Publishing revenues were down 17 percent, to $27.6 million. Broadcasting revenues were down 58.6 percent, to $2.7 million, reflecting “a strategic migration of [the] Broadcasting business away from the higher costs associated with daily live television production, in favor of investment in short-form video for digital formats and targeted broadcast initiatives.”

Merchandising was the report’s one bright spot, with revenues of $13.2 million, up 7.3 percent.

“Including the Publishing segment actions announced yesterday, we have taken actions designed to significantly reduce the cost structure of our print and broadcasting operations this year, an important step toward positioning MSLO for profitable growth,” president and CEO Lisa Gersh said in a statement. “We are transitioning our content operations to digital, mobile and video platforms that feature lower fixed costs and align with evolving consumer preferences for how and where they engage with our content. We are seeing some encouraging early results, particularly in video.”

Martha Stewart Living Omnimedia announced Thursday afternoon that it is laying off 70 of its roughly 600 staff members, ending the standalone publication of Everyday Food magazine and attempting to sell off Whole Living magazine.

Facing declining advertising pages and the need to emphasize “digital, mobile and video platforms” over print, the company said that it will stop selling Everyday Food as a standalone monthly publication. Rather, subscribers to the monthly Martha Stewart Living will receive an Everyday Food “supplement” five times a year, and more of its content will be available online starting next year. MSLO will try to sell Whole Living, but if it can’t find a buyer its content will be folded into Martha Stewart Living.

The New York Times‘ Media Decoder blog reported that 70 MSLO employees, out of about 600, are being laid off: “Employees at Martha Stewart Living have not been able to return to work this week because Hurricane Sandy flooded the basement of their downtown offices. As a result, many of them learned of layoffs by phone and e-mail.”

MSLO expects the combined changes to save $33 to $35 million annually. The company also announced a handful of digital initiatives: a new PBS show, “several exciting new digital video series made for the web” and more apps.

“As a whole, MSLO’s total digital audience has grown an average of 20 to 25 percent year over year every month since January 2012,” president and CEO Lisa Gersh said. “Following a careful evaluation of our media portfolio, we are responding to clear trends we are seeing across the industry to give our consumers what they are telling us they want: more video, more of the inspiration, solutions and expert advice and how-to content our brands offer in digital formats, across more platforms and on a more frequent basis.”

Your digital craft table in Martha Stewart’s CraftStudio.

How timely: right as we seem to be reopening the debate over whether or not the iPad is a consumption or creation tool, Martha Stewart, the high priestess of crafty creativity, has launched a brand new iPad app called CraftStudio. The app is free until July 8 when it will revert to normal pricing of $4.99, and is available in the App Store starting Thursday.

CraftStudio closely mimics the act of making a card or any other papercraft: sans the actual scissors, construction paper, glue or glitter. Instead, you do your crafting via the iPad’s interface  – tap, swipe, zoom, rotate. For adding glitter, for instance, you trace where you want the glue to go, pick your glitter color and physically shake the iPad. At that point you’ll see the glitter fall down like a snow globe onto your card or project.

The app takes design cues from Apple: it capitalizes heavily on real-life nostalgia. Much like the leather-stitched calendar of Mac OS’s iCal, you click on the vintage film camera in your craft tray and you get the option to import a photo from your iPad or take a new one. Press the round typewriter key and the iPad’s virtual keyboard pops up, along with a font and text alignment picker.

And these creations are made for sharing. CraftStudio is partnered with HP’s Snapfish brand, so you can share your cards via the service or Facebook or Twitter, save it to your device, or print via AirPrint. While it is free for now–until it goes up to $4.99–Stewart wants to upsell you on in-app purchases of themes like “Vacation Adventure” for $1.99. That gets you extra themed stickers, stamps, paper, glitter and customized page edges and corner punches.

I made this with CraftStudio.

Overall, the app is really easy to learn and use.

And here’s the thing: I don’t consider myself the crafty type. I would never pick up a Martha Stewart magazine off the newsstand, even just for browsing. I don’t own any glitter, markers or stamps. But this app, and the card I made in just a few minutes (at right, don’t laugh) was not only fun as an experience — it made me feel like I was actually capable of being moderately artistic.

