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The Comeback That Wasn’t

Stewart and executive chairman Charles Koppelman in 2009.  

Koppelman understood the needs of artists and celebrities. He told Stewart just how misguided he thought the de-Martha-ing strategy was. She was grateful to find someone who understood how underappreciated she and her brand were. It was a strange merger of sensibilities: The doyenne of baking and fresh linens was aligning herself with a cigar-smoking macher of business deals and pop-music hits (Vanilla Ice, Wilson Phillips) whom she had only just met. But with striking speed, Koppelman, who declined to comment on the record for this article, became Stewart’s confidant.

Stewart recommended Koppelman to the board twice. At first, in June 2004, the board voted not to appoint him, out of concern that he would be a mouthpiece for Stewart, and because of his reputation from his time in the music industry. Off the Charts, Bruce Haring’s exposé of the industry in the nineties, depicts Koppelman as a spendthrift who chased hits at the expense of building artists’ careers. But one month later, after agreeing to go to prison, Stewart again asked that Koppelman be named to the board. This time, the board acquiesced. According to several sources, Arthur ­Martinez, the board’s deeply experienced lead director who was former CEO of Sears, resigned the same day in protest.

The new, softer Martha Stewart who emerged from prison allowed microwave ovens to be referred to in her magazines for the first time. She named one of her French bulldogs Francesca, after a fellow convict. She announced plans to do a TV show about rehabilitating ­errant women while they rehabilitated a house; a fixer-upper was bought in Norwalk.

That show never happened (among other reasons, Stewart’s probation forbade her to ­associate with felons), but otherwise, Martha Stewart Living Omnimedia became a deal-making machine. Besides the Burnett TV deal, there were a series of how-to DVDs to be distributed by ­Warner Home Video; an all-Martha-all-the-time satellite-radio channel on Sirius XM; a business book called The Martha Rules; and a licensing agreement under which KB Home would develop whole communities of Martha-designed and –branded houses. MSLO made plans for a magazine targeted at younger readers called ­Blueprint, which would launch in 2006.

This burst of activity was a strategic plan to save MSLO from extinction, but it soon seemed to some observers within the company as if Stewart’s attitude had less to do with business prudence than with an urgent desire to make up for the years she had lost. “There were things she was more willing to consider” than previously, says a former board member. Some of the deals were misconceived. Her Apprentice was “a debacle,” in the words of a television executive close to the deal. “Mark Burnett was all about controversy,” says the executive. “He wanted to say the word jail. He wanted her to show the house-arrest bracelet. Frankly, Martha’s about making apple pie.” In 2005, the company lost $76 million.

By the end of that year, it was evident that the humility Stewart had acquired during her legal troubles was not so easy to maintain. In interviews, she stopped talking about the poncho and Francesca the convict and jailhouse yoga and became increasingly confident. In an article in Fortune, she declared her big takeaway from the ordeal to have been: “I really cannot be destroyed.”

Stewart was supported by a tight new circle of advisers. Sharon Patrick, the former McKinsey consultant who had been the co-architect of her business empire, was gone, having served as CEO after Stewart’s indictment until being replaced seventeen months later by Susan Lyne. Patrick lacked a chief executive’s temperament, in the view of the board, but her absence was quickly felt: Because of her feisty personality and long relationship with Stewart, Patrick was seen as having a unique ability to stand up to her.

Koppelman became chairman in 2005, and he began to take an increasingly hands-on role at the company. He was a canny, Brooklyn-born businessman who, while still in college, had managed to land a record deal for his singing trio the Ivy Three. Though some of the deals he would make for the company were invaluable—Sirius XM and Home Depot, to name two—he could be an irritant to the rest of the corporate leadership, partly because of his own deal with MSLO (when he first joined the board, he negotiated a paid consulting arrangement for himself) and partly for more stylistic reasons (he had the computer removed from his office to make room for a TV). Koppelman was also viewed as enabling Stewart’s self-regard as much as tending to the company’s well-being. “He told her the stock should be at $30,” an executive recalls. “I asked him, ‘What’s your math?’ He’d call me negative.”