LARGING IT UP WITH RICHARD DESMOND

LARGING IT UP WITH RICHARD DESMOND - For some, the Express proprietor can do no right: he's a rude upstart who made his money publishing low-grade erotica. But newpapers are the roughest of businesses and maybe in their tabloid pages he has found his true home. Alex Benady reports.

by Alex Benady
Last Updated: 31 Aug 2010

For some, the Express proprietor can do no right: he's a rude upstart who made his money publishing low-grade erotica. But newpapers are the roughest of businesses and maybe in their tabloid pages he has found his true home. Alex Benady reports.

Every morning, Richard Clive Desmond leaves his lovely home just off The Bishops Avenue - 'millionaires' row', as it is known to the locals.

It's the brash end of London's expensive Hampstead Garden Suburb, favoured by Eurotrash business tycoons and minor Arab royalty. Sometimes he takes the Ferrari, but he usually climbs into the back of his chauffeur-driven Bentley turbo, registration number RCD1, for the six-mile journey across London to the offices of Express Newspapers, the newspaper group he bought just three years ago.

There he takes the lift to his fourth-floor office, which boasts a drumkit, white leather sofas and paintings by his friend, the artist Gillian Burrows.

He works until 11am, when his butler enters bearing a single banana on a platter. The butler returns at five o'clock sharp with another salver-borne fruit, to ensure that Desmond's energy levels are equal to the pleasurable daily ritual of putting the finishing touches to the newspaper as he savours a large cigar in the strictly no-smoking newsroom.

It's a curiously unsophisticated, almost cliched vision of how a newspaper magnate should behave. It's the Lord Beaverbrook-Rothermere lifestyle as viewed through the lens of a celebrity magazine like OK! - which Desmond also happens to own.

Although many find it hard to accept, Desmond is arguably the most successful business figure in the British media today, with the single exception of Rupert Murdoch. His rise has been meteoric. Ten years ago he was a minor publisher of minority-interest and top-shelf magazines. Today, Desmond claims to be the ninth-richest man in Britain, worth pounds 1.32 billion, although more conservative estimates value him at between pounds 400 million and pounds 500 million. His 100%-owned company Northern & Shell controls national newspapers - the Daily Express, Sunday Express and the Star, his hugely successful celebrity magazine OK! and a stable of 'adult' interests such as Asian Babes magazine and the Fantasy (television) Channel.

The consensus among media pundits when he acquired the Express group three years ago was that he was a lucky street-trader who had got hopelessly out of his depth and was going to drive a venerable British institution into the ground. Yet in the past 12 months the Star has enjoyed the biggest rise in circulation of any national newspaper - up 25%. And thanks to a hefty dose of celebrity news, including big-ticket exclusives like August's interview buy-up with John Leslie (for which the TV presenter and his family received pounds 550,000), the Daily Express racked up an increase of 1.76%. That compares to 0.53% for the same period at its deadly mid-market rival, the Daily Mail. Meanwhile the Sunday Express turned in the best performance of any Sunday national when it increased its circulation by 6.52%.

These figures represent a remarkable achievement, say newspaper industry experts, stabilising a declining brand with a declining share of a market that is itself in long-term decline, made worse by a cyclical downturn in the economy. 'His success has been surprising,' says Ian Reeves, editor of the UK Press Gazette. 'Everyone wrote him off as a bit of a buffoon, but he has confounded his critics by turning in a very impressive performance with the Express, reversing 40 continuous years of decline when many others have failed, all in the face of the worst advertising recession for decades.'

But circulation figures are only part of the story - it's not clear exactly how much money is being made by Northern & Shell. The figures quoted by Desmond's PR and widely reported in the press show a profit of pounds 60 million being made on turnover of pounds 405 million for 2002. But accounts filed at Companies House for Northern & Shell Network, which includes all his media businesses, show only pounds 9 million profit on a turnover of pounds 387 million - a difference gleefully alighted on by his enemies at the Mail on Sunday back in May.

