8-K

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                 --------------

                                    FORM 8-K

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

                         Date of Report: August 5, 2004
                 Date of Earliest Event Reported: August 3, 2004

                      MARTHA STEWART LIVING OMNIMEDIA, INC.
               (Exact Name of Registrant as Specified in Charter)


            Delaware                       001-15395            52-2187059
(State or Other Jurisdiction of    (Commission File Number)    (IRS Employer
         Incorporation)                                      Identification No.)


                               11 West 42nd Street
                               New York, NY 10036
                    (Address of Principal Executive Offices)

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

ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.

(c) Exhibit Description

The following transcript of Martha Stewart Living Omnimedia, Inc.'s August 3,
2004 earnings conference call is included as an exhibit to this report furnished
pursuant to Items 7 and 12:

Exhibit 99.1 Martha Stewart Living Omnimedia, Inc. Transcript of August 3, 2004
Earnings Conference Call.

ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On August 3, 2004, the Registrant held an earnings conference call relating to
its financial results for the second quarter of 2004. The full transcript of the
call is attached hereto as Exhibit 99.1 to this report.

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

Dated: August 5, 2004

                      MARTHA STEWART LIVING OMNIMEDIA, INC.


                         By:        /s/ James Follo
                             -----------------------------------
                              James Follo
                              Executive Vice President, Chief Financial and
                              Administrative Officer

                                Index of Exhibits

Exhibit No.                    Description
- -----------                    -----------

99.1              Martha Stewart Living Omnimedia, Inc. - Transcript of August
                  3, 2004 Earnings Conference Call.

EX-99.1

EXHIBIT 99.1

SECOND QUARTER 2004 CONFERENCE CALL TRANSCRIPT

OPERATOR

Good afternoon and welcome to the Martha Stewart Living Omnimedia second quarter
2004 earnings conference call and web cast. All participants will be in a
listen-only mode until the question-and-answer session of the call. At the
request of Martha Stewart Living Omnimedia, this call is being recorded. Anyone
with objections should disconnect at this time. At this time, it is my pleasure
to introduce Mr. James Follo, Executive Vice President and Chief Financial and
Administrative Officer of Martha Stewart Living Omnimedia. Sir, you may begin
when ready.

JAMES FOLLO - MARTHA STEWART LIVING OMNIMEDIA, INC. - EVP, CHIEF FINANCIAL AND
ADMINISTRATIVE OFFICER

Thank you. Good afternoon. And thank you for attending Martha Stewart Living
Omnimedia's second quarter 2004 earnings teleconference and web cast. Also with
me today is Sharon Patrick, our President and Chief Executive Officer. Sharon
will open today with a strategic and operational overview of the Company and I
will conclude with the financial review of the second quarter, and discuss the
outlook for the third quarter of 2004.

Before turning the conference call over to Sharon I would like to remind
everybody that our discussion today may include forward-looking statements which
can generally be identified by the use of terminology such as will and expect.
Our actual results may differ materially from those projected in the statements,
and factors that could cause such differences are discussed in our filings with
the Securities and Exchange Commission, particularly in the management
discussion and analysis sections of our periodic filing, and our earnings
release issued this morning. An archived version of this teleconference and web
cast will be available on the Company's website at www.marthastewart.com through
August 17th, 2004. And finally, this morning's press release reflects the
requirements of Regulation G and other rules affecting the use and disclosure of
non-GAAP financial measures.

During this call we will discuss the measure operating income or loss before
depreciation and amortization. Additional information relating to the measure
operating income before depreciation and amortization is contained in our press
release issued this morning, which is accessible on our website,
marthastewart.com, under the heading, "Investor Relations".

With that completed, I would now like to turn the call over to Sharon Patrick.
Sharon?

SHARON PATRICK - MARTHA STEWART LIVING OMNIMEDIA, INC. - PRESIDENT AND CEO


                                       1

Thanks Jim, and good afternoon, everyone. Thank you for joining us today. But
first things, first. It's August 3rd and I'm sure you all join with me in
wishing Martha happy birthday. Today we're also reporting out our second quarter
results which reflect a 19 million loss, due primarily to advertising
performance that is negatively affected by Martha Stewart's personal legal
circumstance. These results are generally in line with our expectations and
prior guidance.

