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Viacom to buy Channel 5 in £450m deal Richard Desmond in the money with sale of Channel 5
(about 14 hours later)
Viacom, the American television giant behind MTV and Nickelodeon, is set to buy Channel 5 in a £450 million deal that will net a huge profit for Richard Desmond. The media mogul Richard Desmond was last night celebrating as he more than quadrupled his money by selling Channel 5 to America’s Viacom for £450m – less than four years after buying it.
This is the first time a US company has bought a British public-service broadcaster. Regulator Ofcom is likely to rubber-stamp the acquisition as Viacom already broadcasts in the UK. The deal, which sees MTV owner Viacom become the first US company to buy a British public-service broadcaster, marks a stunning return for Mr Desmond – even though it was mooted he wanted £700m initially.
Toby Syfret of Enders Analysis said Viacom will need to show it can produce programming that has a mainstream appeal for Britons and it would be “a mistake” to rely on imported American shows such as Jersey Shore and SpongeBob SquarePants. “The whole service has got to have a broad national appeal,” he said. The cigar-smoking mogul, who owns the Daily Express, Daily Star and OK! magazine, confounded the sceptics by revitalising Channel 5, after buying it for £103.5m from European giant RTL in 2010.
Ofcom rules require half of Channel 5’s programming to be original UK productions and it must broadcast 260 hours of news a year. Channel 5 has a 6 per cent share of TV viewing. Mr Desmond slashed costs, bought the rights to the ratings winner Big Brother, and claimed to have made his money back in three years as the advertising market improved. When Viacom announced the acquisition, it noted that Channel 5 was the “only commercial public-service broadcaster to consistently grow viewership share in recent years”.
The acquisition will more than triple Viacom’s share to 8.4 per cent from 2.4 per cent. BSkyB already sells Viacom’s TV advertising in Britain, but it is understood the US giant may not hand Channel 5’s ad sales to Sky in the near future. Many were surprised when Mr Desmond bought Channel 5 as he had little experience of television, apart from running  adult channels. RTL was a broadcasting behemoth whose assets include the X Factor production firm Fremantle yet it had been unable to make a success of Channel 5.
Selling Channel 5 is a coup for Desmond, proprietor of the Daily Express and Daily Star, even though it was mooted he wanted £700 million. He bought it for £103.5 million in 2010. Mr Desmond admitted in a speech last year that he had fretted about buying Channel 5, recalling how he had a banker’s draft for £103.5m drawn up before he completed the acquisition and got every member of his board of directors to pass the cheque around the table.  “I asked each person if they thought we should do the deal,” he said.
Sky saw a 74,000 jump in TV customers, including online subscribers to Now TV, in the last quarter. Chief executive Jeremy Darroch said analysts who had forecast its satellite TV subscribers would fall were “just wrong”. The 62-year-old has not explained why he has sold Channel 5 and those close to him gave no indication what he might do with the windfall.
Nine-month operating profits fell 8.5 per cent to £910 million as Sky invested in internet-connected TV technology. Revenues leapt 6.6 per cent to £5.67 billion. The shares rose 4 per cent to 915.5p. Channel 5, whose shows include Neighbours and  Ice Road Truckers, has a  6 per cent share of British  television viewing. The acquisition will more than triple Viacom’s share to 8.4 per cent from  2.4 per cent.
Viacom already operates MTV, Comedy Central and the children’s channel Nickelodeon. The regulator, Ofcom, is likely to rubber-stamp the acquisition because Viacom is an exisiting British broadcaster.
Viacom’s chief executive, Philippe Dauman, said: “Viacom’s global resources, technology and expertise will help Channel 5 develop even more compelling programming and provide content to consumers. In addition, we will introduce our popular content to new UK audiences.”
Toby Syfret of Enders Analysis said Viacom will need to show it can produce programming that has a mainstream appeal for Britons and it would be “a mistake” to rely on imported shows.
Ofcom rules mean that half of Channel 5’s programming must be original UK productions. It must also air 260 hours of news.
BSkyB already sells Viacom’s  television advertising in Britain, but it is understood that the US giant may not hand Channel 5’s ad sales to Sky in the near future. 
If Sky does handle Channel 5’s sales, it will have close to  28 per cent of the TV ad market, against 26 per cent for  Channel 4 and 44 per cent  for ITV.
That “could be more of a threat to Channel 4 than ITV”, according to Liberum Capital, which said: “ITV’s main appeal is the mass-market audience of ITV1, which Five  cannot replicate.”