Contrary to his working-boy-done-good image, Desmond was born into a prosperous middle-class north London Jewish family in the days of rationing after the second world war. His father was sales director for Pearl & Dean, the cinema advertising company, and Desmond was educated at Christ's College grammar school.

However, he says he felt that he was an outsider, describing himself as a 'a fat and lonely child'. His father went deaf when he was three and Desmond claims to have spent evenings as a young child helping him close sales deals with advertising agencies.

His parents split up when he was 12 and Desmond went to live with his mother in a tiny flat above a shop in north London. He said later that it was this glimpse of poverty that spurred his entrepreneurial ambitions.

He was 14 when he left school (where, according to classmates, he distinguished himself only by running a precocious entrepreneurial enterprise in the playground) and took a job in telephone sales for Thomson Regional Newspapers.

It was a role at which he excelled. By the age of 18 he was sales director of xxx magazine and by the age of 21 he owned two record shops, as well as property. In 1974 he started his first magazine - International Musician - where he honed the formula for commercial success that was to become his modus operandi throughout his business life.

Says a former employee: 'He wasn't too concerned with content, but he was an astonishingly prolific advertising salesman. First he sold ads to equipment manufacturers, and only then did he worry about providing the figleaf of editorial in between.' It's a hard-nosed view of publishing that has served him well.

In 1984, he broke into adult publishing when he secured the rights to publish Penthouse in the UK. Often described in headlines as 'Dirty Dick', he has been accused by his many enemies of being a pornographer - 'the Prince of Porn', 'a foul-mouthed bully', 'a philistine', 'Dumb-down Dick' intent on debasing our national culture. All in all, he is consistently portrayed as a thoroughly bad egg, quite undeserving of his success.

The starting point of all criticism is his barrow-boy persona. Not only is he flash, he is famously foul-mouthed, apparently incapable of uttering a sentence without swearing. 'I couldn't believe it,' said a well-known business figure after a recent encounter. 'We had never met him, he wanted something from us, yet he was effing and blinding all through our meeting.' (Desmond got what he wanted.) According to one former employee who amused himself in meetings by counting the profanities, Desmond once crammed seven 'fucks' or 'fuckings' into one sentence.

His management style also includes outbursts of violent temper and bullying, say those who've worked with him. He once threw a chair at a wall just millimeters to one side of his right-hand man at the Daily Express, Paul Ashford, simply because he didn't like the art direction in a magazine.

On another occasion he is said to have told an executive to stand on a table, pull down his trousers and call himself a c***, because he was late for a meeting.

Although Desmond's spokesman denies that there was any intent to harm Ashford, I can personally testify to Desmond's muscular approach to HR issues. Twenty years ago he employed me as a copywriter in his advertising agency De Monde Advertising. Perhaps it's a mark of the space salesman's disdain for 'content', but I would have to call him an equal opportunities employer, because he recruited me off the street, unperturbed by my lack of experience or talent. I had never written an ad before, yet more than once Desmond described me as his 'star f*****g copywriter'.

My desk was immediately outside his office and many times I witnessed him yelling obscenities at his staff for minor failures. Despite being decidedly porky at the time, he had an intimidating physical presence which he used to marked effect. Even his elder brother - whom he employed as an account director - seemed afraid of him. Strangely though, notwithstanding my own manifest lack of competence, he never raised his voice at me. And when the inevitable parting of the ways came, he was even apologetic, offering me a job elsewhere in the organisation.

His boorishness is reflected in his choice of publishing sector, say critics. Although 'adult material' - his preferred term for what you and I would call porn - provides a diminishing portion of turnover, it has been the cash powerhouse driving his growing empire.

Top-shelf titles such as Asian Babes, Big Ones and Horny Housewives are relatively small beer. Company filings for 2002 show that broadcasting - ie, the Fantasy Channel - was responsible for pounds 33.8 million of Northern & Shell's turnover but contributed a disproportionate pounds 8.8 million to profits. Says Philip Beresford, author of the Sunday Times Rich List: 'The adult material is especially significant, because it generates huge amounts of cash and allows him to rapidly pay off borrowings on acquisitions.'