I think that’s the most important thing with these new digital creativity tools that we’re starting to see for the iPad. They not only appeal to people who are inclined toward craftiness or building, they also open up these activities to people (like me) who would only use an app like this because it’s easier to get started on digital projects. Snapguide has a similar effect — I don’t normally find myself creating DIY how-to guides for other people, but Snapguide’s ease of use makes me want to.

That’s why the idea that the iPad is not a creation tool is really rather silly. There are plenty of apps out there that prove that wrong already — Paper, Brushes, GarageBand, Codea — but now even Martha Stewart is putting her name and her brand on the iPad as a legitimate avenue of creativity.

If your responsibility is to make money from content, what should you do next? If the answer was easy, we’d all be on vacation. It’s not — which is why several hundred execs in media, entertainment, information and technology will be at The TimesCenter in New York today for top-level discussion about what’s working, what hasn’t and what’s showing the most promise. We’re hosting a star-studded roster of digital media leaders, including News Corp.’s Jon Miller, Pottermore CEO Charlie Redmayne; Martha Stewart COO Lisa Gersh; WordPress creator Matt Mullenweg; new USA Today Publisher Larry Kramer; and Condé Nast’s Bob Sauerberg. We’ll talk about making video pay, true cross-platform publishing, discoverability and much more.

Can’t make it in person? Our staff will be writing about it here, you can follow the hashtag #pc2012 — and, even better, you can join us virtually via the livestream of paidContent 2012 here.

Live-blogged stories from the event:

• Content, not hardware, have made tablets the current king
• The new digital newsstand: Enabling “pass-along” — and saying no sometimes
• Digital story-telling and the rise of the new publishers
• Fred Wilson: Content owners, don’t fear the future
• New ‘radically simplified’ WordPress is on the way
• HTML5 is a newspaper’s best friend – even if it has a mobile app
• Conde Nast’s Sauerberg: Get busy innovating, or get busy dying
• Don’t think of it as content, think of it as information
• For discoverability, traditional tools still dominate
• Does social beat search, or does “peacocking” get in the way?
• Financial Times exec: iOS apps don’t work for publishers
• Jon Miller: Hulu still essential to broadcasters
• Social media doesn’t speed up the news cycle — it kills it
• Richard Russo: Amazon puts great young writers in “particular peril”
• Is a vast video library worth the time and money?
• Harry Potter’s publishing wand can tame Amazon, pirates

In addition to the merchandise revenues, J.C. Penney also will make advertising commitments. The investment gives it a stake in the company’s success across the board.

The deal, which gives MSLO a cash infusion, should put to rest the notions of an outright sale raised when MSLO brought in Blackstone Advisory Partners in June “to review and respond to various parties that have expressed interest in potentially partnering with or investing in the Company, as well as exploring other opportunities.” Wednesday’s announcement marked the end of Blackstone’s role with the company.

Blackstone was part of a sweeping series of moves announced at the same time, include the hiring of Oxygen alum Lisa Gersh as president and COO with the goal of making her CEO by early 2013. Coincidentally, June is also when Ron Johnson left as the head of Apple’s phenomenally successful retail operations to take the helm as CEO of J.C. Penney.

Martha Stewart also rejoined the board of directors of the company she founded. The two women appeared together Wednesday at the annual UBS media conference, where they stood out because of the buzz around the deal — and because companies led by women are still an exception. The session was scheduled for Tuesday but was postponed at the company’s request for what turned out to be good reason. (Much better news for MSLO than for THQ; (NSDQ: THQI) the gaming company canceled, then announced a 25 percent cut in its net sale estimates for the quarter.)

The J.C. Penney announcement comes as Gersh finished her first six months. The next six and beyond will be about making it pay off, along with the company’s other major retail partnerships, while continuing to push the publishing and broadcasting segments to perform to capability. Despite numerous iterations, reorgs and personnel changes, MSLO has yet to find a way to turn up the flames on all burners at the same time. A healthy cross platform matters not only for revenues but for the ultimate success of merchandising, which relies on the personal brand of Martha Stewart and MSLO’s reach across its sites, apps, magazines, TV shows and radio.

