From the bargain basement to high Five: Richard Desmond stands to make £600m from sale of television channel

 

Within days of buying Channel 5 for £103m, Richard Desmond sacked seven of the nine members of the board, axed 80 of the 250 staff and disposed of the broadcaster’s well-appointed, modern headquarters in London’s Covent Garden.

Little more than three years later, he is looking to sell the business for in excess of £700m – 10 times the company’s likely earnings before taxation this year.

One wonders what Gerhard Zeiler, the chief executive of the Luxembourg-based RTL Group, which sold Channel 5 to the Northern & Shell publisher in what appears to be the greatest bargain in the history of British broadcasting, makes of this now.

“We saw a window of opportunity to realise a transaction based on a fair evaluation of Five,” is what Mr Zeiler said after shaking on the deal in July 2010. RTL dropped the word “Channel” from the broadcaster’s title when it acquired the business in 2002. It later changed the “five” to lower case, and then to upper case. But none of these rebranding exercises could lift the company out of last place in Britain’s free-to-air television sector.

But Mr Desmond, 62, previously known as a print mogul and the publisher of the Daily Express and Daily Star newspapers, had seen potential that RTL had apparently not noticed. The previously stagnant television advertising market was showing new signs of life. In the time since Mr Desmond went into broadcasting, a revived ITV has seen its share price quadruple and the entire sector’s fortunes have benefited.

With portable devices providing a means to catch up with missed shows and an additional screen for using social media while watching popular programmes, the big television channels remain essential inventory for media buyers.

By the end of 2011, Channel 5 (the “channel” was quickly reintroduced by Northern & Shell) announced a 28 per cent increase in advertising revenues. Part of the credit for this success goes to the broadcaster’s sales director Nick Bampton, who has been innovative in working with commercial clients.

But the growth in Channel 5’s value has not just been a result of improved advertising revenues. The whole television sector has been boosted by the show of confidence reflected in the vast amount of cash that has been pumped into the market since July 2010. A year after Mr Desmond’s comparatively modest outlay, the American media company Scripps Networks International invested £339m in buying a 50 per cent stake of UKTV from Virgin Media. Early last year, another American media giant, Liberty Global, paid £15bn to acquire Virgin Media itself.

The battle for football rights between Sky and BT has also added to the sense of television’s viability. The rivals paid £3bn for Premier League rights last year before BT made a staggering further investment by spending £897m on Champions League rights in November.

When Mr Desmond acquired Channel 5 there were concerns that a public-service broadcaster had been delivered into the hands of a businessman who had made much of his fortune from adult entertainment. As the sole shareholder of a private company, he became the first individual to control a public service broadcaster. In the main, Channel 5 has managed to avoid censure from the broadcasting regulator Ofcom under its new owner.

Which is not to say that the broadcaster (a family of channels that includes 5USA and 5*) has moved upmarket. Acquiring Big Brother as a flagship show was one of Mr Desmond’s first strategic moves. As rival Channel 4 has sought to put distance between itself and its former blockbuster asset and undergone a “creative renewal” of its schedule, Channel 5 has used the reality programme to boost its ratings.

Last July Channel 5 beat Channel 4 in the ratings over a full week, the first time that had happened in the 16 years since its launch. It was an important psychological moment for a broadcaster that has often been looked down on by newspaper television critics.

A confident Mr Desmond arrived at Cambridge last September to address the Royal Television Society’s annual conference. The channel was about “being populist and proud of it”, he said, as he took swipes at rival networks.

Ben Frow, who he has installed as director of programmes, has mocked Channel 4 for making a documentary called The Man with the 10-Stone Testicles. “There’s a line we won’t cross at Channel 5,” he said.

The network champions documentaries series such as And Proud, a voyeuristic show which follows the lives of unashamed shoplifters or benefit claimants.

Its Minute by Minute strand examines the background to disasters such as the Lockerbie air crash or the King’s Cross fire. And then there is its signature show: a new series of Celebrity Big Brother starts tonight.

Channel 5 is still last among the free-to-air channels with 6.13 per cent adult audience share across its family of channels. But that belies a new swagger. Christmas audiences were at their highest since 2007 with populist shows such as Britain’s Craziest Christmas Lights and Michael Buble’s Christmas Special.

A month before he landed Channel 5, Mr Desmond told this newspaper: “I’ve got so much money it’s ridiculous.” His personal wealth was then estimated at £950m and he had cheekily suggested he might make a bid for The Sun, which he has long admired. If Northern & Shell’s bankers Barclays manage to find him a buyer for his broadcasting network at the price he wants, he could yet follow up on that boast.

Start your day with The Independent, sign up for daily news emails
News
Ben Little, right, is a Labour supporter while Jonathan Rogers supports the Green Party
general election 2015
News
The 91st Hakone Ekiden Qualifier at Showa Kinen Park, Tokyo, 2014
news
Life and Style
Former helicopter pilot Major Tim Peake will become the first UK astronaut in space for over 20 years
food + drinkNothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
News
Kim Wilde began gardening in the 1990s when she moved to the countryside
peopleThe singer is leading an appeal for the charity Thrive, which uses the therapy of horticulture
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
Sport
Alexis Sanchez celebrates scoring a second for Arsenal against Reading
football
Life and Style
health
Voices
An easy-peel potato; Dave Hax has come up with an ingenious method in food preparation
voicesDave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
News
i100
News
Japan's population is projected to fall dramatically in the next 50 years (Wikimedia)
news
Life and Style
Buyers of secondhand cars are searching out shades last seen in cop show ‘The Sweeney’
motoringFlares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Media

Recruitment Genius: Telesales Executive - OTE £25,000

£15000 - £25000 per annum: Recruitment Genius: This publishing company based i...

Ashdown Group: Content Manager - Publishing

£30000 - £35000 per annum + benefits : Ashdown Group: A highly successful, glo...

Guru Careers: Report Writer / Reporting Analyst

£25 - 30k + Benefits: Guru Careers: A Report Writer / Reporting Analyst is nee...

Guru Careers: German Speaking Account Manager / Account Executive

£24-30K + Excellent Benefits: Guru Careers: A German speaking Account Manager ...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own