Can Martha turn her
businesses around?

The company says it expects to see advertisers return to the company’s magazines now that Martha the citizen and Martha the brand are well on their way to full rehabilitation.

Much of the optimism surrounding the rebirth of her company centers on Stewart’s return to television — most visibly as the star of her own version of “The Apprentice,” which is set to air on NBC. (MSNBC is a Microsoft-NBC joint venture.)

“I don't know how you put a price on the ability to reach 15 to 16 million people a week with a show about your company,” Lyne, the CEO, told CNBC last week.

While the publicity may be priceless, it remains to be seen how much of the profits from that show, if it succeeds, will flow to Martha Stewart Omnimedia. Television has never been a big revenue generator for the company: Even in its best year, television revenues of $32 million only made up roughly 10 percent of the company’s business. (TV revenues fell to $1 million last year.) Even if the prime time show is a hit, it won’t bring in enough to justify the current optimism, according to analysts.

“I think the TV show has a great potential to turn around her image, and advertisers will come back to the magazine once her image has been rehabilitated,” said Gary McDaniel, a media industry analyst at Standard & Poor's. “But I don't think that they can generate enough ad sales to support the stock price.”

For the time being, in fact, cash has been flowing out of the company in preparation for Stewart’s television revival. Last September, the company signed a deal with reality TV guru Mark Burnett that included a consulting fee, payable as a warrant to buy up to 2.5 million shares of company stock at an exercise price of $12.59 per share. (Though Burnett can’t exercise the warrant until various “milestones”  related to the new program are met, at the current stock price the warrant is worth about $50 million.) Burnett reportedly will own the rights to the prime-time show, with the company owning the syndicated daytime show.

Regardless of the outlook for the company’s stock, Stewart won’t have to worry about her personal fortunes, thanks to the new employment contract she negotiated before checking in to prison last fall. 

On top of her widely reported $900,000 a year salary, Stewart will get a bonus of at least $450,000 and as much as $1.35 million is all goes well.

Then she gets a $200,000 “talent fee” for appearing on her shows. She’s also entitled to at least $500,000 for her appearances on each season of the new prime-time show plus 10 percent of any rerun revenues. She’s also guaranteed a “location rental” fee of between $500,000 and $750,000 for the use of her homes during the filming of her TV shows.

And in case she gets low on pocket money, Stewart will be paid a $100,000 “non-accountable” expense account along with free car and driver seven days a week.

Separately, Stewart has asked her company to reimburse her for $3.7 million in legal fees. (The company has said an outside expert is reviewing the claim.)

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