Richard Desmond has built a British publishing empire by playing his own tune. It doesn't play quite as well in the U.S., but give him time.Richard Desmond will do anything to drum up business. When he launched his celebrity magazine OK! in the U.S. 19 months ago, he paid Jessica Simpson, then a darling of rival Us Weekly, an undisclosed fee to appear on five of his covers, a practice scorned in the U.S. He ran provocative billboards in Times Square taunting the magazine category's king: "Avoid Dull People." He slashed the newsstand price from $3.29 to $1.99, and then to 25 cents for one promotional issue, riling other publishers.
Such bold tactics have worked brilliantly for Desmond back home in London, where he has built up a $1.3 billion publishing fortune that includes the British edition of OK!, the nation's number one celebrity weekly. But getting a foothold in the $1 billion (estimated revenues) U.S. market for celebrity magazines is a challenge. So far he has changed publishers three times and his design once. In single-copy sales of 330,000 (first half of 2006), OK! falls far short of People at 1.5 million and Us Weekly at 1 million. Desmond, 55, has poured $83 million into the so far unprofitable venture. "Anyone who says I can't do it, I'll prove the bastards wrong," he says.
There is a basis for Desmond's bravado. He has successfully introduced at least 60 magazines. His London holding company, Northern & Shell, which includes newspapers, magazines and adult television channels, posted sales of $920 million in 2006, up 9% from the previous year. Operating income (in the sense of earnings before depreciation, amortization and taxes) was a handsome $156 million, and that was after such costs as the rent that Desmond personally collects from Northern & Shell for its headquarters space.
Desmond has been selling himself for 40 years. His father, who lost his hearing after contracting a disease while on a business trip to Nigeria, brought 5-year-old Desmond along with him on sales calls to write down what prospects were saying. But his father gambled away most of his money. His parents divorced when Desmond was 10. He moved into a garage apartment with his mother, who went to work as a secretary. At age 14 he quit school to become a drummer. "I wanted money and self-esteem, and I needed something to get me there quick," he recalls. To buy his own drum set, Desmond worked in the cloakroom of Manor House, a popular London music venue in the 1960s.
While Desmond became a decent drummer--these days he plays on his Ludwig Vistalite set at charity events with his band, RD Crusaders--his true talent was in sales. At age 15 he dressed up in his much older brother's suit to land a job selling newspaper classified ads over the phone; he was hired on the spot. Within months he won a car for the best sales figures but then was forced to quit before his age was discovered. Desmond moved on to selling ads for Beatles and Rolling Stones fan magazines and then opened a music store selling records and eventually equipment.
But Desmond, then 22, had bigger ambitions. Using his music world connections and $60,000 from an investor, he started International Musician. Catering more to musicians than fans, the magazine was loaded with reviews of instruments and equipment, written by fellow musicians. Advertisers like Yamaha and JVC loved it. Desmond used the same formula to create as many as 30 specialty publications on such topics as bicycles, videos and stamps.
Then came the phone call that changed Desmond's course. Penthouse wanted him to become its U.K. licensee. Desmond hesitated, asking his then girlfriend, and now wife of 24 years, what she thought. "She told me as long as I don't date the dollies it was okay," recalls Desmond. He signed up and ran with the idea the same way he had with his hobby titles; soon he was selling dozens of magazines such as Asian Babes, Posh Housewives and Skinny and Wriggly.
When two female members of Parliament attacked the sexist nature of his lad porn business, Desmond found an opportunity, launching an adult title catering to women. Called For Women, the magazine sold out its initial print run of 60,000 in one day, and 600,000 copies within a month. Desmond also dabbled in adult television, launching soft-porn channels such as Red Hot and Television X--The Fantasy Channel.
A tussle with his distributor in 1991 showed Desmond's survival skills. When the distributor, a much larger company that owned one of Britain's biggest printing plants, backed out of their contract and stopped distribution of his magazines, Desmond took his business directly to retailers and threatened to sue. The parties settled: The distributor got Desmond's hobby titles; Desmond got $119 million in cash and kept the adult magazines. "I suppose I should have been a pussycat and rolled over," says Desmond, "but I didn't."
When he needed to, Desmond also paid big money for content. Photographs of Michael Jackson's first newborn were delivered to OK! offices by armored car. Catherine Zeta-Jones and Michael Douglas gave OK! the exclusive photos for their wedding (and when Hello! secretly snapped their own, the stars and OK! won a suit).
