Circulatory problems & ever decreasing circles = Pi in the sky
Paper Boy – the irreverent insider
So Richard Desmond said last month that the Express titles (including the Daily Star) are not and were never up for sale.
This is a totally mischievous remark from someone who revels in controversy. If he continues in this vein we may believe he is developing a mendacious habit. It is well known around town that a couple of newspaper groups had been looking at the potential in acquiring the titles and no doubt some private equity ones too.
However, the landscape is changing quickly everyday with more and more developments in the phone-hacking scandal. Much analysing of the advertising figures and seeing what extra leverage could be forced upon the media buying market has been happening over the last three months. Other groups would be doing similar analyses to understand their competitive position to a new newspaper magnate entering the game or the impact on their business of a larger competitor. Rumour has it there was at least one bid.
Unsurprisingly it was at a level that the purchaser deemed a bargain and ‘Dirty Des’ perceived as below desirable. Let’s not take anything away from Desmond as a shrewd businessman… time and time again he has proven an adept deal maker – buying at low points and endeavouring to sell at reasonably high marks.
Ages ago he struck a canny deal with a seemingly naive management team at United News and Media (before he dreamt of owning the Express titles) over a “guaranteed” print deal. This left UN&M massively out of pocket with no way of ending the nightmare as Desmond upped the print order of some of his minuscule magazines (and this was not the previously owned porn mags). He closed the deal quickly and simply with Lord Hollick when buying the Express for a snip and quickly paid back the debt to Commerzbank.
I am sure he will make a success of Channel 5, in terms of packaging cost-effective content and maximizing cross media asset advertising deals. This will no doubt be in the area of “creative solution” type deals rather than standard air time (hamstrung by limited manoeuvrability in share deals) that will make even more money for Northern and Shell.
Richard Desmond has proven he has a firm hand on the tiller of his own business and is interested in the micro detail to understand every lever he can pull for maximum advantage. It is no surprise that he put up for sale the Express titles at the start of the year. There was a buoyant advertising market, or the most buoyant it had been for over two years. He had stripped out as much cost from editorial operations to the extent that even my recently deceased grandfather (98) gave up reading after 80 years with the words “there is not a lot in it, even for me!” as he left for the evening to take his 72 year old girlfriend out (comfortably acceptable – see half your age plus seven rule).
Taking back those small denominations of silver coins really improves the bottom line and helped N&S improve on last year’s profit. I also believe the former Sage of Smut saw that the steam was running out of the recovery. He obviously has a good forecaster looking at forward bookings of advertising and knew before Sorrell and Murdoch (junior) – or before they were prepared to admit or act – that the advertising market was slowing down dramatically.
Collecting more consumer revenues by taking the decision to take the cover price of the Daily Star up to previous levels helped profitability. Despite losing copy sales and an uncertain hope that advertising revenues would be sustainable there would have been more revenue for N&S with this strategy. This has now meant that on a level playing field the two N&S dailies are the worst performing daily tabloids.
Daily Express is down year on year for June by just over 6.3%. Now for Nobby Number types like me, June saw the mathematical world turned on its head. Pi (3.14159265 etc.) we were told was dead and no longer the golden rule in mathematical circles. The constant that relates the circumference of a circle to its diameter, is wrong! Well not exactly wrong… just the wrong one to be associated with circles. To replace it we should be using Tau as the most natural number to understand a circle. Tau is 6.28 so my digression is fully circulatory. If you want to read more the full article on Tau is in The Times. Don’t worry if you can’t, I don’t subscribe either.
Re-circling back again, Desmond must have concluded that the bids didn’t match his valuation of the titles. In his own indomitable way he thought there was value still to be had with the cross promotion across his new TV assets; surely there are no more large cost saving initiatives to impose on the stripped-to-the-bone Express?
Knowing as we all do, that time will tell if Desmond is right and more often than not he is, he is likely to have the last laugh. A more benign economy with advertising bolstered by hosting the XXX Olympiad (that’s thirty not triple X… that’s a different sporting event completely!) should provide a better vendor environment for the off-loading of N&S newspaper titles.
Even as I write, the scandal around the News of the World phone-hacking saga is being amplified on a global scale. Desmond has been a master politician – from the furore around his £100,000 donation to the Labour Party, which resulted in the return favour of an advertising booking of £120,000 – to the cheekily supposed £1 billion bid for The Sun. Rather spectacularly he also mooted that he didn’t want to be part of the Press Complaints Commission as he “didn’t want to be with a bunch of f****** phone hackers!” I am looking forward to my forthcoming July column – it will be interesting to assess how far News International has slipped from being the lodestar it once was for the newspaper industry.