##### Table of Contents





UNITED STATES 
    SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
  Form 10-K
  x

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    fromto   Commission file number
    001-15395
  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.)11 West 42nd Street, New York, New York(Address of Principal Executive Offices)

10036(Zip Code)   Registrants telephone number,
    including area code:
    (212) 827-8000
  Securities Registered Pursuant
    to Section 12(b) of the Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredClass 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 x
  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 x
  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 x 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.o
  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 the
    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 x
    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 x
  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, 2008,
    was $184,832,242.*
  *Excludes 2,888,163 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, 2008. 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.
  Number of Shares Outstanding As
    of March 10, 2009
 28,148,482 shares of
    Class A Common Stock
 26,690,125 shares of
    Class B Common Stock
  Documents Incorporated by
    Reference.
 Portions of Martha Stewart Living
    Omnimedia, Inc.s Proxy Statement for
 Its 2009 Annual Meeting of
    Stockholders are Incorporated
 by Reference into Part III of
    This Report.




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##### 





TABLE OF
    CONTENTS
  PART IItem 1.

Business


3Overview


3History


4Publishing


4Merchandising


6Internet


9Broadcasting


10Intellectual Property


12Available Information


12Item 1A.

Risk Factors


12Item 1B.

Unresolved Staff Comments


20Item 2.

Properties


20Item 3.

Legal Proceedings


21Item 4.

Submission of Matters to a Vote of Security
    Holders


21PART IIItem 5.

Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


21Item 6.

Selected Financial Data


24Item 7.

Managements Discussion and Analysis of
    Financial Condition and Results of Operations


26Item 7A.

Quantitative and Qualitative Disclosure About
    Market Risk


45Item 8.

Financial Statements and Supplementary Data


46Item 9.

Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


46Item 9A.

Controls and Procedures


47Item 9B.

Other Information


49PART IIIItem 10.

Directors, Executive Officers and Corporate
    Governance


49Item 11.

Executive Compensation


49Item 12.

Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


49Item 13.

Certain Relationships and Related Transactions,
    and Director Independence


51Item 14.

Principal Accountant Fees and Services


51PART IVItem 15.

Exhibits and Financial Statement Schedules


52Signatures


57Index to Consolidated Financial Statements,
    Financial Statement Schedules and Other Financial
    Information


F-1Report of Independent Registered Public
    Accounting Firm


F-2Consolidated Statements of Operations for the
    years ended December 31, 2008, 2007 and 2006


F-3Consolidated Balance Sheets at December 31,
    2008 and 2007


F-4Consolidated Statements of Shareholders
    Equity for the years ended December 31, 2008, 2007 and
    2006


F-5Consolidated Statements of Cash Flows for the
    years ended December 31, 2008, 2007 and 2006


F-6Notes to Consolidated Financial Statements


F-7Financial Statement Schedule: II 
    Valuation and Qualifying Accounts for the years ended
    December 31, 2008, 2007 and 2006


F-33Exhibit Index


E-1EX-10.11.1: FIRST AMENDMENT, TO THE EMPLOYMENT AGREEMENT WITH MARTHA STEWARTEX-10.46: DIRECTOR DEFERRAL PLANEX-10.47: NON-EMPLOYEE DIRECTOR STOCK AND OPTION COMPENSATION PLAN DEFERRAL ELECTION FORMEX-21: LIST OF SUBSIDIARIESEX-23.1: CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32: CERTIFICATION   2




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Form 10-K,
  FORWARD-LOOKING
    STATEMENTS
  Form 10-K, Form 10-K Form 10-K.
 PART I Item 1.Business. OVERVIEW     
    Increase advertising on our media platforms, including
    publishing, broadcasting and online, through cross-platform,
    omnimedia initiatives;
    Leverage our brands through merchandising relationships; and
    Create, launch
    and/or
    acquire new brands   
    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) 3




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HISTORY  Entertaining Martha Stewart Living editor-in-chief. Living Martha by Mail
  BUSINESS
    SEGMENTS
   PUBLISHING    Magazines
  Martha Stewart Living. Martha Stewart Living Martha
    Stewart Living Martha Stewart Living
  Martha Stewart Weddings. Martha
    Stewart Weddings Martha Stewart Weddings Martha Stewart
    Weddings
  Everyday Food. Everyday Food Everyday
    Food
  Body + Soul. Body + Soul Dr. Andrew Weils Self Healing
 4




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##### Table of Contents



Body + Soul Body + Soul
  Blueprint: Design Your Life. Blueprint: Design Your Life ages 25-39, Blueprint
  Magazine Summary
    2007

2007 Rate

2008

2008 Rate

2009 RateTitle

Frequency

Base *

Frequency

Base *

Base *Martha Stewart Living


12


1,950,000


12


2,000,000

2,025,000Martha Stewart Weddings


5
**

N/A ***


5
**

N/A ***

N/A ***Everyday Food


10


875,000


10


900,000

1,000,000Body + Soul


8


450,000


10


550,000

600,000  *
    
    Rate base increases are effective
    with the January issues which typically are on sale in December
    of the prior fiscal year.**
    
    Includes one special issue of
    Martha Stewart Weddings***
    
    Does not have a stated rate base.  Special Interest Publications. Good Things for
    Kids, Outdoor Living, Good Things for the Healthy Home, Handmade
    Holiday Crafts, Holiday Entertaining Body +
    Soul
  Magazine Production, Distribution and
    Fulfillment. Martha
    Stewart Living
 5




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Books
    Martha Stewarts
    Cookies and Martha Stewarts Cooking School The New York Times
  Emeril at the Grill
  Competition
  Martha Stewart Living Everyday Food Martha Stewart Weddings Body + Soul
  Seasonality
  Martha
    Stewart Weddings
 MERCHANDISING  and/or and/or
 6




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Select
    Licensed Retail Partnerships
  Martha
    Stewart Everyday at Kmart and Sears Canada
  Martha Stewart Everyday
  Martha
    Stewart Everyday
  Martha Stewart Everyday
  Martha
    Stewart Collection at Macys
  Martha Stewart Collection Martha Stewart Collection trim-a-tree Martha Stewart Collection
  Martha
    Stewart Flowers with 1-800-Flowers
  same-day
  Martha
    Stewart at Costco
    Digital
    Photography Products
   7




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Select
    Licensed Martha Stewart Manufacturing Partnerships
  Martha
    Stewart Crafts
  Martha Stewart Crafts
  Martha
    Stewart Furniture with Bernhardt
    KB Home
    /Martha Stewart Homes
    Select
    Licensed Emeril Lagasse Manufacturing Partnerships
    Emerilware
    by All-Clad
  Emerilware
  Emerilware
    by T-Fal
  Emerilware
 8




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Emerils
    Original with B&G Foods
  Emerils Original
  Competition
    Seasonality
   INTERNET  marthastewart.com Martha Stewart
    Flowers
  Martha By Mail
  marthastewart.com
  marthastewart.com
 9




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##### Table of Contents



Martha
    Stewart Flowers
  marthasflowers.com marthastewartflowers.com same-day Martha Stewart
    Flowers
  WeddingWire
    pingg
  marthastewart.com
  Competition
  marthastewart.com,
  Seasonality
  marthastewart.com
 BROADCASTING   10




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The Martha Stewart Show The Martha Stewart Show Living The Martha Stewart Show
  The Martha
    Stewart Show one-day Martha Stewart Crafts Living
  video-on-demand Martha Stewart On Demand
  Martha Stewart Living Radio Whatever Martha! Living
  Everyday Food half-hour The
    Martha Stewart Show, Everyday Food Everyday Baking from Everyday
    Food
  Emeril Green Essence of Emeril Emeril Live
  Martha Stewart Living Radio
  Competition
  and/or
 11




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INTELLECTUAL
    PROPERTY  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 Bam! Form 10-K.
 AVAILABLE
    INFORMATION  www.marthastewart.com www.marthastewart.com. Form 10-K, Form 10-Q Form 8-K marthastewart.com
 Item 1A.Risk
    Factors   12




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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.
        The crisis in the financial markets and sustained weakening
    of the economy could significantly impact our business,
    financial condition, results of operations and cash flows, and
    could adversely affect the value of our intellectual property
    assets, hamper our ability to refinance our existing debt or
    raise additional funds.
       13




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Our Merchandising business and licensing programs may
    continue to suffer from downturns in the health and stability of
    the general economy and housing market, and their adverse impact
    on our consumers and business relationships.
    Our business is largely dependent on advertising revenues in
    our publications, online operations and broadcasts. 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 face significant competition for advertising and consumer
    demand.
   14




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Acquiring or developing additional brands or businesses, and
    integrating acquired assets, poses inherent financial and other
    risks and challenges.
        Our Merchandising business has relied heavily on revenue from
    a single source, the loss of revenue from which has hurt and may
    continue to hurt our profitability.
    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.
     15




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If The Martha Stewart Showfails 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 would be adversely
    affected. We also anticipate deriving value from
    Mr. Lagasses television shows, the popularity of
    which cannot be assured.
    Failure of our television programming to maintain a
    sufficient audience
  The Martha Stewart Show one-hour
    Adverse trends in the television business generally
   16