When United News & Media was selling its newspaper business in 2000, Desmond jumped in against several of London's high-profile press barons, such as the billionaire Barclay brothers, Conrad Black and Jonathan Harmsworth, better known as Viscount Rothermere. Desmond says he personally closed the deal when he sent a letter to the company's then chairman, whom he had met at a soccer match six months before. He promised to wrap up the sale quickly and quietly. Five weeks later Desmond, who paid $190 million (including $150 million in assumed debt), became the proprietor of three newspapers-- Daily Express, Sunday Express and tabloid Daily Star--with a combined circulation of 2.5 million.
If the move was an attempt to gain a modicum of respectability, it backfired. His rivals lambasted him in their papers for his porn empire. The media nicknamed him Dirty Des. Though he had always felt like an outsider, he was surprised by the viciousness of the attacks, losing 14 pounds and any illusions that he would be accepted by the upper crust. But it didn't take long for Desmond to recover. He was soon calling Rothermere, who inherited his $1.6 billion fortune, a "lucky sperm."
Desmond slashed costs by dumping online ventures, eliminating more than 500 jobs and moving production from London to Lancashire. He has had a tough time competing with his nemesis Rothermere; his Express titles, which compete directly with Rothermere's Daily Mail, have lost 20% of their circulation since Desmond's arrival, while Rothermere's circulation is flat (according to abc data). He's had more luck with the lower-end Daily Star, changing its format, adding more photographs of bikini-clad girls and launching a Sunday edition. Its circulation is up 44%.
Analysts say Desmond's newspaper group is worth $800 million. "The punch-up with Lord Rothermere was the best thing for me," says Desmond.
When a U.S. publisher offered to buy OK! for $320 million in 2004, hoping to expand the brand worldwide, Desmond thought it was such a terrific idea he rejected the offer and began planning his own overseas invasion. He sold his sex magazines, which were more embarrassing than they were worth, for $36 million and focused on making OK! an international brand. He began with Australian and American launches of OK!, figuring the two English-speaking markets would be easy to conquer.
In 2005 Desmond sent his OK! editor Sarah Ivens, 31, to New York City to start the U.S. edition. She was unprepared for what awaited. Many accepted practices in Britain didn't travel well. Paying stars was scorned. "We didn't realize it would be such a scandalous admission. They are a business and we are a business, so why not?" says Ivens. Its oversize pages didn't fit in retailers' racks; the bold red typeface looked cheap and led to unflattering comparisons with the National Enquirer. Cutting the cover price annoyed newsstand owners.
The company did a makeover, shrinking pages and changing the words and pictures on the cover to make it look and feel more like its rivals. So far it is still struggling to find an identity. "There is no buzz about OK!," says R. Lash Fary, who heads the entertainment marketing company Distinctive Assets. Fary says he prefers to place his clients' stories in the magazines with more readers but does admit that he calls up OK! when he wants to get more pages and better photographs.
Desmond gets sales updates three times a day. He meets with staff, many of whom have worked for him for more than a decade, three times a week. On Mondays they discuss profits; on Wednesdays they discuss the American version of OK! and marketing; and on Fridays editors brainstorm stories. He's enlisted his 17-year-old son as online consultant to help revamp his Web sites. This year he plans to cash out of the porn business by taking his adult television business public. Proceeds of the offering will be put back into magazines and Web sites.
In October Desmond lured Thomas Morrissy away from Entertainment Weekly, where he had spent a decade as publisher, by offering him an equity stake. An amateur drummer and musician, Morrissy also hit it off with Desmond. Since joining U.S. OK! Morrissy has lured new advertisers, such as Revlon (nyse: REV - news - people ) and Diet Coke, and is hiring 14 sales and marketing reps across the country. He has taken several advertisers to see The Who in concert recently and brought them backstage to meet Desmond pal vocalist Roger Daltrey.
U.S. OK! circulation is still shy of the 750,000 promised to advertisers. But ads brought in $16 million last year, and Desmond expects to break even by August. Not that he would be satisfied: "I didn't start this to break even, I started it to be the number one celebrity magazine in the world."
Desmond has so far signed ten licensees for foreign editions of OK!, including one in China, putting it ahead of People and Us Weekly in international reach. He says Tori Spelling chose to tell her pregnancy story to OK! because it would appear in multiple editions around the globe. Then there are the brand extensions-- OK!-branded boutiques (in the U.K.), wedding dresses and, imminently, credit cards.