As you will see from my remarks today, the Company remains encouraged by the
support we continue to receive from our large base of readers, viewers and
shoppers, who remain loyal to our quality product and other Martha Stewart brand
attributes, and brand loyal partners and advertisers. Their unflagging
appreciation for what we do, coupled with the continuing strength of our
financial resources, 158 million in the bank and no debt, will allow us to
manage through future losses associated with the uncertainty of Martha's legal
matters to final closure, while simultaneously investing in our future. For at
the end, of the day the Company believes that only when Martha puts
incarceration behind her, and/or has successfully completed the appeal process,
and as importantly, it is no longer the subject of chronic negative media
attention and events, will large numbers of advertisers actively return to our
media properties. Until then, we will be investing to maintain our principal
assets and will be managing our businesses with a commitment to the longer term
prospects of our Company. To the extent that complete resolution of the matter
is not in the near future the Company may need to take additional actions with
respect to its brands to improve financial performance.

There have been several important recent developments that I would now like to
review. First, the sentencing phase of Martha Stewart's trial is now behind us.
While no amount of potential incarceration is ever short enough, the sentence
imposed on Martha Stewart -- five months of incarceration and five months of
home confinement that allows up to 48 hours of work-related activity out of the
house -- is the most lenient penalty that the judge believes she could impose
under the federal sentencing guidelines. We were further heartened that Judge
Cedarbaum recognized Martha's strong public support and her lifetime of
contribution to others that we in the Company know so well. The leniency shown
Martha gave those of us in the Company a boost, as we see it as a significant
step forward towards final resolution, and the certainty that we and our
advertisers seek.

Second, the feeling of having passed through a very difficult period is what
motivated some of the Board developments during the quarter. California-based
Jeff Ubben, who led us so ably as Chairman throughout the past 14 months, knew
that this next period, as we look to resolution and recovery, will require more
time and attention. He felt that having discharged his duties to us during the
period from indictment to sentencing, and as a continuing major shareholder, he
wanted to pass the Chairmanship to someone with, not only proven capability, but
the necessary time and geographic proximity to the Company for the next phase.
Tom Siekman, east coast based, our new Chairman, was the logical and excellent
choice. Moreover, Arthur Martinez, who has given MSO the benefit of his great
business and corporate governance expertise over the past three years, decided
that with resolution on the horizon, this was a good time for him to transition
off the Board. All of us at MSO thank him for his support and wish him well.


                                       2

Having weathered a most difficult period associated with Martha's personal legal
situation, this quarter we also expanded and strengthened our Board of Directors
to better assist MSO as we move forward from here to evolve the Company, rebuild
profitability, and restore shareholder value. Specifically, we elected four
highly-qualified and capable creative and business line executives to our Board:
Rick Boyko, Managing Director of Virginia Commonwealth University Adcenter, and
former co-President of Ogilvy & Mather; Michael Goldstein, Former Chairman and
CEO of Toys "R" Us; Susan Lyne, former President of ABC Entertainment; and Wenda
Harris Millard, Chief Sales Officer of Yahoo! Inc. Last week, we added one
additional Board member, Charles Koppelman, Chairman and Chief Executive Officer
of CAK Entertainment Company, a music and entertainment business, who brings
much expertise to MSO as well. Beyond the focus we've placed on expanding and
strengthening our Board to provide MSO with additional support, guidance,
credibility and perspective, we also took recent steps to continue to evolve our
business segment and brands from expert personality to trusted brand labels with
an eye to future growth prospects, as well as bottom-line profitability.

So let's start with Publishing. As discussed on the last call, MSO unveiled a
new logo and updated design for our flagship magazine, Living, with the
September issue, which is on sale mid-August. The logo will emphasize Living,
but will continue to have Martha Stewart's name on the cover. The updated design
and the new columns that will continue to be added to Living during the next few
months will position MSL as the leader for inspirational "how-to" and
information for the home. The September issue, which is our special decorating
issue, features a wider range of decorating styles and new columns.

The updated look will be highlighted with a cover wrap on the September issue
which will feature the old logo, opening to the updated logo on newsstands.
Subscribers will receive a letter from Martha Stewart attached to their issues
announcing the editorial changes in the magazine. In addition, MSO is running a
trade campaign, "Take a new look at Living," in advertising trade magazines,
such as Ad Age and Mediaweek. The campaign will begin August 16th and will run
monthly, through November. Coupled with the Living campaign, MSO will also run
an advertising campaign for our Everyday Food publication and trade magazine on
urban buses, in subways and bus shelters. The emphasis for the trade portion of
the campaign is EDF's rapid circulation growth which has gone from a sufficient
launch in September '03 to a rate base of 750 thousand in July '04. The transit
portion of the campaign reinforces the quick, simple, and healthy recipes in
EDF.