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We have placed emphasis on building an
    advertising-revenue-based website, dependent on high levels of
    consumer traffic and resulting page views. Failure to fulfill
    these undertakings would adversely affect our brand and business
    prospects.
  marthastewart.com
  
    significantly increase our online traffic and advertising
    revenue;
    attract and retain a base of frequent visitors to our website;
    expand the content, products and tools we offer over 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 new product features to market in a timely manner.    If we are unable to predict, respond to and influence trends
    in what the public finds appealing, our business will be
    adversely affected.
    New product launches may reduce our earnings or generate
    losses.
   17




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Blueprint
  Our principal Publishing vendors are consolidating and this
    may adversely affect our business and operations.
    
    decreased competition, which may lead to increased prices;
    interruptions and delays in services provided by such vendors;
    and
    greater dependence on certain vendors.  We may be adversely affected by fluctuations in paper and
    postage costs.
      We may face increased costs for distribution of our magazines
    to newsstands and bookstores.
    We may be adversely affected by a continued weakening of
    newsstand sales.
   18




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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.
    Martha Stewart controls our company through her stock
    ownership, enabling her to elect who sits on our board of
    directors, and potentially to block matters requiring
    stockholder approval, including any potential changes of
    control.
    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.
    A loss of the services of other key personnel could have a
    material adverse effect on our business.
   19




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We operate in four highly competitive businesses: Publishing,
    Merchandising, Internet and Broadcasting each of which subjects
    us to competitive pressures and other uncertainties.
  Form 10-K
 Item 1B.Unresolved
    Staff Comments.   Item 2.Properties.    Approximate AreaLocation

Use

in Square Feet601 West
    26th Street

    
    New York, NY

Product design facilities, photography studio, Merchandising and
    Internet offices, test kitchens, and prop storage


206,61411 West
    42nd

    Street 
    New York, NY

Principal executive and administrative offices; publishing
    offices; and sales offices


92,649226 West
    26th Street

    
    New York, NY

Executive and administrative office for television production


22,050221 West
    26th Street

    
    New York, NY

Television production facilities


25,80042 Pleasant Street Watertown, MA

Publishing office for Body & Soul Group


7,860Satellite Sales Offices in MI, IL & CA

Advertising sales offices


8,359     Form 10-K.
   20




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Item 3.Legal
    Proceedings  Datatern, Inc. v.
    Bank of America Corp. et al. (No. 5-08CV-70).
   Item 4.Submission
    of Matters to a Vote of Security Holders.   PART II Item 5.Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities.  Market
    for the Common Stock
    Q1


Q2


Q3


Q4


Q1


Q2


Q3


Q42007


2007


2007


2007


2008


2008


2008


2008High Sales Price

$
22.50


$
19.50


$
17.27


$
13.96


$
9.43


$
9.49


$
9.99


$
8.70Low Sales Price

$
16.70


$
16.65


$
10.80


$
8.75


$
5.22


$
7.13


$
5.63


$
2.51     Dividends
    Form 10-K.
 21




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Recent
    Sales of Unregistered Securities and Use of Proceeds
    Issuer
    Purchases of Equity Securities
    Maximum Number (orTotal Number of



Approximate DollarShares (or Units)



Value) of Shares (orTotal Number of







Purchased as Part of



Units) that May Yet BeShares (or Units)



Average Price Paid



Publicly Announced



Purchased under thePeriod(1)


Purchased



per Share (or Unit)



Plans or Programs



Plans or ProgramsOctober 2008



1,806



$
6.04




Not applicable




Not applicableNovember 2008



3,665



$
3.63




Not applicable




Not applicableDecember 2008



9,421



$
3.02




Not applicable




Not applicableTotal for the quarter ended December 31, 2008



14,892



$
3.99   (1)
    Represents shares withheld by, or delivered to us pursuant to
    provisions in agreements with recipients of restricted stock
    granted under our stock incentive plans allowing us to withhold,
    or the recipient to deliver to us, the number of shares having
    the fair value equal to tax withholding due. 22




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Notwithstanding anything to the contrary set forth in any of
    our filings under the Securities Act of 1933, as amended, or the
    Securities Exchange Act of 1934, as amended, that might
    incorporate Securities and Exchange Commission filings, in whole
    or in part, the following performance graph shall not be deemed
    to be incorporated by reference into any such filings.
  PERFORMANCE
    GRAPH
    COMPARE CUMULATIVE TOTAL
    RETURN
 AMONG MARTHA STEWART LIVING
    OMNIMEDIA, INC.,
 S&P COMPOSITE INDEX AND SIC
    CODE INDEX
  
    The Publishing Index
    consists of companies that are primarily publishers of
    periodicals, although many also conduct other businesses,
    including owning and operating television stations and cable
    networks, and is weighted according to market capitalization of
    the companies in the index. The hypothetical investment assumes
    investment in a portfolio of equity securities that mirror the
    composition of the Publishing Index.
 23




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Item 6.Selected
    Financial Data.  SELECTED
    FINANCIAL DATA
 Years ended December 31,
 (in thousands except per share data)
  2008


2007


2006


2005


2004INCOME STATEMENT DATAREVENUESPublishing

$
163,540


$
183,727


$
156,559


$
125,765


$
95,960Merchandising


57,866



84,711



69,504



58,819



53,386Internet


15,576



19,189



15,775



11,258



27,512Broadcasting


47,328



40,263



46,503



16,591



10,580Total revenues


284,310



327,890



288,341



212,433



187,438Operating income (loss)


(10,857)



7,714



(2,833)



(78,311)



(60,004)Income (loss) from continuing operations


(10,857)



10,289



(16,250)



(75,295)



(59,073)Loss from discontinued operations


-



-



(745)



(494)



(526)Net income (loss)

$
(15,665)


$
10,289


$
(16,995)


$
(75,789)


$
(59,599)PER SHARE DATAEarnings/(loss) per share:Basic and diluted  Income (loss) from continuing
    operations

$
(0.29)


$
0.20


$
(0.32)


$
(1.48)


$
(1.19)Basic and diluted  Loss from discontinued operations


-



-



(0.01)



(0.01)



(0.01)Basic and diluted  Net income (loss)

$
(0.29)


$
0.20


$
(0.33)


$
(1.49)


$
(1.20)Weighted average common shares outstanding:Basic


53,360



52,449



51,312



50,991



49,712Diluted


53,360



52,696



51,312



50,991



49,712Dividends per common share

$
-


$
-


$
0.50


$
-


$
-FINANCIAL POSITIONCash and cash equivalents

$
50,204


$
30,536


$
28,528


$
20,249


$
104,647Short-term investments


9,915



26,745



35,321



83,788



35,309Total assets


261,285



255,267



228,047



253,828



264,678Long-term obligations


19,500



-



-



-



-Shareholders equity


150,995



155,529



130,957



160,631



187,628OTHER FINANCIAL DATACash flow provided by (used in) operating activities

$
41,570


$
11,735


$
(5,711)


$
(30,349)


$
(22,226)Cash flow provided by (used in) investing activities


(38,856)



(6,606)



40,125



(58,300)



(39,756)Cash flow provided by (used in) financing activities


16,954



(3,121)



(26,135)



4,251



1,063  24




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NOTES TO
    SELECTED FINANCIAL DATA
  Earnings
    from continuing operations
  2008
  2007 The Martha Stewart Show
  2006 The Martha Stewart Show In re Martha Stewart Living Omnimedia Securities
    Litigation
  2005 The Martha Stewart
    Show
  2004
 25




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Item 7.Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  EXECUTIVE
    SUMMARY
  Blueprint
  Body + Soul Form 10-K.
    Media.
  Blueprint
  Publishing. Martha
    Stewart Living Martha Stewart Weddings Everyday
    Food Body + Soul
  Blueprint Blueprint
 26




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Body + Soul
  Internet. marthastewart.com Martha
    Stewart Flowers
  marthastewart.com
  Broadcasting. The Martha Stewart Show Everyday
    Food Everyday
    Baking from Everyday Food Martha Stewart Living
    Radio Essence of Emeril Emeril Live!
  The Martha Stewart
    Show The Martha Stewart Show The Martha Stewart Show
  Everyday Food Everyday Baking
  Merchandising.
   27




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Martha Stewart Collection Stewart-inspired
  Martha Stewart Collection 1-800-Flowers.com
    1/31/02


1/31/03


1/31/04


1/31/05


1/31/06


1/31/07


1/31/08


1/31/09


1/31/10Minimum
    Royalty
    Amounts


$15.3


$40.4


$47.5


$49.0


$54.0


$59.0


$65.0


$20.0


$15.0*     28




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RESULTS
    OF OPERATIONS
  Comparison
    for the Year Ended December 31, 2008 to the Year Ended
    December 31, 2007.
  PUBLISHING
    SEGMENT
  (in thousands)

2008


2007


VariancePublishing Segment RevenuesAdvertising

$
94,871


$
106,691


$
(11,820)Circulation


62,634



71,707



(9,073)Books


4,676



3,373



1,303Other


1,359



1,956



(597)Total Publishing Segment Revenues


163,540



183,727



(20,187)Publishing Segment Operating Costs and ExpensesProduction, distribution and editorial


