RICHARD DESMOND would like us to believe that he is a loveable rogue. The soft porn magazines have been sold, although you can still watch The Fantasy Channel if you must, and there is always an entertaining story to be told, about butlers delivering daily bananas or the like. It is not the conventional route to a £2 billion fortune but it has landed him ownership of the Daily Express and the arrival of the celebrity-friendly OK! magazine.
When it comes to turning a penny, it is hard to fault the proprietor. He bought the Express titles for a measly £125 million. After a wave of redundancies and wheezes such as charging incoming callers, profits at the newspapers are £38 million, and the titles could fetch £500 million. You can argue about the quality of the Express, where the front page is the last resting place for Diana, Princess of Wales, but the money is there.
What is troubling is the pay. Mr Desmond earned £27.3 million last year — down admittedly from the £51.7 million in 2004 and the £46.2 million the year before that. It is a lot of money in the real world, although the amount involved is not the point. Nor is it technically anybody else’s business: Mr Desmond owns 100 per cent, so how he is paid is simply a matter for him.
The strategy, though, at Mr Desmond’s Northern & Shell is to pay out nearly all of the operating profits in pay and pension contributions. This year, of course, his pay and pension payments are down to half a million a week. That is because effort, and money, has been expended on launching OK! in the US, Mr Desmond’s biggest move since the purchase of the Express in November 2000.
OK! in the US has built up a circulation of 534,000, although start-up losses were £27.5 million. The title is in the top 15 by newsstand sales already, which sounds impressive, although most magazines in America are bought by subscription. OK! could well become very profitable, and a lot has been invested in it — but the question is whether one big launch in five years is enough activity in the era of the digital threat.
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Paying out the lion’s share of profits into the owner’s pocket isn’t good for the long-term development of any media business. It does not necessarily impress talented employees. More importantly, when the future of consumer media is being called into question, is Mr Desmond’s empire investing and developing enough to safeguard its long-term future? Or can Express readers be trusted to remain loyal for ever?