This quarter with the July issue, we also completed the evolution of Everyday
Food to its own independent Omni-brand, eliminating "From the kitchens in Martha
Stewart Living" on the cover, and providing the magazine with its own publisher
sales veteran Anne Balaban, publisher Everyday Food, which we are announcing
today. And before moving from publishing, I would also like to announce and
congratulate Elizabeth Canady on her appointment to West Coast Associate
Publisher. Richly deserved. Everyday Food's story now turns to television for
today's second announcement. Under the Omni-business

                                       3

model, the television platform is a critical step to the evolution of Everyday
Food as its own Omni-brand.

Therefore, we are pleased to also announce that MSO and PBS presenting station
WETA in Washington, D.C. have signed a multi-year agreement that will launch
Everyday Food, a new television program on PBS stations nationwide, beginning
January 2005. Created and produced by Martha Stewart Living Television
Production, each half-hour episode of Everyday Food features five of MSO's most
talented cooks, who bring the pages of the EDF magazine to life, demonstrating
easy to make recipes, along with smart tips and kitchen techniques. Also,
beginning in January 2005 Everyday Food recipes, featuring the television
programs, will appear on pbs.org with links to the Everyday Food landing on
everydayfoodmag.com.

As we reported in May, we also adjusted Television staffing levels this quarter
to reflect the fact we have placed the Martha Stewart Living daily syndicated
show on hiatus for season 12 reducing headcount accordingly. And, to address the
original production hiatus for the 2004-2005 season, Television also announced
this quarter an agreement with the Style Network to air daily hour-long episodes
from the existing library of Martha Stewart Living, our Emmy award-winning
television program created and hosted by Martha Stewart. Launched in June, this
multi-year partnership with Style ensures a home on cable for Martha Stewart
Living, giving our loyal audiences continuing television access to Martha and
the series during the network hiatus and beyond. Moreover, the access has never
been better because Style intends to present the Best of Martha Stewart Living
in both daytime and, for the first time, primetime airings. Finally, I'm pleased
to report the weekend network half-hour show, Petkeeping with Marc Morrone,
distributed by Tribune Company, has achieved approximately 90% coverage for the
2004-2005 season and is currently enjoying solid ratings.

Now moving on to the Retail Merchandising segment, as announced on our last
call, Kmart and MSO amended terms of our long-term agreement this quarter to
better serve the best interests of both of our companies, including extending
the Martha Stewart Everyday partnership for an additional 2 years to 2010. With
respect to Martha Stewart Everyday year-to-date, Martha Stewart Everyday sales
at Kmart have decreased 6.6% on a comp-store basis year-over-year, with weakness
in Garden, offset by strength in Soft Home and Housewares. However, as we've
previously stated, principally as a result of store closings, we are paid based
on contractual guaranteed minimum amounts. With respect to Martha Stewart
Signatures, sales of the paint program with Sherwin-Williams are up 5.4%
year-to-date. The furniture program with Bernhardt launched its third collection
to dealers at high-point markets this quarter and was well received. Problems
remain, however, with the Signature flooring program with Shaw Industries with
results below expectations.

I would like to complete my presentation with some important news about our
Internet/Direct Commerce segment, where we are taking additional steps to
continue to right-size our current IDC businesses based on today's operating
realities and expected future return, to retain the Company's strong financial
position overall and to assure that

                                       4

we invest our resource in areas that offer MSO profitable return. As such by
year 2004 we will be winding down those elements of direct-to-consumer business
- -- namely, The Catalog For Living, whose metrics for 2005 and beyond no longer
maintain the plan to profitability. At this juncture our holiday catalogs will
be the last to be mailed direct to consumers. However, we will continue our now
profitable direct-to-consumers flower business, Martha's Flowers, retaining
catalog format inserts in our publications at key seasons of the year. In fact,
the floral business will be leveraged to capitalize on recent improvements in
sourcing, selection and delivery, that are finally translating nicely into happy
consumers and higher revenue.