86,018



93,312



7,294Selling and promotion


55,419



72,655



17,236General and administrative


5,951



5,034



(917)Depreciation and amortization


379



1,188



809Impairment on assets


9,349







(9,349)Total Publishing Segment Operating Costs and Expenses


157,116



172,189



15,073Publishing Segment Operating Income

$
6,424


$
11,538


$
(5,114)   Martha Stewart Living Everyday Food Martha
    Stewart Weddings Blueprint Body +
    Soul Martha Stewart
    Living Everyday Food Blueprint Martha Stewart
    Living Body + Soul Everyday Food Body +
    Soul Body + Soul.
  Magazine Publication ScheduleYear ended December 31,

2008


2007Martha Stewart Living


12 Issues



12 IssuesMartha Stewart Weddings(a)


5 Issues



5 IssuesEveryday Food


10 Issues



10 IssuesBody + Soul(b)


10 Issues



8 IssuesSpecial Interest Publications


8 Issues



9 IssuesBlueprint(c)


N/A



6 Issues   (a)
    
    In 2008 and 2007, we published one
    special Martha Stewart Weddingsissue.(b)
    
    Frequency switched to 10 issues a
    year in 2008(c)
    
    Launched in May 2006 and
    discontinued after the January/February 2008 issue which was
    accounted for in the year ended December 31, 2007. 29




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Blueprint Body + Soul Blueprint Martha Stewart Living Everyday Food Body + Soul
  MERCHANDISING
    SEGMENT
  (in thousands)

2008


2007


VarianceMerchandising Segment RevenuesKmart earned royalty

$
18,772


$
25,190



(6,418)Kmart minimum guarantee
    true-up


4,978



39,102



(34,124)Other


34,116



20,419



13,697Total Merchandising Segment Revenues


57,866



84,711



(26,845)Merchandising Segment Operating Costs and ExpensesProduction, distribution and editorial


10,409



13,418



3,009Selling and promotion


6,529



6,475



(54)General and administrative


7,980



7,214



(766)Depreciation and amortization


90



375



285Total Merchandising Segment Operating Costs and Expenses


25,008



27,482



2,474Merchandising Segment Operating Income

$
32,858


$
57,229


$
(24,371)   Martha Stewart Collection Singer Husqvarna Viking Pfaff
   30




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##### Table of Contents



INTERNET
    SEGMENT
  (in thousands)

2008


2007


VarianceInternet Segment RevenuesAdvertising and other

$
14,472


$
11,779


$
2,693Product


1,104



7,410



(6,306)Total Internet Segment Revenues


15,576



19,189



(3,613)Internet Segment Operating Costs and ExpensesProduction, distribution and editorial


8,984



14,092



5,108Selling and promotion


6,164



6,023



(141)General and administrative


3,487



3,969



482Depreciation and amortization


1,737



1,242



(495)Total Internet Segment Operating Costs and Expenses


20,372



25,326



4,954Internet Segment Operating Loss

$
(4,796)


$
(6,137)


$
1,341   Martha Stewart Flowers,
  marthastewart.com
 31




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##### Table of Contents



BROADCASTING
    SEGMENT
  (in thousands)

2008


2007


VarianceBroadcasting Segment RevenuesAdvertising

$
26,666


$
21,078



5,588Radio


7,500



7,500



Licensing and other


13,162



11,685



1,477Total Broadcasting Segment Revenues


47,328



40,263



7,065Broadcasting Segment Operating Costs and ExpensesProduction, distribution and editorial


31,291



34,099



2,808Selling and promotion


3,392



4,026



634General and administrative


7,287



7,456



169Depreciation and amortization


2,578



2,201



(377)Total Broadcasting Segment Operating Costs and Expenses


44,548



47,782



3,234Broadcasting Segment Operating Income / (Loss)

$
2,780


$
(7,519)


$
10,299   The Martha Stewart Show Essence of Emeril Emeril Live! The Martha Stewart Show, The Martha Stewart Show Whatever
    Martha! The Martha Stewart Show
  The Martha Stewart Show, The
    Martha Stewart Show Whatever Martha! The Martha Stewart Show The Martha Stewart Show
 32




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##### Table of Contents



CORPORATE
  (in thousands)

2008


2007


VarianceCorporate Operating Costs and ExpensesGeneral 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



726Corporate Operating Loss

$
(48,123)


$
(47,397)


$
(726)     OTHER
    ITEMS
  INTEREST INCOME, NET.
  OTHER INCOME. In re
    Martha Stewart Living Omnimedia, Inc. Securities Litigation.
  LOSS ON EQUITY SECURITIES:
  LOSS IN EQUITY INTEREST.
  INCOME TAX EXPENSE.
  NET LOSS.
 33




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##### Table of Contents



RESULTS
    OF OPERATIONS
  Comparison
    for the Year Ended December 31, 2007 to the Year Ended
    December 31, 2006.
  PUBLISHING
    SEGMENT
  (in thousands)

2007


2006


VariancePublishing Segment RevenuesAdvertising

$
106,691


$
83,285


$
23,406Circulation


71,707



69,721



1,986Books


3,373



831



2,542Other


1,956



2,722



(766)Total Publishing Segment Revenues


183,727



156,559



27,168Publishing Segment Operating Costs and ExpensesProduction, distribution and editorial


93,312



83,770



(9,542)Selling and promotion


72,655



63,386



(9,269)General and administrative


5,034



2,777



(2,257)Depreciation and amortization


1,188



600



(588)Total Publishing Segment Operating Costs and Expenses


172,189



150,533



(21,656)Publishing Segment Operating Income

$
11,538


$
6,026


$
5,512   Martha Stewart Living Everyday Food Body + Soul Martha Stewart
    Weddings Blueprint Blueprint Martha
    Stewart Weddings Everyday Food Martha Stewart Living
  Magazine Publication ScheduleYear ended December 31,

2007


2006Martha Stewart Living


Twelve Issues



Twelve IssuesMartha Stewart Weddings(a)


Five Issues



Four IssuesEveryday Food


Ten Issues



Ten IssuesSpecial Interest Publications


Nine Issues



Five IssuesBody + Soul


Eight Issues



Eight IssuesBlueprint(b)


Six Issues



Two Issues   (a)
    
    In 2007, we published one special
    Martha Stewart Weddingsissue.(b)
    
    Launched in May 2006 and
    discontinued as a stand-alone publication after the
    January/February 2008 issue. 34




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##### Table of Contents



Martha Stewart Living Blueprint Martha Stewart Living Everyday Food Blueprint
  MERCHANDISING
    SEGMENT
  (in thousands)

2007


2006


VarianceMerchandising Segment RevenuesKmart earned royalty

$
25,190


$
29,853


$
(4,663)Kmart minimum guarantee
    true-up


39,102



26,126



12,976Other


20,419



13,525



6,894Total Merchandising Segment Revenues


84,711



69,504



15,207Merchandising Segment Operating Costs and ExpensesProduction, distribution and editorial


13,418



11,956



(1,462)Selling and promotion


6,475



3,145



(3,330)General and administrative


7,214



6,853



(361)Depreciation and amortization


375



1,021



646Total Merchandising Segment Operating Costs and Expenses


27,482



22,975



(4,507)Merchandising Segment Operating Income

$
57,229


$
46,529


$
10,700   Martha Stewart Collection macys.com Martha Stewart Crafts Singer Husqvarna Viking Pfaff
 35




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##### Table of Contents



INTERNET
    SEGMENT
  (in thousands)2007


2006


VarianceInternet Segment RevenuesAdvertising and other

$
11,779


$
8,196


$
3,583Product


7,410



7,579



(169)Total Internet Segment Revenues


19,189



15,775



3,414Internet Segment Operating Costs and ExpensesProduction, distribution and editorial


14,092



10,444



(3,648)Selling and promotion


6,023



3,335



(2,688)General and administrative


3,969



2,410



(1,559)Depreciation and amortization


1,242



117



(1,125)Total Internet Segment Operating Costs and Expenses


25,326



16,306



(9,020)Internet Segment Operating Loss

$
(6,137)


$
(531)


$
(5,606)      36




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##### Table of Contents



BROADCASTING
    SEGMENT
  (In thousands)2007


2006


VarianceBroadcasting Segment RevenuesAdvertising

$
21,078


$
16,969


$
4,109Radio


7,500



7,504



(4)Licensing and other


11,685



22,030



(10,345)Total Broadcasting Segment Revenues


40,263



46,503



(6,240)Broadcasting Segment Operating Costs and ExpensesProduction, distribution and editorial


34,099



32,043



(2,056)Selling and promotion


4,026



4,324



298General and administrative


7,456



8,726



1,270Depreciation and amortization


2,201



3,026



825Total Broadcasting Segment Operating Costs and Expenses


47,782



48,119



337Broadcasting Segment Operating Loss

$
(7,519)


$
(1,616)


$
(5,903)   The Martha Stewart Show The Martha Stewart Show The
    Martha Stewart Show
  The Martha Stewart Show The Martha
    Stewart Show The Martha
    Stewart Show
 37




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##### Table of Contents



CORPORATE
  (In thousands)2007


2006


VarianceCorporate Operating Costs and ExpensesGeneral and administrative

$
44,841


$
49,407


$
4,566Depreciation and amortization


2,556



3,834



1,278Total Corporate Operating Costs and Expenses


47,397



53,241



5,844Corporate Operating Loss

$
(47,397)