Few would argue that sex magazines reflect well on anyone involved in their production or consumption. But for many, including an unlikely alliance of feminists, liberals, conservatives, commercial rivals and disgruntled journalists, Desmond's adult material has greater significance. In their view, it raises serious questions over his entitlement to run a national newspaper.

Critics also point to the questionable nature of some of his associates. Editorial director Ashford is a softly spoken intellectual with a PhD. The reputations of his two managing directors, however, verge on the brutal. Martin Ellice is known within Northern & Shell as 'the Rottweiler' for his outstandingly savage temper. Commercial director Stan Myerson was deputy sales director on the Daily Express before he was sacked for gross professional misconduct in 1994. In May this year back at the Express, he was the subject of controversy when it was revealed that he had entered into a legal but some say unethical deal to reward a media agency with confidential kickbacks for placing advertising in the company's titles. Myerson's former boss at the Daily Express was MD Andrew Cameron.

His view: 'Myerson was probably the most distasteful and unpleasant man I met in all my newspaper years.'

Desmond's controversial donation of pounds 100,000 to the Labour Party in 2001 led to awkward questions of propriety for the Government and one of Tony Blair's more embarrassing TV appearances.

Grilled on Newsnight, he visibly squirmed as Jeremy Paxman read out a list of Desmond's more salacious publications.

The case that Desmond is not a very nice man certainly seems overwhelming.

But the idea that he is somehow uniquely unfit to run a newspaper is more debatable. There is another construction to put on the evidence. That is based on the view that the arguments against him are partial and selective, mounted by people with a variety of undeclared political and commercial agendas.

Take Desmond's notoriously abrasive personality. In the office he may be a foul-mouthed philistine, but he is not alone in that. Many people speak of him as a warm and amusing friend in private. 'He may eff and blind at work, but at home he's just an ordinary man. Dinner at his house is an ordinary family dinner. He's warm, funny and very generous,' says Labour peer Waheed Alli.

In fact, Desmond is on record as saying that for him domestic life is his refuge. 'Home and family are what really matters. Work, the rest ... its just a game.' Lord Stevens, the ex-boss of Express Newspapers, was amazed to discover on being invited around for a meal that Desmond's wife did the cooking because the family has no in-house staff.

He also has a more giving side to his nature than his public image would suggest, say friends. 'He is one of the most generous people I have come across,' says Alli. 'There is a personal compassion that is really out of proportion to his public image.'

Desmond recently told the Channel 4 documentary The Real Richard Desmond (watched by two million people): 'I like to give - but quietly.' What's more, friends say that unlike other successful purveyors of erotic material such as Hugh Hefner, he does not live the lifestyle. Remarks a businessman who has been a close friend for 15 years: 'I'm sure he's as red-blooded as the next man, but I don't think he samples the product. It's just business to him.'

The truth is that high levels of aggression are and always have been a characteristic of successful, powerful men. Desmond may be no worse than the likes of Sir Alex Ferguson, retail magnate Philip Green and advertising guru Charles Saatchi, all of whom have famously short fuses.

As an operator, he is sharp, shrewd and daring, say those who know him.

'He's very bright, and fast,' says longtime associate Keith Harris, chairman of stockbroker Seymour Pierce. 'For instance, when we were going over the spreadsheets while acquiring the Express, he could see the implications in changing assumptions almost immediately.'

But he is much more than a geezer with a head for figures. 'He has a fantastic eye for detail,' Harris adds. 'He's determined, indefatigable, confronts problems head-on and - counter to public perception - he thinks strategically with a long-term view.'

He's at his best, however, when he is involved in a fight, preferably one-on-one. In fact, he seems to go looking for them, says Kelvin MacKenzie, chief executive of the Wireless group and former editor of the Sun. 'Richard is a warrior. He loves a battle - it brings out the best in him as a businessman.

After all, he launched OK! when most thought that Hello! was invincible.

Now OK! is comfortably ahead. Just recently, he took on IPC's Now with New! (another celebrity title) and, from a standing start, it's selling 350,000 a week.'