Going forward we intend to incorporate our catalog product designs and programs
into the retail merchandising business segment. The business model of the
Merchandising group has proven over time, to be, by far, the most profitable
approach for MSO's Merchandising program, as our strategic retail partners
provide us retail outlets that produce wider audiences than direct on a much
more cost efficient basis. Our merchandising partners also take responsibility
for back-end operations including manufacturing and inventory-related risks,
further benefiting our product program and allowing the Company to do what we do
best: design and develop high-quality, beautiful, useful and affordable
products. Again, going forward the Internet/Direct segment will focus on
delivering expert "how-to" related lifestyle content to our website,
marthastewart.com; driving subscription magazine orders for our publishing
group; supporting our television shows and merchandising programs; continuing to
grow our direct-to-consumer flower business; and developing other internet-based
businesses capable of profitable returns.

Overall, we are pleased to be looking forward, and doing so with much greater
certainty than we have had over the last 27 months. Our readers, viewers,
shoppers, distribution partners, are still with us. They remain stalwart. We
appreciate our existing advertisers for sticking with us as well, and we are
focusing on our advertisers that are taking a wait-and-see approach.

Now let me turn the call over to Jim Follo, our Chief Financial and
Administrative Officer who will discuss our second quarter results and outlook
for the third quarter.

JAMES FOLLO - MARTHA STEWART LIVING OMNIMEDIA, INC. - EVP, CHIEF FINANCIAL AND
ADMINISTRATIVE OFFICER

Thank you, Sharon. Let's begin by reviewing the highlights of our second quarter
performance on a consolidated and segment-by-segment basis before concluding,
with an outlook to the third quarter.

Overall Company revenues for the second quarter of 2004 were 44 million,
compared to 65.8 million in the second quarter of 2003. Loss from operation from
the quarter was 19.3 million, compared to income from operations of 1.5 million
in the prior year's quarter. Loss from operations before depreciation and
amortization, including the amortization of non-cash stock compensation in the
quarter was 16.6 million, compared to income of 3.7

                                       5

million the prior year's quarter. And net loss for the 2004 quarter was 19.3
million, or 39 cents per share, compared to a net income of 900 thousand, or 2
cents a share in the 2003 quarter.

We continue to maintain our strong financial position as evidenced by our cash
and short term investment balance of approximately 158 million at June 30th,
2004, and we continue to be debt free. Our capital expenditures continue to be
nominal, totaling approximately half a million dollars for the 6-month period,
and will continue to be nominal for the foreseeable future. We continue to take
a capital look at our businesses and their cost structure, and make adjustments
where appropriate. Our full-time employees at June 30th were 474, which is down
from 558 at the beginning of the year. This decline -- this number will decline
further in the third quarter as a result of elimination of certain positions in
the Internet/Direct Commerce segment -- referred to earlier by Sharon.
Accordingly, our year-end 2004 headcount will be approximately 450 employees.

Now turning to Publishing. Publishing segment revenue for the second quarter was
23.7 million, compared to 39.6 million in the prior year's quarter. The
quarterly performance reflects the results of 3 issues of Martha Stewart Living
magazine, 3 issues of Everyday Food, 3 issues of Martha Stewart Weddings and 1
special-interest publication. For comparison with the 2003 quarter, we published
1 additional issue of Everyday Food, 1 additional issue of Weddings and 1 less
special-interest publication. Publishing revenues in the quarter reflect the
following: advertising pages in Martha Stewart Living magazine decreased
approximately 53% in the quarter to 147 pages according to MIN. Advertising rate
per page was also low in the quarter, primarily the result of the rate-based
reduction effective with January 2004 issue to 1.8 million -- 1.8 million per
issue.

Advertising revenue from Everyday Food decreased 2.7 million in the quarter due
to sponsorship revenues received in connection with the initial test period of
the magazine in the prior year second quarter. However, circulation revenue was
higher in the quarter due principally to higher circulation revenues from
Everyday Food, as both circulation and frequency increased in the quarter. The
increase is partially offset by lower subscription revenues from Martha Stewart
Living magazine, due principally to lower copies sold, resulting in the
reduction in the rate-base. On the cost side, overall expenses in the segment
declined, primarily due to lower production and distribution costs in Martha
Stewart Living magazine, due to lower pages printed per issue, partially offset
by increased circulation acquisition costs for Everyday Food, and one of our
special-interest publications and increased publication frequency.