$
(53,241)


$
5,844     INTEREST INCOME, NET.
  LEGAL SETTLEMENT. In
    re Martha Stewart Living Omnimedia, Inc. Securities
    Litigation
  INCOME TAX PROVISION.
  LOSS FROM DISCONTINUED OPERATIONS.
  NET INCOME.
 38




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##### Table of Contents



LIQUIDITY
    AND CAPITAL RESOURCES
  Overview
      Sources
    and Uses of Cash
      Operating
    Activities
     39




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##### Table of Contents



Investing
    Activities
    marthastewart.com
  Financing
    Activities
     40




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##### Table of Contents



Debt
    1-month
    Financial Covenant

Required at December 31, 2008Tangible Net Worth

Greater than $
40.0 millionFunded Debt to EBITDA (a)


Less than 2.0Parent Guarantor (the Company) Basic Fixed Charge Coverage Ratio
    (b)


Greater than 2.75Quick Ratio


Greater than 1.0    (a)
    
    EBITDA is earnings before interest, taxes, depreciation and
    amortization as defined in the loan agreement.(b)
    
    Basic Fixed Charge Coverage is the ratio of EBITDA for the
    trailing four quarters to the sum of interest expense for the
    trailing four quarters and the current portion of long-term debt
    at the covenant testing date.   41




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##### Table of Contents



Cash
    Requirements
    Payments due by period (in thousands)MoreLess than











thanContractual Obligations


Total



1 year



1-3 years



3-5 years



5 years



OtherLong  Term Debt Obligations


$
19,500



$




$
12,000



$
7,500



$




$
Capital Lease Obligations




























Operating Lease Obligations



75,250




15,045




15,401




13,612




31,192




Purchase Obligations




























Unrecognized Tax Benefits*



226




50



















176Other Long  Term Liabilities Reflected on the
    Companys Balance Sheet under GAAP




























Total


$
110,286



$
15,360



$
36,203



$
20,230



$
38,317



$
176      OFF-BALANCE
    SHEET ARRANGEMENTS
    CRITICAL
    ACCOUNTING POLICIES AND ESTIMATES
  General
   42




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##### Table of Contents



Revenue
    Recognition
    No. 00-21, (EITF 00-21) EITF 00-21 EITF 00-21 EITF 00-21
    true-up
   43




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##### Table of Contents



Television
    Production Costs
    Goodwill
    and Indefinite-Lived Intangible Assets
    Long-Lived
    and Definite-Lived Intangible Assets
    Deferred
    Income Tax Asset Valuation Allowance
   44




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##### Table of Contents



Non-Cash
    Equity Compensation
   Item 7A.Quantitative
    and Qualitative Disclosure about Market Risk.    Interest
    Rate Risk
  1-month
    Investment
    Risk
   45




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##### Table of Contents



Accounting for Certain Investments in Debt and Equity
    Securities
  Accounting for Derivative
    Instruments and Hedging Activities
       Item 8.Financial
    Statements and Supplementary Data.  F-33 Form 10-K
 Item 9.Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure.   46




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##### Table of Contents



Item 9A.Controls
    and Procedures.  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e) Rules 13a-15(b) 15d-15(e)),
  Managements
    Report on Internal Control Over Financial Reporting
      Evaluation
    of Changes in Internal Control Over Financial
    Reporting
   47




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                
   
 48




---



##### Table of Contents



Item 9B.Other
    Information.   PART III Item 10.Directors,
    Executive Officers and Corporate Governance.  ELECTION OF DIRECTORS INFORMATION CONCERNING
    EXECUTIVE OFFICERS AND OUR FOUNDER, MEETINGS
    AND COMMITTEES OF THE BOARD SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
    COMPLIANCE
 Item 11.Executive
    Compensation.  MEETINGS AND COMMITTEES OF
    THE BOARD COMPENSATION OF OUTSIDE
    DIRECTORS, DIRECTOR COMPENSATION TABLE,
    COMPENSATION COMMITTEE REPORT, COMPENSATION
    DISCUSSION AND ANALYSIS, SUMMARY COMPENSATION
    TABLE, GRANTS OF PLAN-BASED AWARDS IN 2008,
    EXECUTIVE COMPENSATION AGREEMENTS, OUTSTANDING
    EQUITY AWARDS AT FISCAL YEAR-END 2008, OPTION
    EXERCISES AND STOCK VESTED DURING 2008, POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN
    CONTROL
 Item 12.Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters. 49




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##### Table of Contents



Equity
    Compensation Plan Information
    EQUITY
    COMPENSATION PLAN INFORMATION
  Number ofSecuritiesNumber of





Remaining AvailableSecurities to be





for Future IssuanceIssued upon


Weighted-Exercise


Under EquityExercise of


Price of


Compensation PlansOutstanding


Outstanding


(ExcludingOptions, Warrants


Options, Warrants


SecuritiesPlan Category

and Rights


and Rights


Reflected in ColumnEquity Compensation plans approved by security holders:Options (1)


4,388,891


$
11.90



n/aRestricted shares (2)


1,187,931
(3)


n/a



n/aTotal


5,576,822



n/a



8,548,459
(4)Equity Compensation plans not approved by security holders:Warrants


416,667
(5)

$
12.59



n/aTotal


5,993,489



n/a



n/a   (1)
    
    We adopted and made grants under
    the MSLO LLC Nonqualified Class A LLC Unit/Stock Option
    Plan in November 1997 (the 1997 Plan). In connection
    with our initial public offering, the 509,841 LLC unit options
    then outstanding were converted into options to purchase
    1,997,374 shares of the Class A Common Stock. All
    options granted under the 1997 Plan have now vested. In
    connection with the 1997 Plan, Ms. Stewart periodically
    returns to us a number of shares of Class B Common Stock
    beneficially owned by her, corresponding, on a net treasury
    basis, to the number of option exercises under this plan during
    the relevant period. Under the net treasury method, we subtract
    from the number of shares resulting from each option exercise
    the number of shares we could purchase, at the then-current
    market price, with dollars equal to the option proceeds from
    such exercise and the value of the tax benefit we receive from
    the exercise. Ms. Stewart returns to us a number of shares
    of our Class B Common Stock equal to the sum of the results
    of these calculations for the relevant period. No options remain
    outstanding under the 1997 Plan and no further awards will be
    made from the 1997 Plan.(2)
    
    The Company routinely issues
    restricted stock as equity compensation pursuant to the terms of
    its equity compensation plans. As a result, the table includes
    data with respect to shares of restricted stock that have been
    granted to more fully illustrate the balances under its equity
    compensation plans.(3)
    
    200,000 restricted shares included
    in this figure are subject to market condition vesting criteria.(4)
    
    Represents total number of shares
    reserved for issuance under the Omnibus Stock and Option
    Compensation Plan, less options and restricted stock issued
    under this plan, plus any forfeited awards and tax shares
    returned to such plans. There are no shares available for
    issuance under the 1997 Plan.(5)
    
    Warrant to purchase
    833,333 shares was exercised in part in January 2007. The
    416,666 shares represented by the remainder of this warrant
    became fully vested in July 2007.  SECURITY OWNERSHIP OF
    CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 50




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##### Table of Contents



Item 13.Certain
    Relationships and Related Transactions, and Director
    Independence.  CERTAIN RELATIONSHIPS AND
    RELATED PARTY TRANSACTIONS MEETING AND
    COMMITTEES OF THE BOARD
 Item 14.Principal
    Accountant Fees and Services.  AUDIT FEES
   51




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##### Table of Contents



PART IV Item 15.Exhibits
    and Financial Statement Schedules.  page F-1 Form 10-K.
  Exhibits:
  ExhibitNumber



Exhibit Title2.1



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 30, 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))
    as amended by Exhibits 10.1.2 and 10.1.3.10.1.2



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))
    as amended by Exhibit 10.1.3.10.1.3



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



Martha Stewart Living Omnimedia LLC Nonqualified Class A
    LLC Unit/Stock Option Plan (incorporated by reference to the
    Registration Statement).10.4



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) as amended by Exhibit 10.4.1.10.4.1



Letter Agreement dated September 17, 2004 between Martha
    Stewart Living Omnimedia, Inc. and Martha Stewart (incorporated
    by reference to Exhibit 10.3 to our Current Report on
    Form 8-K
    (file number
    001-15395)
    filed on September 23, 2004 (September 23, 2004
    8-K)).10.5



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).10.6



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).10.7



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 10.7.1 and
    10.7.2.10.7.1



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) as amended by
    Exhibit 10.7.2. 52




---



##### Table of Contents



ExhibitNumber



Exhibit Title10.7.2



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)).10.8



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)).10.9



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 10.9.1.10.9.1



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).10.10



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 10.10.1 and 10.10.2.10.10.1



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) as amended by
    Exhibit 10.10.2.10.10.2



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).10.11



Employment Agreement dated as of September 17, 2004,
    between Martha Stewart Living Omnimedia, Inc. and Martha Stewart
    (incorporated by reference to Exhibit 10.1 to
    September 23, 2004
    8-K) as
    amended by Exhibit 10.11.1.10.11.1*



First Amendment, dated as of December 23, 2008, to the
    Employment Agreement dated as of September 17, 2004,
    between Martha Stewart Living Omnimedia, Inc. and Martha Stewart.10.12



