This week Richard Desmond’s multi media company Northern & Shell announced profits that have more than tripled from £8.9m in 2009 to £30.3m in 2010.
Until recently, Northern & Shell consisted of a print group that included papers Express and Daily Star as well as magazines Ok!, New! and Star. Desmond moved into the world of broadcast last year when he acquired Channel 5 for £103.4m a move that many at the time said did not make sense.
What’s clear from this announcement is that against all odds Desmond has orchestrated an enormous turnaround of Channel 5. In 2009 RTL posted a £34m loss for Channel 5 – but in 2010 announced a £15m profit. As well as stripping out an entire layer of management and investing 1.5bn over five years, the channel was also helped by a rebounding 2010 TV market.
Whilst the TV station is performing well, the papers have had a much tougher time. Discounting the cover price across both papers affected the margin, but dropping the price of the Star to 10p would have contributed to the bulk of the £43m costs within the print division. This did however drive circulations growth that sales team were able to convert to a rumoured double digit YoY growth in ad revenue which again was helped along by a rebounding 2010 market buoyed by the World Cup.
The future for Northern & Shell lies in the long-term profitability of Channel 5. This year Desmond has invested £200m in a deal to secure the return of Big Brother. Celebrity Big Brother launches this summer followed by a traditional series this winter for three months. This is particularly clever, as if Channel 5 can grow its share of impacts significantly this year through the Big Brother format, it will stand it good stead for its negotiations with agency groups for 2012. Despite rumours of its decline, Big Brother contributed 19.8% of Channel 4’s programming impacts for 16-34 adults in 2010.
Desmond has not washed his hands completely of his print titles and on 15th June announced categorically that rumours of him looking to sell his papers or magazines are not true. He is investing in a new printing press in Luton expected to open late 2011. This will help with the availability of colour ad slots within their newspapers that an ageing West Ferry press can’t deliver.
Northern and Shell are selling advertising packages across TV, print and magazines – which for an advertiser provides an interesting cross promotional opportunity with a level of editorial buy-in not offered by other titles. An example of this is Northern & Shell’s purchase of the Health Lottery, which seeks to raise money for health charities and will be marketed across all properties. It is understood that in the future Northern and Shell will continue to build upon media interests particularly in the digital arena.
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