Operating loss in the second quarter for the segment was 5.3 million, compared
to operating income of 9.3 million in the 2003 quarter. Operating losses before
depreciation and amortization was 9.2 million in the second quarter, compared to
9.4 million in the second quarter of 2003. In Television, revenues in the
quarter were 3.1 million, compared to 6.6 million in the 2003 quarter. The
revenue decrease is due primarily to lower license fees and advertising revenue
from the syndicated program, beginning with the new season, which commenced
September '03, and the expiration of both our HGTV and

                                       6

Canadian licensing agreements. The distribution of the syndicated program is
currently at approximately 50% of U.S. television households, reflecting the
loss of distribution of syndication immediately after the trial outcome. We
expect this distribution to remain approximately this level through the
remainder of the current season, which ends in September.

Costs in the segment for the quarter increased 300 thousand, due to the
write-off of approximately 1.5 million of deferred television production costs,
resulting from the loss of cable television distribution in the quarter,
partially offset by lower production costs for the syndicated program. In
addition, severance costs in the quarter were 500 thousand, associated with
recent downsizing of the segment. Operating loss in the 2004 quarter was 3.5
million, compared to break-even operating income in the 2003 quarter. Operating
loss before depreciation and amortization was 3.5 million in the quarter,
compared to operating income before depreciation and amortization of 400
thousand in the prior year's quarter.

For the Merchandising segment, revenues were 10.9 million, compared to 11.8
million in the prior year's quarter. The current year's quarter reflects royalty
revenue from Kmart based upon actual product sales. Same-store sales of Martha
Stewart Everyday product declined approximately 7% in the quarter. Royalties
were also impacted by Kmart store closings in 2003 and higher royalty rates for
the 2004 quarter. The revenue also reflects increased revenues from Sears Canada
and the Martha Stewart Signature program. Expenses in the segment increased 1.6
million in the quarter, due principally to higher non-recurring professional
fees associated with amending the Kmart contract.

Operating income was 5.5 million in the quarter, compared to 8 million in the
2003 quarter. Operating income before depreciation and amortization for second
quarter of 2004 was 5.5 million, compared to 8 million in the prior year's
quarter. Internet/Direct Commerce revenues in the second quarter were 6.4
million, compared to 7.8 million in the prior year's quarter. The decline in the
quarter primarily reflects lower commerce sales resulting from significant and
lower catalog circulation, partially offset by strength in our
direct-to-consumer floral business, marthasflowers.com.

Loss from operations in the quarter were 2.4 million, compared to 4.6 million in
the second quarter 2003. And loss from operation before depreciation and
amortization in the 2004 quarter was 2.2 million, compared to a loss from
operations before depreciation, amortization in the 2003 were 4.3 million. As
Sharon discussed we will be exiting the commerce portion of our Internet/Direct
Commerce segment by the end of 2004, and the last catalog will be mailed in the
fourth quarter. We expect to take charges in the third and fourth quarter
related to severance and inventory, although such charges will not in the
aggregate exceed 1 million. Our current inventory balance as of June 30th, net
of reserves, is 3.3 million.

On a go-forward basis the segment will focus on delivering content, driving
magazine orders, and continuing to grow our direct-to-consumer floral business.
Losses in the segment will decline substantially in 2005 and beyond. Expense and
time in the decline

                                       7

will be dependent on several factors, including our ability to reduce occupancy
and overhead costs previously absorbed by the segment, ability to reduce costs
of technology platform from our website, our success in growing our floral
business, and increasing advertising revenues.

Corporate overhead before depreciation and amortization was 11.3 million for the
second quarter of 2004, compared to 9.8 million in the second quarter of 2003.
The current quarter includes 1.2 million of higher compensation-related costs
related to certain retention programs, including the cash portion of a November
2003 stock option exchange program. Depreciation and amortization decreased 400
thousand to 1.6 million in the quarter, primarily the result of lower
depreciation of television studio costs, as a majority of the television studio
costs are fully depreciated at the end of 2003. Amortization of non-cash stock
compensation expense was 1 million in the second quarter of 2004, compared to
100 thousand for the second quarter of 2003. The expense in the 2004 quarter
principally relates to the amortization of the value of restricted stock units
granted in connection with a November 2003 stock option exchange program.