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).10.13



Stock Option Agreement dated as of November 11, 2004,
    between Martha Stewart Living Omnimedia, Inc. and Susan Lyne
    (incorporated by reference to Exhibit 99.3 to the
    November 16, 2004
    8-K).10.14



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).10.15



Form of Restricted Stock Award Agreement for use under the
    Martha Stewart Living Omnimedia, Inc. Amended and Restated 1999
    Stock Inventive 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).10.16



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).10.17



Employment Agreement dated as of July 24, 2006, between
    Martha Stewart Living Omnimedia, Inc. and Howard Hochhauser
    (incorporated by reference to Exhibit 10.2 to our Current
    Report on
    Form 8-K
    (file number
    001-15395)
    filed on July 26, 2006).10.18



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 30, 2006
    10-Q).10.19



Bonus Conversion Policy (incorporated by reference to
    Exhibit 10.1 to our Current Report on
    Form 8-K
    filed on February 27, 2007).10.20



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).10.21



Employment Agreement dated as of October 1, 2007 between
    Martha Stewart Living Omnimedia, Inc. and Gregory Barton
    (incorporated by reference to Exhibit 10.41 to our Annual
    Report on
    Form 10-K
    (file number
    001-15395)
    for the year ended December 31, 2007, (the 2007
    10-K)). 53




---



##### Table of Contents



ExhibitNumber



Exhibit Title10.22



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)).10.23



Publicity Rights Agreement dated as of April 2, 2008 by and
    among Martha Stewart Living Omnimedia, Inc., MSLO Shared IP Sub
    LLC and Emeril J. Lagasse, III (incorporated by reference
    to Exhibit 10.4 to our March 2008
    10-Q).10.24



Loan Agreement dated as of April 4, 2008 by and among Bank
    of America, N.A., MSLO Emeril Acquisition Sub LLC and Martha
    Stewart Living Omnimedia, Inc. (incorporated by reference to
    Exhibit 10.6 to our March 2008
    10-Q).10.25



Pledge Agreement dated as of April 4, 2008 by and among
    Bank of America, N.A., as collateral agent (incorporated by
    reference to Exhibit 10.7 to our March 2008
    10-Q).10.26**



Security Agreement dated as of July 31, 2008 among Martha
    Stewart Living Omnimedia, Inc., MSLO Emeril Acquisition Sub LLC,
    and Bank of America, N.A. (incorporated by reference to
    Exhibit 10.1 to our Quarterly Report on
    Form 10-Q
    (file number
    001-15395)
    for the quarter ended September 30, 2008 (September
    2008
    10-Q)).10.27



Continuing and Unconditional Guaranty dated as of April 4,
    2008 executed by Martha Stewart Living Omnimedia, Inc., MSO IP
    Holdings, Inc., Martha Stewart, Inc., Body and Soul Omnimedia,
    Inc., MSLO Productions, Inc., MSLO Productions  Home,
    Inc., MSLO Productions  EDF, Inc. and Flour
    Productions, Inc. (incorporated by reference to
    Exhibit 10.8 to our March 2008
    10-Q).10.28



Registration Rights Agreement dated as of April 2, 2008 by
    and among Martha Stewart Living Omnimedia, Inc., Emerils
    Food of Love Productions, L.L.C., emerils.com, LLC and Emeril J.
    Lagasse, III (incorporated by reference to
    Exhibit 10.9 to our March 2008
    10-Q).10.29



New Director Compensation Program as of May 20, 2008
    (incorporated by reference to Exhibit 10.1 to our June 2008
    10-Q).10.30



Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option
    Compensation Plan (incorporated by reference to
    Exhibit 99.1 to our Current Report on
    Form 8-K
    (file number
    001-15395)
    filed on May 20, 2008 (May 20, 2008
    8-K)).10.31



Form of Martha Stewart Living Omnimedia, Inc. Omnibus Stock and
    Option Compensation Plan Stock Option Agreement and forms of
    related Notices (incorporated by reference to Exhibit 99.2
    to our May 20, 2008
    8-K).10.32



Form of Martha Stewart Living Omnimedia, Inc. Omnibus Stock and
    Option Compensation Plan Restricted Stock Unit Agreement
    (incorporated by reference to Exhibit 99.3 to our
    May 20, 2008
    8-K).10.33



Form of Martha Stewart Living Omnimedia, Inc. Omnibus Stock and
    Option Compensation Plan Restricted Stock Grant Agreement
    (incorporated by reference to Exhibit 99.4 to our
    May 20, 2008
    8-K).10.34



Form of Martha Stewart Living Omnimedia, Inc. Omnibus Stock and
    Option Compensation Plan Stock Appreciation Right Agreement and
    form of related Notice (incorporated by reference to
    Exhibit 99.5 to our May 20, 2008
    8-K).10.35



Form of Martha Stewart Living Omnimedia, Inc. Omnibus Stock and
    Option Compensation Plan Stock Grant Agreement and form of
    related Acknowledgement (incorporated by reference to
    Exhibit 99.6 to our May 20, 2008
    8-K).10.36



Separation Agreement dated as of June 10, 2008 between
    Martha Stewart Living Omnimedia, Inc. and Susan Lyne
    (incorporated by reference to Exhibit 10.8 to our June 2008
    10-Q).10.37



Employment Agreement dated as of September 17, 2008 between
    Martha Stewart Living Omnimedia, Inc. and Charles A. Koppelman
    (incorporated by reference to Exhibit 10.2 to our September
    2008 10-Q).10.38



Employment Agreement dated as of September 17, 2008 between
    Martha Stewart Living Omnimedia, Inc. and Wenda Harris Millard
    (incorporated by reference to Exhibit 10.3 to our September
    2008 10-Q).10.39



Employment Agreement dated as of September 17, 2008 between
    Martha Stewart Living Omnimedia, Inc. and Robin Marino
    (incorporated by reference to Exhibit 10.4 to our September
    2008 10-Q).10.40



Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option
    Compensation Plan Restricted Stock Grant Agreement dated
    October 1, 2008 between Martha Stewart Living Omnimedia,
    Inc. and Charles Koppelman (incorporated by reference to
    Exhibit 10.5 to our September 2008
    10-Q).10.41



Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option
    Compensation Plan Stock Option Grant Agreement and form of
    related Notice dated October 1, 2008 between Martha Stewart
    Living Omnimedia, Inc. and Charles Koppelman (incorporated by
    reference to Exhibit 10.6 to our September 2008
    10-Q). 54




---



##### Table of Contents



ExhibitNumber



Exhibit Title10.42



Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option
    Compensation Plan Restricted Stock Grant Agreement dated
    October 1, 2008 between Martha Stewart Living Omnimedia,
    Inc. and Wenda Harris Millard (incorporated by reference to
    Exhibit 10.7 to our September 2008
    10-Q).10.43



Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option
    Compensation Plan Stock Option Grant Agreement and form of
    related Notice dated October 1, 2008 between Martha Stewart
    Living Omnimedia, Inc. and Wenda Harris Millard (incorporated by
    reference to Exhibit 10.8 to our September 2008
    10-Q).10.44



Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option
    Compensation Plan Restricted Stock Grant Agreement dated
    October 1, 2008 between Martha Stewart Living Omnimedia,
    Inc. and Robin Marino (incorporated by reference to
    Exhibit 10.9 to our September 2008
    10-Q).10.45



Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option
    Compensation Plan Stock Option Grant Agreement and form of
    related Notice dated October 1, 2008 between Martha Stewart
    Living Omnimedia, Inc. and Robin Marino (incorporated by
    reference to Exhibit 10.10 to our September 2008
    10-Q).10.46*



Martha Stewart Living Omnimedia, Inc. Director Deferral Plan.10.47*



Martha Stewart Living Omnimedia, Inc. Non-Employee Director
    Stock and Option Compensation Plan Deferral Election Form dated
    July 1, 2004 and Clarification dated December 23, 2008
    between Martha Stewart Living Omnimedia, Inc. and Michael
    Goldstein.10.48



Form of Performance-Based Restricted Stock Unit Agreement
    pursuant to the Martha Stewart Living Omnimedia, Inc. Omnibus
    Stock and Option Compensation Plan (incorporated by reference to
    Exhibit 10.1 to our Current Report on
    Form 8-K
    (file number
    001-15395)
    filed on February 6, 2009).14.1



Code of Business Conduct and Ethics (incorporated by reference
    to Exhibit 14.1 to our Current Report on
    Form 8-K
    (file number
    001-15395)
    filed on February 27, 2007).21*



List of Subsidiaries.23.1*



Consent of Independent Registered Public Accounting Firm.31.1*



Certification of Chief Executive Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.31.2*



Certification of Chief Financial Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.32*



Certification of Chief Executive Officer and Chief Financial
    Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.     **
    Schedules and exhibits to this Agreement have been omitted. The
    Company agrees to furnish a supplemental copy of any omitted
    schedule or exhibit to the Securities and Exchange Commission
    upon request. 55




---



##### Table of Contents



Disclosures Required by Section 303A.12 of the NYSE
    Listed Company Manual. Form 10-K Form 10-K. Form 10-K Form 10-K.
 56




---



##### Table of Contents



SIGNATURES      By:
    /s/  Charles
    Koppelman   Title:
    Principal Executive Officer    Signature

Title/s/  Charles
    KoppelmanCharles
    Koppelman

Principal Executive Officer & Executive Chairman of
    the Board/s/  Allison
    JacquesAllison
    Jacques

Principal Financial and Accounting Officer/s/  Charlotte
    BeersCharlotte
    Beers

Director/s/  Michael
    GoldsteinMichael
    Goldstein

Director/s/  Arlen
    KantarianArlen
    Kantarian

Director/s/  William
    RoskinWilliam
    Roskin

Director/s/  Todd
    SlotkinTodd
    Slotkin

Director    57




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##### Table of Contents



(This page has been left blank
    intentionally.)




