that is subject to market price volatility. This investment had an aggregate fair value of approximately $3.0 million as of December 31, 2009. A hypothetical decrease in the market price of this investment of 10% would result in a fair value of approximately $2.7 million. The hypothetical decrease in fair value of $0.3 million would be recorded in shareholders’ equity as other comprehensive loss, as any change in fair value of our publicly-traded equity securities are not recognized on our statement of operations, unless the loss is deemed other-than-temporary.

Item 8.  Financial Statements and Supplementary Data.

The information required by this Item is set forth on pages F-1 through F-28 of this Annual Report on Form 10-K and is incorporated by reference herein.

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Principal Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in the Rules 13a-15(e) and 15d-15(e) under the Exchange Act required by Exchange Act Rules 13a-15(b) or 15d-15(e)), as of the end of the period covered by this report. Based upon that evaluation, our Principal Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of that date to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including the Principal Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of our management, including our Principal Executive Officer and Chief Financial Officer, we assessed the effectiveness of our internal control over financial reporting as of the end of the period covered by this report based on the framework in “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our Principal Executive Officer and Principal Financial Officer concluded that our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with United States generally accepted accounting principles.

Our independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on our internal control over financial reporting. The attestation report is included herein.

Evaluation of Changes in Internal Control Over Financial Reporting

Under the supervision and with the participation of our management, including our Principal Executive Officer and Chief Financial Officer, we have determined that, during the fourth quarter of fiscal 2009, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Martha Stewart Living Omnimedia, Inc.

We have audited Martha Stewart Living Omnimedia, Inc.’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Martha Stewart Living Omnimedia, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Martha Stewart Living Omnimedia, Inc. as of December 31, 2009 and 2008, and the related consolidated statements of operations, shareholders’ equity and comprehensive loss, and cash flows for each of the three years in the period ended December 31, 2009 and our report dated March 5, 2010 expressed an unqualified opinion thereon.

/s/ Ernst & Young
New York, New York
March 5, 2010

Item 9B. Other Information.

On March 1, 2010, our Board of Directors appointed Martha Stewart as our Chief Editorial, Media and Content Officer, a role in which she will assume more significant oversight for these areas. Also effective March 1, 2010, Gael Towey will no longer be a named executive officer but will continue to be involved with all creative aspects of our publishing business.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this Item is set forth in our Proxy Statement for our 2010 annual meeting of stockholders (our “Proxy Statement”) under the captions “ELECTION OF DIRECTORS — Information Concerning Nominees,” “INFORMATION CONCERNING EXECUTIVE OFFICERS AND OUR FOUNDER,” “MEETINGS AND COMMITTEES OF THE BOARD — Code of Ethics” and “— Audit Committee,” and “SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE” and is hereby incorporated herein by reference.

Item 11. Executive Compensation.

The information required by this Item is set forth in our Proxy Statement under the captions “MEETINGS AND COMMITTEES OF THE BOARD — Compensation Committee Interlocks and Insider Participation,” “COMPENSATION OF OUTSIDE DIRECTORS,” “DIRECTOR COMPENSATION TABLE,” “COMPENSATION COMMITTEE REPORT,” “COMPENSATION DISCUSSION AND ANALYSIS,” “SUMMARY COMPENSATION TABLE,” “GRANTS OF PLAN-BASED AWARDS IN 2009,” “EXECUTIVE COMPENSATION AGREEMENTS,” “OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2009,” “OPTION EXERCISES AND STOCK VESTED DURING 2009,” and “POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL” and is hereby incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Equity Compensation Plan Information

The following table sets forth certain information regarding our equity compensation plans as of December 31, 2009.

EQUITY COMPENSATION PLAN INFORMATION

Number of Securities Remaining

Number of Securities to be Issued

Weighted-Exercise Price of

Available for Future Issuance Under

upon Exercise of Outstanding

Outstanding Options,

Equity Compensation Plans (Excluding

Options, Warrants and Rights

Warrants and Rights

Securities Reflected in Column (a)

Plan Category

(a)

(b)

(c)

Equity Compensation plans approved by security holders:

7,487,491

(1)

$

7.70

4,579,495

(2)

Equity Compensation plans not approved by security holders:

416,667

(3)

$

12.59

n/a

Total

7,904,158

n/a

n/a

The information required by this Item regarding beneficial ownership of our equity securities is set forth in our Proxy Statement under the caption “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT” and is hereby incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item is set forth in our Proxy Statement under the caption “CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS” and “MEETING AND COMMITTEES OF THE BOARD — Corporate Governance” and is hereby incorporated herein by reference.

Item 14. Principal Accountant Fees and Services.