I'd now like to wrap up with a discussion of the outlook for the third quarter
of 2004. We are currently forecasting a loss per share of 50 cents on revenue of
35 million. The key factors contributing to the quarterly results within each
segment are as follows: for publishing, revenues are expected to be
approximately 20 million, while operating loss before depreciation and
amortization and operating loss, is expected to be approximately 9 million. The
quarterly results will reflect the following: significantly reduced advertising
revenue, principally Martha Stewart Living magazine; increased loss from
Everyday Food, due primarily to increased subscription acquisition spending; and
spending related to a media campaign aimed at supporting the brand and driving
advertising revenue. The publication schedule for the third quarter 2004 is as
follows: 3 issues of Martha Stewart Living, 2 issues of Everyday Food, 2 issues
of Kids, 1 special-interest publication, and no issues of Weddings.

Television revenue is expected to be approximately 2.8 million, while operating
loss before depreciation and amortization is expected to be 2 million. The
decline in profitability relates principally to lower license fees and
advertising revenues due to lower distribution for our syndicated show, as well
as a loss of licensing revenues from cable programming and Canadian
distribution. Merchandising revenues in the quarter are expected to be
approximately 8 million, reflecting royalties earned on product sales in the
quarter in a seasonally slow quarter. Operating income before depreciation and
amortization, and operating income, will approximate 4 million. We expect
Internet/Direct Commerce revenues of approximately 5 million in the quarter,
reflecting lower commerce sales due to reduced catalog circulation. And
operating loss before depreciation and amortization for the quarter is expected
to approximate 3 million. We expect corporate expenses to be approximately 11
million and amortization of non-cash compensation expense to be 1 million.

And finally, looking ahead to the fourth quarter of the year, we currently
expect to report substantially reduced losses compared to third quarter levels,
largely due to the

                                       8

significant amount of revenues to be recognized by our Merchandising segment, as
a result of certain minimum royalty guarantees. As in the past, we will
recognize the difference between earned royalties and minimum guaranteed levels
under our Kmart agreement with Kmart in the fourth quarter.

This concludes the formal portion of our presentation. I would now like to turn
the call over to the conference call operator for a question-and-answer portion
of the session. Thank you.

QUESTION AND ANSWER

OPERATOR

Thank you. The floor is now open for questions. If you have a question or a
comment, please press star 1 on your touch-tone telephone at this time. If at
any point, your question has been answered, you may remove yourself from the
queue by pressing the pound key. Questions will be taken in the order they are
received. We do ask that while you're posing your question, that you pick up
your handset to ensure proper sound quality. Please hold the line while we poll
for questions.

Thank you. Our first question is coming from Douglas Arthur of Morgan Stanley.

DOUGLAS ARTHUR - MORGAN STANLEY - ANALYST

Yeah. Three questions. Sharon, on the 1.8 million rate-base for Living, do you
feel based on renewals, et cetera, that that is solid for the rest of the year?
The second question is: Jim, I'm wondering if you can, sort of, on a broad
range, talk about the revenue impact going forward of the shutdown of catalog
and then any forward comment on what your cash position could look like at
year-end? Thanks.

JAMES FOLLO - MARTHA STEWART LIVING OMNIMEDIA, INC. - EVP, CHIEF FINANCIAL AND
ADMINISTRATIVE OFFICER

So on the rate-base issue, we do feel confident at our renewal rates and new
customer acquisition rates are all holding on plan, and we feel comfortable at
1.8 and we feel that's the right place to be at this time. The revenue impact on
the catalog business, we look at that business on a go-forward basis. Right now
our floral business and some small advertising revenue, we kind of think of,
really, in '05, maybe a 5 million, or maybe a 7 million dollar business. As far
as losses in that segment, we expect those losses to come down dramatically. We
expect the loss in '04 of somewhere around 10 million in the segment. We think
we'll make substantial progress in moving that loss closer to probably, let's
say, 5 million in -- looking out, some of the costs in that segment which were
really allocated facility, and some related costs it may take us some time to
absorb or reduce. So, you know, a larger movement in that loss will be dependant
upon some factors that could take some time. I think your final question had to
do with cash balances. We're likely looking at a cash use in the third quarter
of about 20 million, and a comparable

                                       9

amount in the fourth quarter. Remember, the fourth quarter, while I said the
loss will be dramatically lower as a result of a big revenue catch up we'll book
in the fourth quarter related to our Merchandising business, the payment of that
amount will not be paid until early 2005, so the actual reconciling cash to
earned results has got to impact a substantial receivable at year-end from
Kmart.