Next in Desmond's sights is Associated's Evening Standard in London, which he plans to take on with the launch of an afternoon freesheet. He has already succeeded in turning it into a grudge match after he went to court earlier this year to defend his right to name the paper The Evening Mail. The judge ruled against him on the grounds that it would give the impression of belonging to the Daily Mail. Much to Desmond's pleasure, the Office of Fair Trading is reviewing Associated's exclusive deal with London Underground to carry its Metro freesheet at Tube stations, which locks him out of access to vital distribution points.

Desmond is not only a fighter, he is also on occasion a gambler. A key feature of his success is his preparedness to risk everything - at precisely the right moment. 'He's a mixture of insight and insanity,' says former media-sector analyst Neil Blackley.

In the early '90s, for example, Desmond took two huge risks at the same time. The first was starting up Fantasy Channel before securing a telephone subscription management deal with Sky. The other was taking OK! magazine from a monthly to a weekly - the first time such a manoeuvre had been tried. 'He was able to do this because he was a private company fully owned by himself,' says Blackley. 'No public company would have been prepared to take the same level of risk, and that is his advantage.

'He used the money from a previous trade sale to finance them, but, nevertheless, they were costly moves and he came within six weeks of going under. He was personally writing cheques and finally took out a pounds 1 million overdraft.'

But both moves paid off handsomely, setting up businesses that later allowed him to bid for the Express group.

Subsequently, when sales of OK! were flagging, he took the risk of making massive payments to lure top celebrities onto its pages, in the hope that they would boost readership. He paid Michael Jackson pounds 2 million for pictures of his baby, pounds 1 million to David and Victoria Beckham for exclusives of their wedding, and he famously promised Catherine Zeta-Jones and Michael Douglas pounds 1 million for their wedding snaps. Again, the gamble paid off.

Lately, OK! has been selling 490,000 copies a time, compared to Hello!'s 347,500.

But his Achilles heel remains the business of pornography. He has to put up with the tag 'the pornographer Richard Desmond' as if his activities were illegal.

It's not just Desmond who points out that Northern & Shell's output is sanctioned by the law of the land. 'I don't understand the porn argument used against Desmond,' says Alli. 'Is it illegal? No. Society allows these things. So why should he be stigmatised for it? We should defend this freedom, not attack it.'

As Desmond's spokesman is quick to point out, pornography isn't even the worst thing going on in most newsagents. 'Look at tobacco. Nobody says that Kenneth Clarke is unsuited to public life because he is deputy chairman of BAT, whose products kills tens of thousands of people every year.'

He also makes the point that Desmond isn't the only magnate to make money from erotica. Many respectable business are involved, from high street retailers to media companies. Murdoch, for instance, seems to have no problem running adult channels on Sky. Ditto cable operators NTL and Telewest.

Even Associated Newspapers, owner of that keen champion of family values the Daily Mail, accepts contact ads in its classified ad paper Loot. It's hard to avoid the conclusion that Desmond has been singled out for special treatment by his critics. A look at the events surrounding his acquisition of Express newspapers and the subsequent brutal surgery required to turn it around may help explain why.

Desmond bought the Express, as it was then, from Lord Hollick's United Media Group in November 2000. Hollick had merged his own company, MAI, with United Newspapers in 1996 but, like those before him, had failed to stem either the declining circulation of the Express (it had been above four million in the 1950s) or its mounting losses. In summer 2000 he decided on a quick sale. There were various bidders - the Hinduja brothers, the Barclay brothers (who tabled a bid estimated at the time at between pounds 75 million and pounds 100 million), and mid-market rival Associated Newspapers, whose bid was said to be close to pounds 180 million.

Associated's was by far the best offer, but two factors weighed heavily against it. 'Hollick was still bruised by the Monopolies and Mergers Commission ruling against his earlier proposed merger with Carlton Communications,' explains a senior newspaper industry figure. 'The Associated bid would clearly have been referred. Hollick had no stomach for another protracted battle followed by humiliating defeat.'

Desmond, meanwhile, had been stalking the Express for at least 10 years.