---



##### Table of Contents



INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS,

FINANCIAL STATEMENT
    SCHEDULES AND OTHER

FINANCIAL INFORMATION Consolidated Financial Statements:Report of Independent Registered Public
    Accounting Firm

F-2Consolidated Statements of Operations for the
    years ended
    December 31, 2008, 2007 and 2006

F-3Consolidated Balance Sheets at December 31,
    2008 and 2007

F-4Consolidated Statements of Shareholders
    Equity and Comprehensive Loss for the years ended
    December 31, 2008, 2007, and 2006

F-5Consolidated Statements of Cash Flows for the
    years ended
    December 31, 2008, 2007, and 2006

F-6Notes to Consolidated Financial Statements

F-7Financial Statement ScheduleII  Valuation and Qualifying Accounts for the years
    ended
    December 31, 2008, 2007 and 2006

F-33     F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                 
 F-2




---



##### Table of Contents



MARTHA
    STEWART LIVING OMNIMEDIA, INC.
    CONSOLIDATED STATEMENTS OF OPERATIONSFor the Years Ended
    December 31, 2008, 2007 and 2006
    (in thousands except share and per share data)  2008


2007


2006REVENUESPublishing

$
163,540


$
183,727


$
156,559Merchandising


57,866



84,711



69,504Internet


15,576



19,189



15,775Broadcasting


47,328



40,263



46,503Total
    revenues


284,310



327,890



288,341OPERATING COSTS
    AND EXPENSESProduction, distribution and editorial


136,709



154,921



138,213Selling and promotion


71,504



89,179



74,190General and administrative


69,632



68,514



70,173Depreciation and amortization


7,973



7,562



8,598Impairment charge


9,349







Total operating
    costs and expenses


295,167



320,176



291,174OPERATING
    (LOSS)/INCOME


(10,857)



7,714



(2,833)Interest income, net


490



2,771



4,511Other income/expense






432



(17,090)Loss on equity securities


(2,221)







Loss in equity interest


(763)







(LOSS)/INCOME
    BEFORE INCOME TAXES


(13,351)



10,917



(15,412)Income tax provision


(2,314)



(628)



(838)(LOSS)/INCOME
    FROM CONTINUING OPERATIONS


(15,665)



10,289



(16,250)Loss from discontinued operations










(745)NET
    (LOSS)/INCOME

$
(15,665)


$
10,289


$
(16,995)(LOSS) / INCOME
    PER SHAREBasic and diluted - (loss)/income from continuing operations

$
(0.29)


$
0.20


$
(0.32)Basic and diluted - Loss from discontinued operations










(0.01)Basic and diluted - Net (loss)/income

$
(0.29)


$
0.20


$
(0.33)WEIGHTED AVERAGE
    COMMON SHARES OUTSTANDINGBasic


53,360



52,449



51,312Diluted


53,360



52,696



51,312DIVIDENDS PER
    COMMON SHARE


n/a



n/a


$
0.50   The accompanying notes are an
    integral part of these consolidated financial statements.
 F-3




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##### Table of Contents



MARTHA
    STEWART LIVING OMNIMEDIA, INC.
    CONSOLIDATED BALANCE SHEETSDecember 31, 2008 and 2007 
    (in thousands except share and per share data)  2008


2007ASSETSCURRENT
    ASSETSCash and cash equivalents

$
50,204


$
30,536Short  term investments


9,915



26,745Accounts receivable, net


52,500



94,195Inventory


6,053



4,933Deferred television production costs


4,076



5,316Income taxes receivable


40



513Other current assets


3,712



3,921Total current
    assets


126,500



166,159PROPERTY, PLANT
    AND EQUIPMENT,net


14,422



17,086GOODWILL AND
    OTHER INTANGIBLE ASSETS,net


93,312



53,605INVESTMENTS IN
    EQUITY INTEREST,net


5,749



OTHER NONCURRENT
    ASSETS


21,302



18,417Total
    assets

$
261,285


$
255,267LIABILITIES AND
    SHAREHOLDERS EQUITYCURRENT
    LIABILITIESAccounts payable and accrued liabilities

$
27,877


$
27,425Accrued payroll and related costs


7,525



13,863Income taxes payable


142



1,246Current portion of deferred subscription revenue


22,597



25,578Current portion of other deferred revenue


7,582



5,598Total current
    liabilities


65,723



73,710DEFERRED
    SUBSCRIPTION REVENUE


6,874



9,577OTHER DEFERRED
    REVENUE


13,334



14,482LOAN
    PAYABLE


19,500



DEFERRED INCOME
    TAX LIABILITY


1,854



OTHER NONCURRENT
    LIABILITIES


3,005



1,969Total
    liabilities


110,290



99,738COMMITMENTS AND
    CONTINGENCIESSHAREHOLDERS
    EQUITYClass A Common Stock, $.01 par value,
    350,000 shares
    authorized; 28,204 and 26,738 shares outstanding in 2008
    and 2007, respectively


282



267Class B Common Stock, $.01 par value,
    150,000 shares
    authorized; 26,690 and 26,722 shares outstanding 2008 and
    2007, respectively


267



267Capital in excess of par value


283,248



272,132Accumulated deficit


(132,027)



(116,362)151,770



156,304Less Class A treasury stock  59 shares at
    cost


(775)



(775)Total
    shareholders equity


150,995



155,529Total liabilities
    and shareholders equity

$
261,285


$
255,267   The accompanying notes are an
    integral part of these consolidated financial statements.
 F-4




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##### Table of Contents



MARTHA
    STEWART LIVING OMNIMEDIA, INC.
    CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND
    COMPREHENSIVE LOSSFor the Years Ended
    December 31, 2008, 2007 and 2006
    (in thousands)  Class A


Class B











Class ACommon Stock


Common Stock








Accumulated


Treasury StockCapital in





Otherexcess of


Accumulated


ComprehensiveShares


Amount


Shares


Amount


par value


Deficit


Loss


Shares


Amount


TotalBalance at January 1,2006


24,882


$
249



26,873


$
269


$
242,770


$
(81,882)


$




(59)


$
(775)


$
160,631Net loss






















(16,995)















(16,995)Conversion of shares






































Shares returned on net treasury basis










(82)



(1)



1



















Issuance of shares in conjunction with stock options exercises


151



1











1,582



















1,583Issuance of shares of stock and restricted stock, net of
    cancellations and tax withholdings


332



3











(794)



















(791)Common stock dividends






















(26,934)















(26,934)Issuance of shares in conjunction with warrant exercises


744



8































8Equity charge associated with common stock warrant


















2,261



















2,261Non-cash equity compensation


















11,194



















11,194Balance at December 31, 2006


26,109



261



26,791



268



257,014



(125,811)







(59)



(775)



130,957Net income






















10,289















10,289Cumulative effect of adoption of FIN 48






















(840)















(840)Shares returned on a net treasury basis










(69)



(1)



1



















Issuance of shares in conjunction with stock options exercises


91



1











307



















308Issuance of shares of stock and restricted stock, net of
    cancellations and tax withholdings


384



4











(3,434)



















(3,430)Issuance of shares in conjunction with warrant exercises


154



1































1Equity charge associated with common stock warrant


















5,530



















5,530Non-cash equity compensation


















12,714



















12,714Balance at
    December 31, 2007


26,738



267



26,722



267



272,132



(116,362)







(59)



(775)



155,529Comprehensive loss:Net loss






















(15,665)















(15,665)Other comprehensive loss:Unrealized loss on investment


























(1,129)











(1,129)Realized loss on investment


























1,129











1,129Total comprehensive loss






































(15,665)Shares returned on a net treasury basis










(32)



























Issuance of shares in conjunction with stock options exercises


6















44



















44Issuance of shares of restricted stock, net of cancellations and
    tax withholdings


1,460



15











2,801



















2,816Non-cash equity compensation


















8,271



















8,271Balance at December 31, 2008


28,204


$
282



26,690


$
267


$
283,248


$
(132,027)


$




(59)


$
(775)


$
150,995   The accompanying notes are an
    integral part of these consolidated financial statements.
 F-5




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##### Table of Contents



MARTHA
    STEWART LIVING OMNIMEDIA, INC.
    CONSOLIDATED STATEMENTS OF CASH FLOWSFor the Years Ended
    December 31, 2008, 2007 and 2006
    (in thousands)  2008


2007


2006CASH FLOWS FROM OPERATING ACTIVITIESNet (loss)/income

$
(15,665)


$
10,289


$
(16,995)Adjustments to reconcile net (loss)/income to net cash provided
    by/(used in) operating activities:Non-cash revenue