DOUGLAS ARTHUR - MORGAN STANLEY - ANALYST

Yeah, and I would assume that the reason for the big drop in receivables between
year-end '03 and the 6/30/04 is the question on Kmart.

JAMES FOLLO - MARTHA STEWART LIVING OMNIMEDIA, INC. - EVP, CHIEF FINANCIAL AND
ADMINISTRATIVE OFFICER

That's a major portion. Obviously, advertising revenue is a smaller portion.

DOUGLAS ARTHUR - MORGAN STANLEY - ANALYST

Okay. Thank you.

OPERATOR

Thank you. Our next question is coming from Alissa Goldwasser of William Blair &
Company.

ALISSA GOLDWASSER - WILLIAM BLAIR & COMPANY - ANALYST

Hi. Can you walk us through the fourth quarter publication schedule and, to the
extent that you know it, the 2005 publication schedule?

JAMES FOLLO - MARTHA STEWART LIVING OMNIMEDIA, INC. - EVP, CHIEF FINANCIAL AND
ADMINISTRATIVE OFFICER

2005 publication schedule is a little bit early to discuss, but let me walk you
through the '04 schedule. Obviously, 3 issues of Martha Stewart Living, 2 issues
of Weddings, we'll have 1 issue of Kids, we'll have 2 issues of Everyday Food.
That will be the schedule for the fourth quarter of '04.

ALISSA GOLDWASSER - WILLIAM BLAIR & COMPANY - ANALYST

Can you also talk about trends in circulation revenue per copy of Martha Stewart
Living? It was my understanding you had some fairly low-revenue, low-profit
subscribers that you've now gotten rid of. Are we seeing still a downward trend
in circulation revenue per copy? And if so, when do we expect to hit the bottom
there?


                                       10

JAMES FOLLO - MARTHA STEWART LIVING OMNIMEDIA, INC. - EVP, CHIEF FINANCIAL AND
ADMINISTRATIVE OFFICER

I would say, you know, as we start filtering out of a lot of very low revenue,
we will start seeing an increase in net revenue per copy. In fact, in the fourth
- -- I'm sorry, in the second quarter, our net revenue per subscription copy was
up mid single-digits, and we expect that trend to continue, and possibly
accelerate, through the remainder of the year.

ALISSA GOLDWASSER - WILLIAM BLAIR & COMPANY - ANALYST

Great. Thank you.

OPERATOR

Thank you. Our next question is coming from Dennis McAlpine of McAlpine
Associates.

DENNIS MCALPINE - MCALPINE ASSOCIATES - ANALYST

Thank you, and good afternoon. While we're on Martha Stewart Living, would you
talk about what you're seeing in circulation revenue in total and the same for
ad revenue given the ad page decline? And then secondly, on Kmart, when you
talked about the same-store revenues for the quarter, is that the same as your
same-store, same-product or are we back on an equal basis now that doesn't
matter? And then lastly, could you talk about the status of the SEC suit, and
where that stands and is apt to move?

JAMES FOLLO - MARTHA STEWART LIVING OMNIMEDIA, INC. - EVP, CHIEF FINANCIAL AND
ADMINISTRATIVE OFFICER

Let me deal with that last one first. As far as an SEC suit, I'm not sure what
you're referring to. There are matters related to Martha Stewart personally,
related to the SEC, that have nothing to do with the Company. Your first -- let
me deal with the Kmart question. We have essential similar product line, so the
same-store sale is equivalent to the same-product sales. So that number that
Sharon quoted is a good comparable number year-over-year. You'd asked me about
certain revenue numbers for, I think, Martha Stewart Living. Our pages were down
about 53%. You know that we reduced our rate-base from 2.3 to about 1.8, which
is about a 20% decline of rate-base, so total revenue decline for magazine in
the quarter was about 70%. Again, most of it being page-related, about 50. And a
20 being rate-base related. As far as circulation trends go, again, our
circulation, our rate-base was down, so our circulation revenue for Martha
Stewart Living was about down in line with our rate-base reduction.

DENNIS MCALPINE - MCALPINE ASSOCIATES - ANALYST

Okay. And the -- as far as the newsstand sales, any change in that? Has that
stabilized now at this level?


