Friday, October 28, 2005
KISS OF DEBT: The stock deal reality TV guru Mark Burnett got to produce "The Apprentice: Martha Stewart" is sinking along with the show's ratings. His paper profits have plunged 79% - from $62.2M in February to $13.4M.
By PAUL THARP
The New York Post
Reality-television king Mark Burnett may have punched the wrong dance card with Martha Stewart — and could see a possible $62.2 million jackpot go up in smoke. Stewart's company yesterday dropped an earnings bomb on Wall Street, sending its shares tumbling as much as 16 percent in a vicious selloff. The slide started wiping out Burnett's paper fortune — contained in a stock deal based upon the TV show "The Apprentice: Martha Stewart" and the stock price — signaling that the Domestic Diva's comeback is quickly deflating.
In its latest quarter, Martha Stewart Living Omnimedia said its losses were worse than anticipated, due largely to $10.8 million it had to hand over to Burnett as one of the first big payments in his deal to produce her "Apprentice" TV show. The show debuted last month to critics' pans and a ratings flop.
Instead of taking an upfront cash deal to produce and hype the TV show, Burnett picked a Hollywood-styled back-end deal that gave him as much as 5 percent of the whole company. The deal came in the form of a warrant allowing him to buy 2.5 million shares at $12.59 each over seven years. And just months after he signed his deal in late 2004, the company's stock soared to new high of $37.45, giving Burnett a paper profit of $62.15 million.
But today, that paper profit stands at just $13.4 million due to the sliding stock, which fell $3.23, or 15.3 percent, to $17.97. Burnett's deal will be worthless if the stock falls below $12.59. The company said Martha Stewart Living magazine's ad pages soared 48 percent and the publishing group was doing well, but their gains were wiped out by the perks it had to pay to Burnett. Stewart herself is said to get $100,000 per episode of the show, if it doesn't get canceled.
The company also projected fourth-quarter earnings below Wall Street expectations and acknowledged disappointing ratings for its other TV show, a syndicated TV talk and cooking show called "Martha."
For the three months ended Sept. 30, the company lost $26.07 million, or 51 cents per share, vs. a loss of $14.97 million, or 30 cents per share, a year earlier. Sales rose 5.7 percent to $40.85 million from $38.65 million.
Stuart's Everyday Food magazine enjoyed a 21 percent increase in advertising pages, and the company expects ad growth to double by next year. Its TV revenue was $3.4 million, up from $2.2 million a year ago period. Merchandising sales were flat, inching higher to $8.3 million from $8.0 million due mostly to Sears Canada payments.
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Posted by MITCH TV at 5:07 PM