The information required by this Item is set forth in our Proxy Statement under the caption “INDEPENDENT PUBLIC ACCOUNTANTS” and is hereby incorporated herein by reference.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) (1) and (2) Financial Statements and Schedules: See page F-1 of this Annual Report on Form 10-K.

(3) Exhibits:

Exhibit
Number						Exhibit Title
	2.1			—		Asset Purchase Agreement dated as of February 19, 2008 among Emeril’s Food of Love Productions, L.L.C., emerils.com, LLC and Emeril J. Lagasse, III, as the Sellers, and Martha Stewart Living Omnimedia, Inc. and MSLO Shared IP Sub LLC, as the Buyers (incorporated by reference to Exhibit 99.1 to our Current Report on Form 8-K (file number 001-15395) filed on February 19, 2008).
	3.1			—		Martha Stewart Living Omnimedia, Inc.’s Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to our Registration Statement on Form S-1, as amended, File Number 333-84001 (the “Registration Statement”)).
	3.2			—		Martha Stewart Living Omnimedia, Inc.’s By-Laws (incorporated by reference to Exhibit 3.2 to our Quarterly Report on Form 10-Q (file number 001-15395) for the quarter ended June 30, 2008 (“June 2008 10-Q”)).
	4.1			—		Warrant to purchase shares of Class A Common Stock, dated August 11, 2006 (incorporated by reference to Exhibit 4.2 to our Quarterly Report on Form 10-Q (file number 001-15395) for the quarter ended September 30, 2006 (“September, 2006 10-Q”)).
	10.1	†		—		1999 Stock Incentive Plan (incorporated by reference to the Registration Statement), as amended by Exhibits 10.1.1, 10.1.2 and 10.1.3.
	10.1.1	†		—		Amendment No. 1 to the 1999 Stock Incentive Plan, dated as of March 9, 2000 (incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 1999, File Number 001-15395 (the “1999 10-K”)).
	10.1.2	†		—		Amendment No. 2 to the Amended and Restated 1999 Stock Incentive Plan, dated as of May 11, 2000 (incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 (the “June 2000 10-Q”)).
	10.1.3	†		—		Amendment No. 3 to the Amended and Restated 1999 Stock Incentive Plan (incorporated by reference to our Current Report on Form 8-K filed on May 17, 2005 (the “May 17, 2005 8-K”)).
	10.2	†		—		1999 Non-Employee Director Stock and Option Compensation Plan (incorporated by reference to the Registration Statement) as amended by Exhibit 10.2.1.
	10.2.1	†		—		Amendment No. 1 to the Martha Stewart Living Omnimedia, Inc. Non-Employee Director Stock and Option Compensation Plan (incorporated by reference to the May 17, 2005 8-K).
	10.3			—		Form of Intellectual Property License and Preservation Agreement, dated as of October 22, 1999, by and between Martha Stewart Living Omnimedia, Inc. and Martha Stewart (incorporated by reference to Exhibit 10.8 to the Registration Statement).
	10.4			—		Lease, dated as of September 24, 1992, between Tishman Speyer Silverstein Partnership and Time Publishing Ventures, Inc., as amended by First Amendment of Lease dated as of September 24, 1994 between 11 West 42 Limited Partnership and Time Publishing Ventures, Inc. (incorporated by reference to Exhibit 10.10 to the Registration Statement).
	10.5			—		Lease, dated as of March 31, 1998, between 11 West 42 Limited Partnership and Martha Stewart Living Omnimedia LLC (incorporated by reference to Exhibit 10.11 to the Registration Statement).
	10.6			—		Lease, dated August 20, 1999, between 601 West Associates LLC and Martha Stewart Living Omnimedia LLC (incorporated by reference to Exhibit 10.12 to the Registration Statement) as amended by Exhibits 10.6.1 and 10.6.2.
	10.6.1			—		First Lease Modification Agreement, dated December 24, 1999, between 601 West Associates LLC and Martha Stewart Living Omnimedia, Inc. (incorporated by reference to Exhibit 10.12.1 to our Annual Report on Form 10-K (file number 001-15395) for the year ended December 31, 1999).
	10.6.2			—		Sixth Lease Modification Agreement, dated as of June 14, 2007, between 601 West Associates LLC and Martha Stewart Living Omnimedia, Inc (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q (file number 001-15395) for the quarter ended March 31, 2008 (“March 2008 10-Q”)).