(2,502)







Depreciation and amortization


7,973



7,562



8,598Amortization of deferred television production costs


21,478



21,029



25,324Impairment of intangibles


9,349







Non-cash equity compensation


8,526



19,118



13,811Deferred income tax expense


1,854







Loss in equity interest


763







Loss on equity securities


2,221







Other non-cash charges


815







Changes in operating assets and liabilities


6,758



(46,263)



(36,449)Net cash provided
    by/(used in) operating activities


41,570



11,735



(5,711)CASH FLOWS FROM
    INVESTING ACTIVITIESAcquisition of business


(46,310)







Investments in equity interest


(6,512)







Capital expenditures


(2,864)



(5,032)



(8,342)Purchases of short-term investments


(9,915)



(186,210)



(189,755)Sales of short-term investments


26,745



194,786



238,222Investment in other non-current assets






(10,150)



Net cash provided
    by/(used in) investing activities


(38,856)



(6,606)



40,125CASH FLOWS FROM
    FINANCING ACTIVITIESDebt issuance costs


(719)







Proceeds from long-term debt


30,000







Repayment of long-term debt


(10,500)







Dividends paid










(26,101)Proceeds from exercise of stock options


44



308



750Issuance of stock, warrants and restricted stock, net of
    cancellations and tax liabilities


(1,871)



(3,429)



(784)Net cash provided
    by/(used in) financing activities


16,954



(3,121)



(26,135)Net increase in
    cash


19,668



2,008



8,279CASH AND CASH
    EQUIVALENTS,
    BEGINNING OF YEAR


30,536



28,528



20,249CASH AND CASH
    EQUIVALENTS, END OF YEAR

$
50,204


$
30,536


$
28,528SUPPLEMENTAL
    DISCLOSURE OF NON-CASH ACTIVITIES:Acquisition of business financed by stock issuance

$
5,000   The accompanying notes are an
    integral part of these consolidated financial statements.
 F-6




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS

(in millions except share data and where noted)  1. THE
    COMPANY
  marthastewart.com arthastewartweddings.com wholeliving.com
  2. SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES
  Principles
    of Consolidation
    Acquisitions
    Cash
    and Cash Equivalents
    Short-term
    Investments
    Revenue
    Recognition
  No. 00-21, (EITF 00-21) EITF 00-21
 F-7




---



##### Table of Contents



EITF 00-21 EITF 00-21
            true-up
  Inventory
  first-in,
 F-8




---



##### Table of Contents



Television
    Production Costs
    Property,
    Plant and Equipment
    EITF 00-2, 98-1,
    Studio sets


2 yearsFurniture, fixtures and equipment


3  5 yearsComputer hardware and software


3  5 yearsLeasehold improvements


life of lease   Goodwill
    and Intangible Assets
  Goodwill
    Carrying Value








Carrying Value atat December 31,


Acquisition of


Impairment


December 31,(In thousands)

2006 and 2007


business


charge


2008Publishing

$
53,105


$
-


$
(8,849
)

$
44,256Merchandising


-



510



-



510Broadcasting


-



340



-



340Total

$
53,105


$
850


$
(8,849
)

$
45,106    F-9




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##### Table of Contents



Body &
    Soul
  Intangible
    assets
    Balance atDecember 31,


Acquisition of


Amortization


Impairment


Balance at(in thousands)

2006 and 2007


business


expense


charge


December 31, 2008Trademarks

$
500


$
45,200


$
-


$
(500)


$
45,200Other intangibles


900



5,260



-



-



6,160Accumulated amortization  other intangibles


(900)



-



(2,254)



-



(3,154)Total

$
500


$
50,460


$
(2,254)


$
(500)


$
48,206    F-10




---



##### Table of Contents



Investments
    in Equity Interest
      Investments
    in Other Non-Current Assets
  Accounting for Certain Investments in Debt and Equity
    Securities
     F-11




---



##### Table of Contents



Accounting for Derivative
    Instruments and Hedging Activities
      Advertising
    Costs
   F-12




---



##### Table of Contents



Earnings
    Per Share
      Use of
    Estimates
    Equity
    Compensation
    Recent
    Accounting Pronouncements
  FAS 157-2
   F-13




---



##### Table of Contents



3. CASH,
    CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
    (in thousands)

2008


2007Cash

$
22,790


$
19,469Money market funds


27,414



11,067Total cash and cash equivalents

$
50,204


$
30,536         (in thousands)

2008


2007Municipal debt securities

$



$
19,586Auction rate securities






2,875Corporate debt securities






4,284U.S. government and agency securities


9,915



Total short-term investments

$
9,915


$
26,745    F-14




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##### Table of Contents



4.
    ACCOUNTS
    RECEIVABLE, NET    (in thousands)

2008


2007Advertising

$
38,656


$
42,828Licensing


13,390



50,111Other


3,825



6,06155,871



99,000Less: reserve for credits and uncollectible accounts


3,371



4,805$
52,500


$
94,195   true-up Form 10-K
  5.
    INVENTORY    6.
    PROPERTY,
    PLANT AND EQUIPMENT, NET    (in thousands)

2008


2007Studios and equipment

$
4,202


$
4,202Furniture, fixtures and equipment


10,845



10,518Computer hardware and software


27,090



25,956Leasehold improvements


28,672



27,279Total Property, Plant and Equipment


70,809



67,955Less: accumulated depreciation and amortization


56,387



50,869Net Property, Plant and Equipment

$
14,422


$
17,086     7.
    CREDIT
    FACILITIES   F-15




---



##### Table of Contents



1-month
    Financial Covenant

Required at December 31, 2008Tangible Net Worth

Greater than $40.0 millionFunded Debt to EBITDA (a)

Less than 2.0Parent Guarantor (the Company) Basic Fixed Charge Coverage Ratio
    (b)

Greater than 2.75Quick Ratio

Greater than 1.0     (a)
    
    EBITDA is earnings before interest, taxes, depreciation and
    amortization as defined in the loan agreement.(b)
    
    Basic Fixed Charge Coverage is the ratio of EBITDA for the
    trailing four quarters to the sum of interest expense for the
    trailing four quarters and the current portion of long-term debt
    at the covenant testing date.   F-16




---



##### Table of Contents



8.
    SHAREHOLDERS
    EQUITY  Common
    Stock
      9.
    EMPLOYEE
    AND NON-EMPLOYEE BENEFIT AND COMPENSATION PLANS  Retirement
    Plans
    and/or
  Stock
    Incentive Plans
     F-17




---



##### Table of Contents



Black-Scholes
    Assumptions
    Stock
    Options and Warrants
  after-hours
 F-18




---



##### Table of Contents



2008

2007

2006Risk-free interest rates

3.3% - 3.7%

3.5% - 5.1%

4.5% - 5.2%Dividend yields

Zero

Zero

ZeroExpected volatility

45.5% - 47.8%

32.9% - 41.5%

35.5% - 65.7%Expected option life

7.1 - 7.5 years

4.6 - 8.4 years

2.5 - 9.5 yearsAverage fair market value per option granted

$2.00 - $2.55

$2.89 - $13.32

$7.29 - $14.59   Note:
 F-19




---



##### Table of Contents



Number of shares


Weightedsubject to


averageoptions


exercise priceOutstanding as of December 31, 2006


1,723,350


$
18.70Granted


52,500



18.09Exercised


(40,650
)


6.87Cancelled


(12,000
)


12.05Outstanding as of December 31, 2007


1,723,200


$
19.01Granted


2,750,000



7.05Exercised


(6,425
)


6.78Cancelled


(935,384
)


7.71Outstanding as of December 31, 2008


3,531,391


$
12.71Options exercisable at December 31, 2008


1,636,391


$
19.26Equity available for grant at December 31, 2008 after
    deducting restricted stock outstanding


     Number of shares


Weightedsubject to


averageoptions


exercise priceOutstanding as of December 31, 2007






Granted


865,000



8.56Exercised


0



0Cancelled


(7,500)



9.09Outstanding as of December 31, 2008


857,500



$8.55Options exercisable at December 31, 2008






Equity available for grant at December 31, 2008 after
    deducting restricted stock outstanding


8,548,459  F-20




---



##### Table of Contents



Shares Subject to


Shares Subject toOptions Outstanding


Options ExercisableWeightedAverageRemaining





Weighted





WeightedContractual





Average





AverageRange of Exercise Price

Life in


Number


Exercise


Number


ExercisePer Share

Years


Outstanding


Price


Exercisable


Price$0.60


0



0


$
0



0


$
0$6.78-$10.61


2.5



2,959,667



7.59



207,167



8.44$14.90-$15.75


2.1



13,725



15.37



13,725



15.37$15.90


3.1



150,000



15.9



150,000



15.90$16.45-$18.90


4.7



683,699



18.46



683,699



18.46$19.92-$26.25


5.9



231,300



20.92



231,300



20.92$26.56-$33.75


4.0



350,500



27.71



350,500



27.71$0.60-$33.75


3.2



4,388,891


$
11.90



1,636,391


$
19.26   Restricted
    Stock
        WeightedAverage Grant(in thousands, except share data)

Shares


Date ValueNonvested at December 31, 2007


961,364



$       17,404Granted


583,932



4,122Vested(1)


