Richard Desmond is the rags-to-riches, pleased-with-himself Brit who has made a billion by upstaging established media leaders. Across the past 40 years, Desmond has successively scored big against the odds. Look at his record:
1966: Leaves school at age 15 after an impoverished, lonely adolescence living with his mother above a garage. Sells classified ads for Thomson newspapers by day, and plays the drums in jazz bands at night. By 21, he owns his own house and two record shops.
1974: Starts Northern & Shell and combines his music-advertisinginterests by launching International Musician & Recording World which, for 17 years, was a pioneering magazine. Before companies like Dennis and Future had really begun to exploit the international licensing potential of specialist magazines, Desmond had launched editions of International Musician in the UK, US, Australia, Japan, and Germany.
1983: Obtains the UK licence for Penthouse, as a springboard to developing his first major profits from adult and special interest magazines.
1993: Launches Ok! magazine as a (fairly) shameless copy of Hello! which had hit the UK in 1988 (44 years after its pioneering launch in Spain). After a stuttering start as a monthly, OK! goes weekly in 2006 and scales 600,000 circulation before falling back to a current 355,000. It is slightly ahead of Hello! after crazy years of circulation records achieved through Desmond’s gutsy exploitation of cheque book celebrities and their weddings. Even after an unsuccessful 2005 venture in the US (sold in 2011 for £14m) and after the general decline of gossip weeklies from dizzy 2007 heights, OK! claims to be the world’s largest celebrity magazine with 20 international editions.
2000: Buys the faded Express Newspapers from private equity buccaneer Clive (Lord) Hollick for £125m, much of which was quickly recouped from asset sales. Most observers were sceptical of Desmond’s chances of restoring profits to the once-legendary newspaper group and assumed that if Hollick couldn’t sort it out, nobody could. But even in an era of sharply declining fortunes for daily newspapers, the Express titles managed to increase turnover by £15m (7%) in 2011. The four Express titles each have have current circulations of 450-600k – some two-thirds of those in 2001 – with sharply lower staffing. The Daily Star has actually grown.
2010: Pays £104m to acquire Channel 5, the UK’s struggling third commercial TV network from CLT (Bertlesmann). The channel had failed to make a profit in its first 13 years, and managed to lose CLT £36m in 2009. The sceptics were out in force again to predict that, now Desmond was in the big league of media, he had bitten off more than he could chew. But he quickly lopped £12m off annual costs (mostly by slashing senior jobs) and flipped the channel into profit in his first full year. It was not exclusively about cost-cutting. He increased young audiences by signing up (and revitalising) Endemol’s “Big Brother”; and has scored bigger still with the 2012 return (after 21 years) of the glittery soap “Dallas”. J.R. Ewing last month attracted an audience of 2.9m for the comeback episode – double the channel’s average ratings. In 2011, Channel 5 made operating profit of £26m on revenue that had surged 23% to £353m. The channel is growing its advertising share at the expense of state-owned Channel 4 and even the giant ITV, a far cry from a one-time boycott by major advertising agencies.
2011: Desmond’s wholly-owned Northern & Shell company reports post-tax profits of £40m – 30% up on 2010, on revenues of £688m that were 40% ahead, despite heavy investment in his jury’s-still-out Health Lottery. The UK’s Sunday Times Rich List says he is worth £1bn.
That is how Richard Desmond has rapidly grown a major UK-based media business – against the odds – by taking on the challenges of high-profile competitors. He has been relentlessly climbing the media ladder from small specialist magazines through big international weeklies, daily newspapers and, now, network television. It is this route that has given him a sharp eye for cost-cutting and the confidence to challenge media market orthodoxy. That, and his devil-don’t-care attitude, have given him a reputation for aggression and ruthlessness. And the swearing has helped.
Desmond has enjoyed being under-estimated and has not cared too much about a personal reputation splashed with muddy anecdotes. He seems to thrive on it all, shaking hands on deals with “Now you have done a deal with the Devil…”. But he has actually succeeded through high-energy, a determination to prove sceptics wrong, and an unmistakeable flair for media content and promotion. The success of OK! and now of Channel 5 owe much to their owner’s clear-sighted understanding of his audience and (for all the bluster) his concentration on the things that matter to readers and advertisers. And he doesn’t care that his energies (as drummer in a star-studded, special-occasion rock band) and huge donations to charity are lost in the noise.
