It must be nice to go on a diet and make $45 million as a result. There is only one person in America who can pull off that trick — Oprah Winfrey.
The media mogul has gone on diets in the public eye before, but never one quite like this. Winfrey has signed a five-year deal with Weight Watchers (NYSE: WTW) in which she acquired a 10% stake in the company through her Oprah Winfrey Network (OWN) for $43.2 million. She acquired around 6.4 million shares at $6.79 per share, and will also have options to buy another 5% stake if she chooses.
Winfrey will make appearances for Weight Watchers and let the company use her name and likeness for advertising purposes. She will also join Weight Watcher's Board of Directors. However, Winfrey will be more than just a spokesperson and part owner; she will be a client as well. She will be working with a personal coach and using the Weight Watchers mobile app to help her through her dieting struggles. Winfrey has battled with her weight for years, even going so far as to take a wagon full of 67 pounds of fat onstage to illustrate the amount of weight she had lost at the time.
In a statement, Winfrey said that Weight Watchers had given her the resources to start making the lasting shift she, and so many others struggling with excess weight, had always longed for. She went on to add that she believes in the program so much that she decided to invest in the company and partner in its evolution.
Weight Watcher’s evolution involves an emphasis toward overall health instead of simply focusing on shedding unwanted pounds. The company has recognized the need to alter its approach as high-tech competitors such as health-related smartphone apps chopped away at its market share. Earnings had decreased annually since 2011, and meeting attendees had fallen from 1.3 million members to approximately 800,000 in that same time frame. Weight Watchers stock had fallen 73% for the year prior to the announcement.
The deal with Winfrey was the perfect tonic for Weight Watcher's beleaguered stock. After the announcement, the stock more than doubled to $13.92 per share, making Winfrey an immediate $45 million on her investment. Such is the persuasive power of Oprah.
Winfrey may not have her iconic daytime talk show anymore, but she does have her own network, her own magazine (O), and Oprah.com to reach her audience. Her social media connections are equally strong, with 29 million Twitter followers, another 11 million on Facebook, and 4 million additional followers on Instagram. There will be no shortage of advertising opportunities.
Winfrey shied away from product endorsements during the run of her talk show, but Weight Watchers is not her first endorsement since the talk show left the air. She also has a relationship with Starbucks to peddle Oprah-branded teas.
The Oprah effect has Weight Watchers off to a great start, but will it last? It is not a given. Winfrey's once-powerful book club that could make almost any book into a best seller was re-launched in 2012, but the effect has diminished without the power of daily viewership behind it. It is possible that Weight Watchers' effect will fade as well, because the addition of Oprah does not address the competition problem.
We wish Oprah the best of luck on her personal journey, and we will not be surprised if she manages to revive the fortunes of Weight Watchers. Never count out the magic of Oprah.