Ghost readers.

Media criticism.
Aug. 18 2004 7:00 PM

Ghost Readers

Is everybody in the newspaper business inflating circulation?

(Continued from Page 1)

With standards like these, it's no wonder circulation employees engaged in numerical fiction to reach the goals set by the publisher. Newsday reporters went inside the circulation system to describe how the workers gamed the process there. One unnamed former circulation worker alleges that home delivery would be started for people who hadn't requested the paper—sometimes 1,000 or more at a time. When recipients called customer service to demand a stop of delivery, the calls would be ignored. "We even delivered to addresses where the house had been burned down," one former employee—unnamed—tells Newsday. Death offered no refuge from the Newsday circulation, either. Copies would continue to arrive at the deceased subscriber's last earthly address long after he died. At Hoy, where the pressure to match the circulation of rival newspaper El Diario/La Prensa was intense, money from circulation's promotional fund was allegedly funneled to distributors to "buy" copies of Hoy from the company; the newspapers were then dumped. Customers who didn't pay their bills still got the paper. Free home-delivery promotional copies were often counted as paid circ. And according to the lawsuit filed against Newsday, the circulation department manipulated numbers with a special computer system called "Fudge ABC."

Newsday Publisher Raymond A. Jansen blames the fraud on a "rogue operation" inside circulation. Where have we heard that excuse before? Did Jansen never doubt the good news of Newsday's15 consecutive semiannual periods of increased circulation during a time when the most of the industry was enduring flat or decreasing circ?

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Given the scope of the scandal, you'd think that advertisers getting gouged by rate increases based on fraudulent circulation would be hollering. Indeed, some local advertisers are suing, but for mysterious reasons the big corporate advertisers aren't making much noise, even though they're perfectly situated to do so. Corporate advertisers command a big delegation on the 36-member board of directors that runs the ABC, sharing power with representatives from publishing and advertising agencies. Why have these advertisers (Target, Pfizer, J.C. Penney, L'Oreal, Walgreen's, Sears, Xerox, Kraft, et al.) allowed the ABC to liberalize the definition of paid circulation, which is against their interests? Why haven't they publicly demanded an internal investigation of ABC auditing practices? Perhaps they've stuck their heads in the sand because they're overinvested in the status quo. The scandal could stretch back years, maybe even decades. How will they explain to their bosses that while they slept the publishers profited?

How shoddy an operation is the ABC? The group concedes that its audits aren't rigorous enough to spot dedicated frauds. ABC Senior Vice President for Communications John Payne told Editor & Publisher, "We're reviewing our process internally, but if there is a real concerted effort to cheat, it can work."

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It's worth noting that the ABC doesn't seem to have uncovered any of the recent circulation fraud. At Newsday, the February advertiser lawsuit appears to have alerted the newspaper. (The paper maintains it uncovered them without the help of suit.) The Sun-Times discovered its circulation fraud on its own. Incoming Sun-Times Publisher John Cruickshank says he caught the scam when he found that circulation revenue didn't match claimed circulation.

Despite the blatant fraud, the newspaper-advertiser industrial complex insists all is well in the newspaper industry. "There is no circulation scandal," Gannett Chief Executive Douglas McCorkindale told the Gannett-owned USA Today. The story is being "blown out of proportion" by the media, he said. "I don't want to blame A.B.C., because we deceived them,'' Sun-Times Publisher Cruickshank told the New York Times, which published a good overview of the scandal. "A.B.C. is not at fault in either of these situations,'' Robin Steinberg, director of print at MediaVest, which buys advertising for clients like Nintendo, Coca-Cola, and Johnny Walker, told the Times. "They are the newspaper and magazine print police, and I think they did a good job of finding and detecting fraudulent numbers."

The most sober voice in the house belongs to Merrill Lynch analyst Lauren Rich Fine, who told Newsday the Hoy and Newsday overstatements "may not be isolated incidents" and that they "suggest that there may be loopholes in the ABC audit system." The Chicago Tribune quoted her saying, "This isn't good. … The question is how bad is it." To the Times, she said, "Me, as an analyst, I was never thinking there was an issue. … Now I think there's an issue.'' Note to investment funds: Sell newspaper stock?

An immutable law of the universe states that if you can cheat, you will. With the financial incentives to deceive so great and the risks of getting caught by the flat-footed ABC so low, who's to say how many newspapers are cooking their books? While it's near impossible for a reporter to investigate the newspaper that employs him, the Newsday dispatches show that the job can be done. E.W. Scripps Co. and other newspaper chains have ordered internal circulation reviews to soothe nervous advertisers. That's all well and good, but wouldn't the reports be more credible if they were supplemented by news accounts from the newspapers' own staffs? The big guns from the Wall Street Journal, the Los Angeles Times, the New York Times, the Washington Post, the Boston Globe, the Chicago Tribune, and the Philadelphia Inquirer might want to pay a call on ABC headquarters in Schaumburg, Ill., and practice a little investigative journalism.

How about it, barons of the press? You have nothing to lose but your inflated circulations!

Addendum, Aug. 19: Belatedly coming to my attention is the fine coverage of the Newsday scandal in the alt-weekly Long Island Press. Don't miss it.

Correction, Aug. 19: The original version of this article mistakenly stated that the Chicago Sun-Times reportedly invented 25 percent of total circulation. The newspaper reportedly invented 25 percent of newsstand sales. (Return to the corrected sentence.)

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