Analog and digital: The agreement with J.C. Penney is both analog and digital, calling for Martha Stewart retail stores in the majority of jcpenney department stores and a jointly developed new e-commerce site planned to launch in 2013. Each includes a focus on “how to” advice in addition to selling merchandise.

This is where Johnson’s background at Apple (NSDQ: AAPL), where he opened more than 300 stores over a decade, and previously at Target, where he launched the Michael Graves line that helped give the discount chain a sophisticated veneer, comes into play. Johnson understands how to blend retail and e-tail. As important, he knows what’s it’s like to work with an iconic perfectionist.

He also gets the human component of sales. As Apple retail chief, Johnson suggested a way to bridge the concierge experience a guest might expect at the Ritz-Carlton with in-store customer service. His suggestion was the Genius staffed with the “smartest Mac people.” In his bio Steve Jobs, Walter Isaacson says the Apple co-founder called the idea crazy: “You can’t call them geniuses. They’re geeks. They don’t have the people skills to deliver on something called the genius bar.” The next day Johnson heard Jobs ordered up a trademark on the name. As anyone who has been to an Apple store can tell you, the Genius Bar is the hub. Jobs was right about the geek component — not every geek is cut out to help people — but he was also wrong — a lot of geeks are great at it.

The idea for Martha Stewart is to help people use the merchandise in ways that work for them, just as the Genius Bar helps people learn to use new shiny objects to show off family pictures, make movies or do schoolwork. We can’t all be Martha Stewart and buying a Martha Stewart plate doesn’t mean you know how to set a festive table. They promise trained staffers for each retail outlet with lifestyle expertise.

Done right, it should boost the publishing and broadcasting segments as well.

In a brief interview Wednesday as she left UBS, Stewart told me they have yet to settle on a name for the service. (Note trademark mention above for one reason why it won’t be a Genius Bar.) But the way she spoke of Johnson suggested a comfort level working with him that could bode well.

Stewart also was careful not to leave other retailers out of the conversation — Macy’s, Home Depot and Staples (the Martha Stewart office collection) — but given Johnson’s aspirations and the chains head-to-head competition in malls, it’s easy to see why Macy’s might not be keen. Indeed, according to the WSJ, the department store chain that has had an exclusive line since 2007, said Wednesday that it is reviewing potential changes. The paper also reported that Macy’s was told about the new pact the night before it was announced. The five-year deal with Macy’s expires at the end of 2012 with a renewal option; if that isn’t picked up it would be a blow for MSLO and its investors, including J.C. Penney. MSLO promises the lines will be different. Will that be enough — and will Macy’s really want to feature Martha Stewart as prominently as it has in marketing?

Having spent considerable time in various Macy’s Martha Stewart spaces, I can safely say the chain hasn’t come close to creating the kind of experience Johnson envisions. The collections blend in to various departments instead of truly standing out and despite the engaging ad campaign that highlights Stewart’s contributions and some in-store events, it rarely feels connected to other elements of the MSLO empire. And I’ve never had the sense anyone wants to show me how to use a bundt cake pan.

All about the execution: We’ve all seen deals that sound great go sour and promises that look good on paper fail to deliver. They have about 18 months to set the foundations to really make this work. Johnson knows what it takes to create a great retail experience for electronics in today’s environment. That has to translate in a consumer world that’s far more tech savvy and comfortable with mobile and e-commerce but inside a mid-range department store chain. You aren’t going to see stone floors from Italy and floating staircases in these stores. J.C. Penney also will have to deal with the same issue of anyone basing a strategy on a key figure: it has to be able to work without Martha Stewart, too. Johnson knows this all too well but while Apple and Steve Jobs were synonymous, he was not “the” brand.

Boost for the stock: The stock popped in June on expectations that Blackstone would deliver. It popped again Wednesday on the deal news and word of a special dividend for shareholders on record as of Dec. 19, rising more than a dollar to close 33 percent higher at $4.16 although it didn’t get back to the June high of $5.49.

