Desmond has big ambitions for struggling U.K. web

When 58-year-old billionaire publisher Richard Desmond bought struggling commercial broadcaster Five last month, an ambitious new player entered the mainstream U.K. television market.

And while a billionaire publisher running a TV network may be nothing new in Blighty, Desmond is an unabashed risk-taker who built his business on pornography.

Few doubt Desmond’s business credentials. A decade ago, when he bought loss-making U.K. group Express Newspapers for $198 million, many commentators thought he was wasting his money. But Desmond confounded skeptics, becoming one of the U.K.’s richest men, worth an estimated $1.5 billion.

“I’ve got so much money it’s ridiculous,” he told an interviewer earlier this year.

On July 23, Desmond, a former advertising salesman, used some of that coin to buy Five from pan-European broadcast group RTL for £103.5 million ($164.3 million).

Now the question is, can his business savvy bolster the troubled web?

“Desmond’s track record suggests that he can find pots of gold where other people only see losses,” says media commentator Raymond Snoddy.

Aside from the Daily Express, his Northern and Shell media empire includes the Daily Star (a lowbrow mix of sex, showbiz and celebrity that is the only U.K. national paper uping its circulation) and OK! magazine, which sells 6 million copies a week in more than 20 overseas markets, including the U.S.

His Portland TV subsidiary owns U.K. adult TV channels Television X and Red Hot TV — Desmond sold his porn magazines for a reported $31.7 million around the time he bought Express Newspapers.

The mogul takes a very hands-on approach to his businesses, and had been eyeing Five for months despite the fact it lost $54 million last year.

Desmond’s keenness to secure the deal is perhaps best illustrated by reports that the nearest bid to his was just $79 million — less than half his buying price.

Originally he had bid for the broadcaster in partnership with Endemol, but when the entertainment giant pulled out, Desmond was happy to go it alone.

European Union legislation prevents Desmond from using Five to plug his other media interests. But there is nothing to stop him using his print interests to cross-promote the channel.

“Clearly Desmond’s grasp of populism and celebrity, including celebrity tie-ins with OK!, will help, as will his relationships with the likes of Simon Cowell,” Snoddy says. Already his papers have started running stories knocking rival webs.

Desmond plans to rebrand Five as Channel 5 and has vowed to increase the web’s total budget to about $2.4 billion over the next five years.

“We don’t envisage a change in direction, it’s simply an enhancement,” Desmond says. Five’s chairman and CEO Dawn Airey has told staff that it’s “business as usual.”

Indeed, Five acquired a package of TV series and movies from Warner Bros. last week that includes rights to the third season of “The Mentalist,” plus the local terrestrial premieres of “300,” “Beowulf,” “10,000 BC” and “Teenage Mutant Ninja Turtles” among others. These will air on Five and its digital webs Fiver and Five USA.

Nevertheless, critics fear Desmond’s pursuit of the bottom line will lead to cost cuts at the web. Short of a miracle, it is hard to see how the numbers can start to make sense for Five without significant savings.

Some of Five’s biggest costs involve longterm commitments to program suppliers including an output deal with Sony and exclusive U.K. free-to-air rights deal with CBS Studios for the “CSI” franchise — one of Five’s few bankable shows — thought to cost $635,000 an episode.

In 2008, Five bought Oz soap “Neighbours” in a life-of-series agreement with FremantleMedia reckoned to cost $222,000 for each 30 minutes. The BBC, which had run the show since its 1986 debut, balked at the pricetag. “I won’t be surprised if he tries to renegotiate some of these deals,” Snoddy says.

Like many a maverick, Desmond enjoys making headlines. In a recent BBC interview, he said News Corp.’s best-selling tabloid, the Sun, was at the top of his acquisitions wish list.

Desmond also has told reporters he wants to buy the U.K. rights to “Big Brother,” recently axed by Channel 4, and add ITV’s two most popular properties, long-running soap “Coronation Street” and “The X Factor,” to Five’s lineup. This kind of chutzpah goes a long way in the entertainment biz.

But the reality is that Five’s audience share is down almost half a ratings point (4.54 vs. 4.93) from a year ago, and the ad market is unforgiving for an upstart like Five, launched in 1997.

Everybody knows the prospects for ad-funded free-to-air TV are challenged. Nonetheless, Desmond’s sheer sense of self-belief could beat the odds and turn Five into a going concern.

Says Snoddy, “I wouldn’t put it past Desmond to find a way to make serious money out of something that other people clearly disregard.”

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