So what next for the man who enjoys snarling metaphorically towards his sworn rivals from his office balcony over the Thames: upstream to Rupert Murdoch’s News Internati0nal and, downstream, to the Daily Mail‘s Lord Rothermere? Well, Richard Desmond has become the only UK newspaper proprietor to control a terrestrial television channel. So he may well be able to increase his media footprint during a period when cross-media ownership restrictions will be eased if not rendered increasingly meaningless by the explosion of “TV’ on the web.
Desmond has long coveted Murdoch’s still-tenacious and highly-profitable The Sun – and, in 2010, even claimed to have offered Murdoch £1bn for his then four UK papers. He is not the only media boss to have picked through the post-scandal announcements of News Corp’s planned spin-off of its worldwide newspapers. The 2013 flotation plans have thrilled News Corp investors (and boosted the share price), not least because they will free the core TV-film company to make a renewed takeover bid for its 40%-owned, super-profitable BskyB pay TV group. But the current News Corp plan seems unlikely to survive in its current form, for three key reasons:
- The “new” company would include: regional and metro newspapers in Australia and the US; national dailies in Australia and the UK; major international book publisher Harper Collins; education and digital data interests; and the Wall Street Journal newspaper and information business. This is, self-evidently, a diverse collection of good and not-so-good assets with various prospective acquirers in different countries. It looks like an obvious case for break-up in order to maximise shareholder proceeds, despite Rupert Murdoch’s plans.
- The legally-challenged UK newspapers comprise: the potentially profitable (again) Sunday Times; the eternally-lossmaking but prestigious The Times; and the cash-rich Sun, still with a 2.5 million daily circulation. Richard Desmond is ready to pounce.
- The Australian end of the business comprises: The Australian, the country’s only national daily; the largest regional and metro newspaper group; and (as a result of a recent deal with James Packer) 50% of Foxtel, the country’s leading pay TV group and stakes in Sky News Australia, and Fox Sports. The shape of the proposed Australian divestment is curious, to say the least. Why would the “new” News Corp (refocused on TV and film) not want to retain its Australian pay TV? Unless the company actually expects a separate Aussie auction and wants to maximise the proceeds by selling-off a strong multi-media group? Or could there be a planned stitch-up sale to Sydney-based eldest son, Lachlan Murdoch? Stranger things have happened – but shareholders are on alert.
So News Corp’s planned spin-off may not take place in quite the way Rupert Murdoch has announced. And, even if it does proceed, separate offers may force a subsequent break-up within months. Either way, the smart money is on Richard Desmond to secure one or all three of those UK newspapers. No one doubts he would be able painfully to restore profitability to the fully-staffed Murdoch papers. But the transformational deal would also enable him to lead consolidation of the British news market, turbo-charge the growth of Channel 5, push new TV channels down into the internet – and tear into ITV’s £2bn revenues. That’s the ultimate prize.
It is reasonable to think that, at age 61, Desmond still has a way to go to achieve his UK media ambitions. Whether you like him or not.
UPDATE 1 May 2014: Richard Desmond sells Channel 5 to Viacom
Richard Desmond has sold Channel 5 to US media group Viacom, owner of MTV, Comedy Central and Nickelodeon. Desmond – who is worth a reported £950m – was reportedly asking for £700m for the channel, but it’s believed the deal is worth £450m. Desmond – who also owns OK magazine, the Daily Star and Daily Express newspapers and a host of ‘adult entertainment’ channels – paid £103.5m for the then loss-making channel in 2010 from German broadcaster RTL. The deal includes all Channel 5 properties – flagship Channel 5, 5*, and 5 USA.
UPDATE: 9 May 2016 (The Guardian)
Express Newspapers more than tripled pre-tax profits last year to over £30m, after slashing staff and cutting printing costs. The parent company of the Daily Express, Sunday Express, Daily Star and Daily Star Sunday, reported pre-tax profits of £30.5m in 2015. This is more than triple the £9.1m reported in restated accounts for 2014. The pre-tax profit figure is significantly boosted by a £15m in interest received. When this is stripped out, Express Newspapers made an operating profit of £16.3m in 2015 (2014:£4.5m operating loss. In common with its rivals, the company admitted it was a tough year. Total revenues fell 12% from £197m to £173m. However, the company highlighted major cost-savings in the business, including to overall staff levels, for driving profitability. The accounts show that the total headcount at Express Newspapers fell from an average of 536 to 460 last year, slashing the wage bill from £54m to £38.9m. (The Guardian)