Speaking of print, Arianna rejects the blame often heaped on her for hurting the newspaper business: “I didn’t kill newspapers. What happened to newspapers had nothing to do with Huffington Post. It had more to do with CraigsList,” she told Swisher. “An exciting hybrid is emerging. The way [NYT Editor] Bill Keller is talking about blogs is totally different today. When the Times Square bomb attempt occurred, the NYT sought comments from its users. Traditional journalism needed invigoration. The mainstream media missed the two biggest stories of the last decade: the Iraq war and the weapons.”

Arianna also had some advice for how media companies and agencies should use social media as a primary advertising vehicle. “We’ve seen a what [Digitas CEO] Laura Lang is calling a ‘post-advertising world.’ We’re seeing BP waste $50 million on ads about how much they ‘care.’ That is old fashioned manipulation of the public. They should have given that $50 million to the fishermen whose livelihoods have been lost and tweeted about it.”

“We’re trying to show how digital and other platforms, our magazines, our TV programming, all revolves around close interaction with our audience, and how digital is central to that,” said Janet Balis, MSLO EVP of Media Sales & Marketing, after the presentation. “For example, with Help Me Martha, we’re going to find the stories we feature in the shows online. At the end of the day, digital is the glue between the interaction and the content.”

The expanded cross-platform push comes follows a significant turnaround for MSLO in Q4, when, in addition to returning to profitability, the company’s online ad dollars jumped 30 percent.

Among the 12 cross-platform ideas MSLO will be promoting in the next few weeks — executives are taking the upfront show on the road to Chicago and Los Angeles next — are At Martha’s Table, which touches on chef Emeril Lagasse and MSLO, along with PBS’ Everyday Food hosts Lucinda Scala Quinn and Sarah Carey, bringing in other star cooks together for a talk show about food. In addition to touching on the Everyday Food mag, paid iPhone app and PBS series, as well as The Martha Stewart Show (which is moving to Hallmark), At Martha’s Table will also spawn a new original web series featuring Emeril.

“I’m hoping that marketers will engage us in a conversation in taking Lucinda and Emeril and create a deeper, more social experience with these programs,” Balis told paidContent. “I hate to use the phrase ‘branded entertainment,’ but I do think there are opportunities there as well, especially on the web. The other fundamental shift here is that it’s not just about distribution on our platforms, it’s also about distribution seamlessly on other media companies’ properties.” While the iPad is an example of outside distribution in a sense, Balis didn’t say whether there were other, more typical content distribution deals in the works with other media companies. But the company appears to be keeping more of an open-mind when it comes to distribution.

There is also going to be more willingness to give its audience more influence. As an example, during her introduction, Martha Stewart read an e-mail from an Everyday Food subscriber who asked the company to come up with an iPhone app, saying she would be willing to pay for both. Last month, MSLO granted the reader’s wish. “Everyday Food was the number one paid app the week it was released and for the past month, has remained in the top four,” Stewart told attendees, noting that more use of mobile was also on the way.

That’s not to say all is well for MSLO’s online business, but it appears to be improving. The internet segment posted an smaller operating loss in Q2 of $500,000 versus a loss of $2 million the year before. On the print side, the story is the same throughout the industry, as MSLO’s publishing revenues declined 27 percent to $33.5 million, as ad pages continued fall.

Earnings release | Webcast (10:00 AM EDT) | Transcript (via Seeking Alpha)

One of the first announcements to pop up fits in with the content focus Armstrong is stressing, although it’s not an owned-and-operated operation: AOL is teaming up with A Squared Entertainment LLC, a new company founded by children’s programming vet Andy Heyward and Amy Moynihan, to distribute “purpose-driven” entertainment for kids featuring — seriously — animated versions of Warren Buffett, Martha Stewart at age 10 , supermodel Gisele Bündchen, and the late Carl Sagan. The series will be done as seasons of three-five minute webisodes that will premiere on AOL. AOL also will help distribute the shows online “leveraging the power of social networking.” No, I don’t think this means we should be on the watch for Baby Bebo but you never know. [Update: Buffett and Stewart made cameo appearances at the Dulles All Hands, setting off a volley of tweets from staffers.]

Due this fall: Secret Millionaire

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