Exhibit
Number						Exhibit Title
	10.7			—		Lease, dated as of October 1, 2000, between Newtown Group Properties Limited Partnership and Martha Stewart Living Omnimedia, Inc. (incorporated by reference to Exhibit 10.1 our Quarterly Report on Form 10-Q (file number 001-15395) for the quarter ended June 30, 2001 (the “June 2001 10-Q”)).
	10.8			—		License Agreement, dated June 21, 2001 by and between Kmart Corporation and MSO IP Holdings, Inc. (incorporated by reference to Exhibit 10.3 to the June 2001 10-Q) as amended by Exhibit 10.8.1 and 10.8.2.
	10.8.1			—		Amendment, dated as of April 22, 2004 to the License Agreement, by and between MSO IP Holdings, Inc. and Kmart Corporation, dated June 21, 2001 (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q (file number 001-15395) for the quarter ended June 30, 2004).
	10.8.2	*		—		Amendment, dated as of July 7, 2009, to the License Agreement, by and between MSO IP Holdings, Inc. and Kmart Corporation, dated June 21, 2001, as amended.
	10.9	†		—		Split-Dollar Life Insurance Agreement, dated February 28, 2001, by and among Martha Stewart Living Omnimedia, Inc., Martha Stewart and The Martha Stewart Family Limited Partnership (incorporated by reference to Exhibit 10.17 to our Annual Report on Form 10-K (file number 001-15395) for the year ended December 31, 2000) as amended by Exhibits 10.9.1 and 10.9.2 and terminated by Exhibit 10.9.3.
	10.9.1	†		—		Amendment, dated January 28, 2002, to Split-Dollar Life Insurance Agreement, dated February 28, 2001, by and between Martha Stewart Living Omnimedia, Inc., Martha Stewart and The Martha Stewart Family Limited Partnership (incorporated by reference to Exhibit 10.14.2 to our Annual Report on Form 10-K (file number 001-15395) for the year ended December 31, 2001).
	10.9.2	†		—		Amendment, dated as of January 1, 2003, to Split-Dollar Life Insurance Agreement, dated February 28, 2001, as amended, by and among Martha Stewart Living Omnimedia, Inc., Martha Stewart and The Martha Stewart Family Limited Partnership (incorporated by reference to Exhibit 10.14.3 to our Annual Report on Form 10-K (file number 001-15395) for the year ended December 31, 2002).
	10.9.3	†*		—		Agreement, dated November 9, 2009, terminating the Split-Dollar Life Insurance Agreement dated February 28, 2001 by and among Martha Stewart Living Omnimedia, Inc., Martha Stewart and the Martha Stewart Family Limited Partnership, as amended.
	10.10			—		Amended and Restated Employment Agreement, dated as of April 1, 2009, between Martha Stewart Living Omnimedia, Inc. and Martha Stewart (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q (file number 001-15395) for the Quarter ended March 31, 2009 (“March 2009 10-Q”).
	10.11			—		Intangible Asset License Agreement, dated as of June 13, 2008, between Martha Stewart Living Omnimedia, Inc. and MS Real Estate Management Company (incorporated by reference to Exhibit 10.9 to our June 2008 10-Q), as amended by Exhibits 10.11.1 and 10.11.2.
	10.11.1	*		—		First Amendment, dated as of December, 2008, to the Intangible Asset License Agreement between MS Real Estate Management Company and Martha Stewart Living Omnimedia, Inc. dated as of June 13, 2008.
	10.11.2	*		—		Second Amendment, dated as of February 8, 2010, to the Intangible Asset License Agreement between MS Real Estate Management Company and Martha Stewart Living Omnimedia, Inc. dated as of June 13, 2008, as amended.
	10.12	†		—		Employment Agreement, dated as of March 24, 2009, between Martha Stewart Living Omnimedia, Inc. and Kelli Turner (incorporated by reference to Exhibit 10.1 to our March 2009 10-Q).
	10.13	†		—		2005 Executive Severance Pay Plan (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (file number 001-15395) filed on January 6, 2005).
	10.14	†		—		Form of Restricted Stock Award Agreement for use under the Martha Stewart Living Omnimedia, Inc. Amended and Restated 1999 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (file number 001-15395) filed on January 14, 2005).
	10.15	†		—		Registration Rights Agreement between Charles A. Koppelman and Martha Stewart Living Omnimedia, Inc. dated January 24, 2005 (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K (file number 001-15395) filed on October 21, 2005).
	10.16	†		—		Separation Agreement, dated as of April 20, 2009, between Martha Stewart Living Omnimedia, Inc. and Wenda Harris Millard (incorporated by reference to Exhibit 10.3 to our March 2009 10-Q).
	10.17			—		Warrant Registration Rights Agreement, dated as of August 11, 2006, between Martha Stewart Living Omnimedia, Inc. and Mark Burnett (incorporated by reference to Exhibit 10.3 to our September, 2006 10-Q).
	10.18	†		—		Form of Restricted Stock Unit Award Agreement under the Amended and Restated 1999 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K (file number 001-15395) filed on February 27, 2007).
	10.19	†		—		2008 Executive Severance Pay Plan (incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q (file number 001-15395) for the quarter ended September 30, 2007 (“September 2007 10-Q”)).