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JAMES FOLLO - MARTHA STEWART LIVING OMNIMEDIA, INC. - EVP, CHIEF FINANCIAL AND
ADMINISTRATIVE OFFICER

We will be reporting ABC circulation over the next 30 days or so. For the
6-month period, our single-copy sales of the product will be down about 9%. Now,
overall industry, I believe, is also experiencing softness during that time, so
I think it's probably a little too early to tell whether, you know, whether any
of that is sentencing-related, or whether it's just an industry trend. But we
understand that the Woman's Service Group is all under a little bit of pressure
during that period.

DENNIS MCALPINE - MCALPINE ASSOCIATES - ANALYST

Okay. And could you just remind us what the minimum guarantee you're going to
take on the Kmart will be?

JAMES FOLLO - MARTHA STEWART LIVING OMNIMEDIA, INC. - EVP, CHIEF FINANCIAL AND
ADMINISTRATIVE OFFICER

The minimum guarantee under the Kmart agreement is approximately 49 million, and
there's an element in there -- it should be about 49 million. I'm sorry.

DENNIS MCALPINE - MCALPINE ASSOCIATES - ANALYST

And your reference, I'm assuming what you're also saying is that the fourth
quarter will be a loss rather than a profit?

JAMES FOLLO - MARTHA STEWART LIVING OMNIMEDIA, INC. - EVP, CHIEF FINANCIAL AND
ADMINISTRATIVE OFFICER

Without getting into any more detail than that, I believe we will be reporting a
loss in the fourth quarter, yes.

OPERATOR

Thank you. Our next question is coming from Michael Meltz of Bear Stearns.

MICHAEL MELTZ - BEAR STEARNS - ANALYST

Hi. Jim, can you quantify the impact of the rate-based reduction on EBITDA in
Q2? Secondly can you give a little bit more clarity on that cable write-down in
the quarter? And third question, now that legal costs have subsided a bit and
the real estate location reduced, what's a good run-rate for corporate expense
going forward? Is what it you -- that 11 million you talked about for Q3? Thank
you.

JAMES FOLLO - MARTHA STEWART LIVING OMNIMEDIA, INC. - EVP, CHIEF FINANCIAL AND
ADMINISTRATIVE OFFICER


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Let me work backwards. As far as a run-rate, I think 11 million is a large
run-rate, and there are certain elements within there related to retention that
will start working their way out at the end of this year. So we expect that
corporate expenses will really start to moderate and decline from this point
forward. Hard for me to be precise, but I would expect that number on a run-rate
basis will be certainly below 10 million. We have not experienced and will have
- -- we have not experienced any benefits on the real estate side. That often
takes some time and you're essentially tied to the market. We're not expecting
that to be a major variant to the business, but could it be 1 to 2 million of
potential savings, depending upon the market. You asked a question about
rate-base, and what the impacts are. The circulation that we've, kind of,
essentially given up, walked away from, and going down to, is circulation of
about 1.9 million on a rate-base of 1.8 was very low remit revenue rate-base. On
the revenue line, it's relatively small. On the cost side, you can, you know,
going from Q3 to 1.8 you're giving up, obviously, printing 500 thousand copies,
that's somewhere, you know, on an average, maybe, of about -- in a quarter about
50 a copy, but more importantly what it does, it allows us to avoid some very
costly customer circulation acquisition as well. So putting a precise -- you can
certainly quantify the production savings based upon the numbers I've laid out,
but the true savings is really avoidance of having to pay some very expensive
customer acquisition costs. I'm sorry, I think you asked, I'm sorry, one final
you asked was on TV write-down. The accounting rules for -- the accounting rules
for television production costs is you defer costs in your balance sheet and you
match them against future revenues. We've had a contract -- cable licensing
contract that will terminate earlier than we had expected, in September, and
it's caused to us re-evaluate future projected revenues. We accordingly adjusted
our deferred television production costs asset on our balance sheet, we've
written down in the quarter by 1.5 million, and that's a non-recurring cost.

MICHAEL MELTZ - BEAR STEARNS - ANALYST

Great. Thank you.

OPERATOR

Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a
question please press star, 1 on your touch-tone phone. Please hold as we poll
for questions. Thank you. There appear to be no further questions at this time.
Ladies and gentlemen, thank you for your participation. This concludes today's
teleconference. Please disconnect your lines and enjoy your day.


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