Knives at Five: Can Richard Desmond rescue his new channel?

He's sacked a raft of executives and has big plans to take the TV world by storm. Nick Clark asks industry insiders what they'd do in his shoes

Richard Desmond has wasted no time in razing the broadcaster formerly known as Five to the ground, and has already set about building the all-new Channel 5 on top of the smouldering ashes. The media tycoon, who sealed a £103.5m deal for the beleaguered broadcaster at the end of July, yesterday took his first radical step in reshaping it.

Despite a dramatic cost-cutting drive during the downturn, Desmond has left employees reeling as he axed seven out of the nine executive-board directors and revealed plans to slash 80 further jobs. The brutal cuts have been dubbed "the night of the long knives".

His company, Northern & Shell, which owns the Express and Star titles as well as OK!, released a statement saying that this was "the first of many initiatives that will see a new streamlined Channel 5 make enormous strides over the coming years". As part of the statement, Desmond revealed that he has scrapped the "Five" brand and will turn back to its original launch-name of Channel 5. Now all eyes are on his next move, as he sets about building a business that he wants to "go toe-to-toe with the biggest players in the TV world".

But what does that world make of the prospect? Greg Dyke, the former director general of the BBC, says: "Desmond is a brave man; Channel 5 hasn't made any money since it started, and it was clearly in difficulties when he bought it. I wish him luck; it would be great to make it work." Among the senior departures was Dawn Airey, Five's chairman and chief executive. However, it is understood that she was asked to stay and will be managing the handover process over the next few months, before joining the broadcaster's former owner, RTL.

Only Five's sales director, Kelly Williams, and Jeff Ford, its managing director of digital channels, remain from the senior team.

While some media insiders are speaking of their surprise that so many senior figures have been forced out, the cull was "to be expected," a source at a rival broadcaster says, adding that Channel 5's payroll of 300 employees was "a lot" for a business of its size. "It is a necessary step. In the past, Five has overpaid for content, and the advertising revenues are not sufficient to post a profit," one media expert claims.

The advertising market has only recently pulled itself out of the mire, following the worst ad recession in living memory. Channel 5 also faces structural issues as TV audiences are fragmenting with the launch of more digital channels, and the popularity of online catch-up TV grows.

One former manager at Five says costs have to be slashed if Desmond wants to turn a profit. "All that Richard can do is take an axe to costs and get rid of great swathes of management." He continues, "Richard will probably cut the programming budget, as he needs to take £40m out of the business to make it profitable." He added: "He can do it too, it isn't rocket science."

Yet, Dan Sabbagh, co-founder of media news website Beehive City, believes that the dramatic management cuts could cause severe headaches for the broadcaster's new owner.

"When you get rid of almost all the programming team you lose a dense network of relationships built up over many years. It will save money but will you get the best programming ideas?" He adds: "Suddenly you have a bunch of professionals moved out and replaced by a bunch of amateurs who think they can pick programmes. Which independent producers are going to approach them now? Desmond will find that running a newspaper is less complicated than running a TV show".

Desmond will be watching developments at rival ITV very carefully. The UK's largest free-to-air broadcaster this month revealed plans to boost revenues from its online operations as well as to move some of its channels onto Sky's pay-TV platform. This formed the bedrock of a move to become less reliant on advertising, and should it prove successful it would be a useful template for Desmond's new-look Channel 5.

He has pledged to invest £300m in the broadcaster for each of the next five years, but Sabbagh is not sure this will be enough.

"To be in competition with ITV and Channel 4, you have to spend an awful lot of money on TV shows," he comments, and he questions whether Desmond is really preparing to wear what could be a £90m loss this year.

While managing costs is crucial for the Channel 5, rivals are in no doubt that the channel's line-up will have to be heavily scrutinised. The role of bringing in new shows has been handed to Jeff Ford, who has been promoted to become director of programming following the departure from the company of Richard Woolfe.

Tellingly, Ford has a background in programme acquisitions, with relationships particularly with the US, rather than in commissioning original content. "The programming role will be crucial, but overhauling it will be expensive. Desmond has been canny to put someone into that role already," the source at a rival broadcaster adds.

"He would be searching for a new head of broadcasting from a small talent pool. That gets even smaller when you're talking about someone who would work for Channel 5 and Richard Desmond."

Currently, the broadcaster's most popular shows include CSI and The Mentalist. Yet, one of the biggest headaches for the channel – which stopped many of Desmond's rival bidders cold – are the expensive and lengthy contract deals for movies.

Ford will have to keep the US sweet, but also look to negotiate better deals in the future, experts said. "They did overpay for those," one producer says. "But those are the shows getting bums on seats. Leaving aside the cost, the acquisition strategy has been right."

There has already been talk about resurrecting TV classics including Top of the Pops. Desmond also says he wanted to show Coronation Street, The X Factor and Panorama. More likely in the short term is Big Brother. The reality show has been dropped by Channel 4 after 11 seasons, and Desmond is keen to bring it to Channel 5.

One producer says there is a chance to commission more British content: "There should be more content coming from closer to home. Programmes like The Gadget Show and The Hotel Inspector show that the right content can work." Few believe that Channel 5 will move into the costly and complicated business of producing the shows itself. One media industry expert says: "The expectation is that Desmond will turn Channel 5 into a UK version of The Entertainment Channel in the US. He will look to share content between the channel and his publishing assets, with celebrities featured in OK! or his newspapers."

While others quibble, one thing that is clear is his plan to use his other businesses to promote the new Channel 5. Enders Analysis founder Claire Enders said when the deal closed that his edge was in the "free publicity" from his publications. "He will build the buzz and the glamour in the publications, which is something the channel has been sorely lacking," she said.

Despite very public utterances to the contrary, few in the British media industry believe that Desmond will keep Channel 5 as a public service broadcaster, adhering to the codes on programming that this role entails.

Dyke says: "I can't believe it will remain a public service broadcaster. In the end, the regulator is likely to loosen the obligations."

Today, however, the dust is still settling.

"It's very sad for the people there," said one independent producer who knows the ousted management well. "Whether Desmond's strategy will be a success is a different matter. We have to wait and see what happens – who he brings in, the new programming and how much he invests in the channel."