(725,181)



(11,390
)Forfeitures


(215,434)



(2,724
)Nonvested at December 31, 2008


604,681



$7,412   (1)
    
    Included in the gross shares vested during the period ended
    December 31, 2008 are 263,255 shares of Class A
    common stock which were surrendered by recipients in order to
    fulfill their tax withholding obligations.   F-21




---



##### Table of Contents



WeightedAverage Grant(in thousands, except share data)

Shares


Date ValueNonvested at December 31, 2007





$
Granted


604,750



4,978Vested(1)


(20,000)



(56
)Forfeitures


(1,500)



(11
)Nonvested at December 31, 2008


583,250


$
4,911   (1)
    
    Included in the gross shares vested
    during the period ended December 31, 2008 are
    8,458 shares of Class A common stock which were
    surrendered by recipients in order to fulfill their tax
    withholding obligations.    Non-Employee
    Equity Compensation
    The Martha Stewart
    Show The Martha
    Stewart Show The Martha Stewart Show
   F-22




---



##### Table of Contents



Form S-3
      10.
    INCOME
    TAXES   F-23




---



##### Table of Contents



(in thousands)

2008


2007


2006Current Income Tax (Expense)/BenefitFederal

$
175


$
64


$
(399)State and local


(80)



(165)



(77)Foreign


(555)



(527)



(362)Total current income tax (expense)/benefit


(460)



(628)



(838)Deferred Income Tax ExpenseFederal


(1,582)







State and local


(272)







Total deferred income tax expense


(1,854)







Income tax provision from continuing operations

$
(2,314)


$
(628)


$
(838)     (in thousands)

2008


2007


2006Computed tax at the federal statutory rate of 35%

$
4,673


$
(3,821)


$
5,655State income taxes, net of federal benefit


(51)



(107)



(50)Non-deductible compensation


(1,756)



(1,347)



(5,486)Non-deductible expense


(170)



(264)



(226)Non-deductible litigation reserve










(5,981)Non-taxable foreign income










225Tax on foreign income


(555)



(527)



(362)Valuation allowance


(4,629)



5,438



5,418Other


174







(31)Provision for income taxes

$
(2,314)


$
(628)


$
(838)Effective tax rate


17.3
%


5.8
%


5.4
%  F-24




---



##### Table of Contents



(in thousands)

2008


2007Deferred Tax AssetsProvision for doubtful accounts

$
949


$
918Accrued rent


1,131



1,170Reserve for newsstand returns


308



926Accrued compensation


7,067



7,531Deferred royalty revenue


5,094



4,101NOL/credit carryforwards


44,349



45,736Depreciation


4,113



4,409Amortization of intangible assets


3,149



Other


1,804



766Total deferred tax assets


67,964



65,557Deferred Tax LiabilitiesPrepaid expenses


39



(199)Amortization of intangible assets


(1,854)



(2,081)Total deferred tax liabilities


(1,815)



(2,280)Valuation allowance


(68,003)



(63,277)Net Deferred Tax Asset/(Liability)

$
(1,854)


$
     Accounting for
    Uncertainty in Income Taxes  an interpretation of
    SFAS 109
   F-25




---



##### Table of Contents



(in thousands)

2008


2007Gross balance at January 1

$
1,038


$
1,478Additions based on tax positions related to the current year






Additions for tax positions of prior years






168Reductions for tax positions of prior years


(128)



Settlements


(759)



(608)Reductions due to lapse of applicable statute of limitations






Gross balance at December 31


151



1,038Interest and penalties


75



246Balance including interest and penalties at December 31

$
226


$
1,284     11.
    RELATED
    PARTY TRANSACTIONS    5-year
     F-26




---



##### Table of Contents



sister-in-law brother-in-law
  12.
    COMMITMENTS
    AND CONTINGENCIES  Operating
    Leases
   F-27




---



##### Table of Contents



Operating(in thousands)

Leases2009

$
15,0452010


9,1582011


6,2432012


6,4872013


7,125Thereafter


31,192Total minimum lease payments

$
75,250   Legal
    Matters
  Datatern, Inc. v.
    Bank of America Corp. et al. (No. 5-08CV-70).
      Other
     F-28




---



##### Table of Contents



13.
    ACQUISITION
    OF BUSINESS          Years endedDecember 31,(unaudited, in thousands, except
    per share amounts)

2008


2007Net revenues

$
287,528


$
340,599Net (loss)/income


(13,050
)


13,336Net (loss)/income per share-basic and diluted

$
(0.24
)

$
0.25      F-29




---



##### Table of Contents



14.
    SELECTED
    QUARTERLY FINANCIAL DATA (UNAUDITED)
    (in thousands except per share data)  First


Second


Third


FourthYear ended December 31,
    2008

Quarter


Quarter


Quarter


Quarter


TotalRevenues

$
67,834


$
77,110


$
66,512


$
72,854


$
284,310Operating (loss)/income


(4,535
)


1,723



(3,532
)


(4,513
)


(10,857
)Net (loss)/income

$
(4,234
)

$
328


$
(3,747
)

$
(8,012
)

$
(15,665
)(Loss)/earnings per share  basic and diluted

$
(0.08
)

$
0.01


$
(0.07
)

$
(0.15
)

$
(0.29
)Weighted average common shares outstandingBasic


52,722



53,476



53,590



53,668



53,360Diluted


52,722



55,588



53,590



53,668



53,360   First


Second


Third


FourthYear ended December 31,
    2007

Quarter


Quarter


Quarter


Quarter


TotalRevenues

$
66,705


$
73,446


$
69,256


$
118,483


$
327,890Operating income/(loss)


(12,551
)


(7,790
)


(4,911
)


32,966



7,714Net (loss)/income

$
(11,869
)

$
(6,737
)

$
(4,414
)

$
33,309


$
10,289(Loss)/earnings per share  basic and diluted

$
(0.23
)

$
(0.13
)

$
(0.08
)

$
0.63


$
0.20Weighted average common shares outstandingBasic


52,349



52,386



52,479



52,551



52,449Diluted


52,349



52,386



52,479



52,650



52,696   Fourth
    Quarter 2008 Items:
   F-30




---



##### Table of Contents



15.
    BUSINESS
    SEGMENTS    (in thousands)

Publishing


Merchandising


Internet


Broadcasting


Corporate


Consolidated2008Revenues

$
163,540


$
57,866


$
15,576


$
47,328


$



$
284,310Non-cash equity compensation


2,855



1,038



230



807



3,596



8,526Depreciation and amortization


379



90



1,737



2,578



3,189



7,973Impairment charge


9,349



















9,349Operating income/(loss)


6,424



32,858



(4,796)



2,780



(48,123)



(10,857)Total assets


79,512



83,307



15,730



25,608



57,128



261,285Capital expenditures


144



37



319



191



2,163



2,8542007Revenues

$
183,727


$
84,711


$
19,189


$
40,263


$



$
327,890Non-cash equity compensation


4,297



1,555



501



6,866



5,899



19,118Depreciation and amortization


1,188



375



1,242



2,201



2,556



7,562Operating income/(loss)


11,538



57,229



(6,137)



(7,519)



(47,397)



7,714Total assets


92,931



61,784



9,937



19,960



70,655



255,267Capital expenditures


266



64



1,344



183



3,175



5,0322006Revenues

$
156,559


$
69,504


$
15,775


$
46,503


$



$
288,341Non-cash equity compensation


2,715



967



208



3,006



6,915



13,811Depreciation and amortization


600



1,021



117



3,026



3,834



8,598Operating income/(loss)


6,026



46,529



(531)



(1,616)



(53,241)



(2,833)Total assets


82,824



37,734



8,001



17,106



82,382



228,047Capital expenditures


770



70



3,054



439



4,009



8,342   16.
    DISCONTINUED
    OPERATIONS    (in thousands)

2008


2007


2006Net loss from discontinued operations

$



$



$
(745)    F-31




---



##### Table of Contents



(in thousands)

2008


2007Total assets

$



$
Accounts payable and accrued expenses


(99)



(884)Net liabilities of discontinued operations

$
(99)


$
(884)   17.
    OTHER
    INFORMATION                18.
    SUBSEQUENT
    EVENTS     F-32




---



##### Table of Contents



MARTHA
    STEWART LIVING OMNIMEDIA, INC.
 SCHEDULE II 
    VALUATION AND QUALIFYING ACCOUNTS  (in
    thousands)
  Additions/Additions


(Deductions)


DeductionsBalance,


Charged to


Charged to


Charged toBeginning of


Costs and


Balance Sheet


Costs and


Balance,Description

Year


Expenses


Accounts


Expenses


End of YearAllowance for doubtful accounts:Year ended December 31,2008

$
1,247


$
399


$



$
144


$
1,5022007


1,207



332







292



1,2472006


1,221



316







330



1,207Reserve for audience underdelivery:Year ended December 31,2008

$
3,542


$
1,563


$



$
3,236


$
1,8692007


2,554



2,706







1,718



3,5422006


1,085



2,951







1,482



2,554Reserve for valuation allowance on the deferred tax asset:Year ended December 31,2008

$
63,277


$
4,629


$
97


$



$
68,0032007


62,141







6,575



5,439



63,2772006


71,576







(4,017
)


5,418



62,141  F-33