This is the Northern & Shell style and sets the scene for his planned £1.5 billion, five- year reshaping of the business. But Desmond’s actions come at a time of growing competition for UK broadcast ad revenue, and this is not a market in which the Northern & Shell formula has been tested. "OK! TV" is a high-risk bet.
Desmond and his team of trusted lieutenants at Northern & Shell have taken just three weeks to clear out old the executive management and around 25% of the 300 staff at his £103.5 million new asset, Five.
Channel controller, Richard Woolfe, and director of strategy Charles Constable will both leave by the end of August. Chairman and Chief Exec Dawn Airey, who apparently was asked to stay on as part of the new team but has declined, and her finance, legal and HR teams are set to remain until 31 October.
Of the pre-acquisition team at Five, only Jeff Ford, the current director of digital channels, and sales director Kelly Williams will stay on to join the new Northern & Shell team, which seems likely to see Desmond’s number two, Stan Myerson, in the MD role.
Dawn Airey, a consummate power player in UK media, is set rejoin RTL. Does a role at Fremantle await? Or perhaps buoyed by the success of the Netflix model in the US, she will choose to broaden her involvement in LoveFilm, where she joined as a non-exec in June. Her move will be interesting to watch as always.
For Desmond, this early surgery on the shape of the team at Five will be just the first phase in a long program of treatment to try to turn the long-term loss-making business into another profit centre for Northern & Shell.
The next phase will be the movement of the remaining Five staff from the Long Acre HQ to Northern & Shell real estate in Lower Thames Street and the Docklands, alongside some deep cuts and rigorous cost control that will set the scene for the long-term strategy. £1.5 billion is being committed over five years, along with commitments to media space in N&S newspapers and OK!
Right now we have few details as to where Desmond plans to spend the money. Commitments have been made that Five will not be taken down market, but this statement will be to head off short-term regulator or advertiser shock.
He has an experienced acquisitions head on his team in Jeff Ford, and it would be surprising if he doesn’t look to somehow push his formula of low-cost, mass-market celebrity-driven content into the broadcast market and lever other assets in the Northern & Shell group, such as OK! and the Daily Express.
Some smart multi-platform ad sales programmes look likely and, as the N&S team has proved with its exploitation of the ABC system, it is a past master at bundling. It is also believed that Five will re-engage with Project Canvas, with Desmond mentioning the platform in his statement on the restructure. He is unlikely to pass up a commercial opportunity to exploit the BBC’s new video distribution vehicle. Who would bet against on-demand "OK! TV" becoming a guilty pleasure for audiences across the UK and potentially international markets in a few years?
But for all the opportunity, Desmond is swimming against the tide. When Bertelsmann’s RTL bought out United Business Media’s stake in Channel 5 in 2005, it valued the business at £700 million , a 7× multiple on the £103.5 million 2010 acquisition price. Even this price may end up looking generous.
RTL is a highly experienced broadcast operator with 41 channels in 11 markets. The UK market has marked an uncharacteristic failure for the TV veteran to secure a sufficient market share of audience and advertising revenue to make the cost model for the business work.
Northern & Shell has a tested blueprint for print, but this is his first venture into broadcasting outside the adult pay-TV market. Competing head to head with ITV, Channel 4 and Sky in a rapidly changing broadcast market is going to leave very little margin for error. This is set to be a real test of Desmond’s chutzpah.
Adrian Drury is principal analyst, media & broadcast at Ovum.