He had made various approaches in the '90s but had been rebuffed. Now that he saw the titles on the market, he swooped. Desmond claims he thought the price would be about pounds 400 million, but Hollick set the bar at pounds 125 million - on the condition that Desmond moved fast.

Within four weeks he had raised the money. Desmond put up pounds 28 million of his own cash, and his new bankers, Commerzbank, supplied the balance.

He had pulled off a major coup, snapping up the Express from under Associated's nose, transforming himself into a national figure and earning the undying enmity of Associated in the process.

With customary vigour, he set about turning the Express into a profitable enterprise, his most urgent task to cut costs. The assumption that there were large amounts of fat to trim was the basis of his bid. 'The Express had long been run without care and attention - a typical subsidiary of a big group,' says Harris, who advised Desmond and helped arrange the finance. 'We knew that part of our edge was the ability to bring ruthless attention to cost.'

Desmond was aided in that by having former Express man Myerson in his team. In the words of one commentator, 'He knew exactly where the bodies were buried.'

So out went free parking spaces, taxis on account, first-class travel, four-star hotels, and expense account meals. He sold off internet operations and attacked costs across the board. He took a similarly swingeing approach to staffing levels: 150 of 400 journalists were made redundant. Staffing levels in some departments were slashed by 85%.

Desmond was prepared to think the unthinkable in his determination to axe spending. For instance, he encouraged 'synergies' - common sourcing of material in different publications. In particular, he ran material from celebrity magazine OK! in the Express. This common sourcing is seen as heresy by many in the industry. And in a move reminiscent of Murdoch's controversial treatment of printers in the '80s, the work once done by 24 sub-editors at Express HQ in London was shipped out to Broughton in Lancashire. The reward has been cost-savings of pounds 40 million a year.

But it would be unfair to describe Desmond as a mere cost-cutter. He also claims to possess a coherent vision and strategy for the paper, and that is for the Daily Express to outsell the Daily Mail (in his son's lifetime, if necessary). His strategy is to attack his main rival where it is most vulnerable: on its aggressively doctrinaire right-wing attitudes.

'Our mission is to go against the Mail in the mid-market,' explains editorial director Ashford. 'While the Mail is backward- looking, run by preachers, the Daily Express has zest. It still reflects many of the same mid-market concerns, but has a much kinder inflexion and a much lighter touch.'

He has also taken measures to grow sales. 'He invested heavily in the papers - but in marketing campaigns costing tens of millions of pounds, rather than product quality,' says Chris Shaw, chairman of media agency Universal McCann. 'And he cut the cover price of the Express by 5p.'

He even introduced a Sunday edition of the Star, the first new Sunday paper since the Sunday Correspondent in the mid-80s. It is now selling about half a million copies, providing largely incremental revenue.

The strategy has drawn praise from experienced newspaper commentators.

Says MacKenzie: 'People can talk all they like about the great old days of the Express group, but they should bear in mind that Lord Hollick had run it into the ground before Richard took over. He has brought fresh investment to the Star, which has paid off handsomely in circulation, and with the Express and Sunday Express he has steadied the ship after years of decline.'

But it was the practice of common sourcing that drew most flak - principally from journalists. He started using what was essentially the same material in different publications. In particular, he was prepared to recycle items from OK! in the Express and from his adult titles in the Star. In most other businesses this would be simple common sense. But for those who believe that newspapers (as opposed to magazines) have a higher moral purpose and that journalists are its guardians, common sourcing was an open attack on the integrity of the fourth estate.

He also intervened personally in the choice and slant of stories. 'People had never witnessed a hands-on proprietor before,' says former Daily Express journalist David Hellier. 'He started interfering with the news agenda, introducing things he was interested in and bringing in stories that he thought would sell newspapers, rather than for their traditional news values.'

Of course, the truth is that proprietors have always done this, but they tend to do so by phone rather than in person. It's also true that he started using his new-found editorial power to perpetuate feuds with his rivals.

For instance, he questioned the financial viability of Hollinger, the company run by Telegraph proprietor Lord Black. Black issued a libel action, Desmond responded in kind, although the pair have now buried the hatchet. Desmond also accused the late Viscount Rothermere - father of the present chairman of Associated Newspapers - of being a Nazi.

