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Desmond eyes bumper £700m payday from Channel 5

We haven’t always been UK media entrepreneur Richard Desmond’s biggest fan – he started out at the tacky end of tacky with porn magazines (where he still resides with some of his TV channels) – but the boy certainly has an eye for a deal.

With a fortune resting on his Express Newspapers empire (acquired for a song) and his copy of Hello! magazine, OK!, he bought UK terrestrial broadcaster Channel 5 in 2010 from German broadcaster RTL for just over £100m.

imagesNow Desmond (left) has asked his adviser Barclays to hunt for a buyer with, according to the Financial Times, £700m to spend. This is pretty toppy even allowing for the fact that Desmond has managed to produce operating profits of £20m or so, with £70m hoped for this year. But the UK’s much larger ITV has shown that good old TV advertising is still alive and kicking (despite its own efforts to re-configure itself as a digital company) and so Channel 5 represents a rare opportunity for a buyer to pick up a mainstream TV channel in the UK.

Channel 5 only has about four per cent of UK viewing but Desmond has slashed costs (in his inimitable way) and profited mightily by picking up reality show Big Brother from Channel 4, whose ratings have slumped in consequence. The Big Brother contract expires in 2015. The channel has also bought in programmes cleverly as well as cheaply.

Who might be interested? The usual suspects of course: John Malone’s US-based Liberty cable empire is always in the frame; the UK’s BSkyB would surely like it (although the Murdoch 39 per cent shareholding in BSkyB won’t help with the phone hacking trial continuing) and even ITV might fancy expanding its empire, although there would be competition issues as with BSkyB.

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BT, now challenging BSkyB for sports rights, might reflect that Channel 5 would cost less than it’s just agreed to pay for Champion’s League rights while a content-rich company like HBO, owned by Time Warner, might fancy a mainstream UK outlet. This would surely attract a premium audience for advertisers. Then there’s Google and, less likely, Apple…as always. And what about WPP’s GroupM, now an increasingly big player in TV production?

Like all good dealmakers, Desmond knows when to sell as well as when to buy. He recently bemoaned the power of outfits like GroupM to push broadcasters around. The way for him to win this particular contest would be to take lots and lots of their money.

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About Stephen Foster

Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.
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