When it comes to redefining what newspapers and journalism are about, its hard not to draw parallels with Murdoch's controversial treatment of printers in the '80s. He, too, destroyed decades-old working practices and threatened the interests of a deeply entrenched and powerful industrial group. The difference is that Desmond has angered rival newspapers and journalists, and they enjoy an almost unique ability to shape our perceptions of him.

'It is no coincidence that detractors refer to him as Dirty Dick,' observes Ashford. 'It's an echo of 'The Dirty Digger', as Murdoch was referred to when he first entered the UK newspaper industry.'

Journalists may not like it, but there was harsh commercial logic on Desmond's side. It was dumb down or close down, says Alli. 'He's made the commercial imperative absolutely clear. It's about selling newspapers, not exposing the truth. He said to them: 'Do it my way. No-one's reading it your way.' Journalistic integrity is often used to justify bad business practice.'

The idea that newspapers are first and foremost businesses may not be a particularly palatable message, and Desmond may not be a particularly palatable character, but the newspaper industry has no divine right to exist. Readers seem more interested in celebrity these days than the minutiae of the latest developments in Westminster. Desmond seems to grasp this and doesn't care who knows it.

< INTERNATIONAL MUSICIAN Launched 1974 (shut) PENTHOUSE Launched 1964 Acquired 1984, sold to IPM April 2003 Circulation uncertified 45,000 Full-page colour ad pounds 2,400 FORUM Launched 1968 Acquired 1984 Circulation uncertified 52,145 Full-page colour ad pounds 2,250 ASIAN BABES Launched 1992 Circulation uncertified Full-page colour ad pounds 2,250 FOR WOMEN Launched 1992 Circulation uncertified 38,000 Full-page colour ad: pounds 2,250 OK! MAGAZINE Launched 1993 Circulation 489,882 Full-page colour ad pounds 16,170 ATTITUDE Launched 1994 Circulation uncertified 90,000 Full-page colour ad pounds 3,500 DAILY EXPRESS Acquired 2000 Circulation 1,015,326 Full-page colour ad pounds 31,500 THE STAR Acquired 2000 Circulation 928,710 Full-page colour ad pounds 16,782 New! Launched 2003 Circulation 339,035 Full-page colour ad pounds 13,475 STAR SHINES IN DESMOND'S EXPRESS NEWSPAPER STABLE Title Aug '00 Aug '01 Aug '02 Aug '03 Sunday Express* 969,009 876,421 1,002,763 1,011,601 Daily Express* 1,039,738 963,433 1,026,669 1,015,326 Daily Star* 560,070 638,629 753,927 928,710 Daily Star Sunday** - - - 524,460 *Bought from United Media Group in November 2000. **Launched September 2002 SOURCE: ABC CELEBRITY TITLES WEATHER THE MEDIA RECESSION Title Jan-Jun '00 Jan-Jun '01 Jan-Jun '02 Jan-Jun '03 OK!* 455,162 651,513 575,307 489,882 New!** - - - 339,035 *Launched 1993. **Launched February 2003 SOURCE: ABC HOW MUCH MONEY DOES DESMOND REALLY MAKE? Figures claimed by Northern & Shell ('02) Turnover pounds 405m Profit pounds 60m Figures for Northern & Shell Network according to Companies House ('02) Turnover pounds 387m Profit pounds 9m

How much money Northern & Shell Network, the principal holding company for Desmond's media interests, makes is a matter of interpretation. The figures, as given by Desmond, show a profit of pounds 60 million on a turnover of pounds 405 million for 2002. Yet those filed with Companies House on behalf of Northern & Shell Network show a total operating profit of pounds 9 million on a turnover of pounds 387 million for that year. Philip Beresford, author of the Sunday Times Rich List, explains the difference: 'Northern & Shell has counted in the chairman's pension fund contribution of pounds 21 million to the profit and has forgiven pounds 9 million of debt of Desmond's ultimate company RCD1, then added this back to the pre-tax profit.' The Mail on Sunday reported a predictably hostile story on the differences in May.

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