The company behind the Dallas Morning News agreed on Monday to hand back $23-million to advertisers after admitting circulation figures for the daily and Sunday editions had been inflated.
In ordinary circumstances the incident would hardly have raised a flicker of interest outside Texas. Instead, fudging the numbers at the tenth largest title in the country pointed to a widening, damaging scandal in the United States newspaper industry.
The Dallas Morning News was the fourth leading newspaper in the past three months to admit circulation figures had been overstated.
In June Hollinger International, which recently sold the Daily Telegraph, said the Chicago Sun-Times had overstated circulation figures. In the same month Tribune, the publisher of the LA Times, said it had found evidence of inflated numbers at Newsday, the Long Island, New York-based paper and at Hoy, one of the biggest Spanish language papers in the US.
Belo Corporation, the public company that owns the Dallas Morning News, made its admission earlier this month and promptly announced the resignation of its top circulation executive. It attributed the problem to company policy on counting unsold returns.
”The fact that four newspapers have disclosed circulation overstatements has been a real shocker,” wrote Lauren Rich Fine, a media analyst with Merrill Lynch, in a report last week. ”Now, of course, there is concern that more companies will step forward with disclosures.”
The epidemic of inflated figures betrays the pressures on circulation managers struggling against decline.
Circulations in the newspaper business have been falling for years, and not just in the US, as competition intensifies from 24-hour television news and the internet.
According to Zenith Optimedia, the total circulation of American daily newspapers fell by 1,8% between 1998 and 2003, to 55,2-million. The Sunday market contracted by 2,6% to 58,5-million. Advertising spend in American newspapers had been sliding but picked up again last year from $45,3-billion to $46,2-billion.
”It’s damaging to the newspaper industry’s credibility and it doesn’t come at a good time,” said John Morton, a veteran industry analyst who writes a column for the American Journalism Review. ”The only positive is that the newspapers have dealt with the problems in a forthright manner.”
At Newsday, which is also sold in New York City, the paper appeared to be doing the impossible by bucking the trend.
A near 4 000-word investigation published in the paper on July 19, examining its own circulation activities, uncovered the allegedly fraudulent practices behind the astonishing rise. The article described an almost lawless culture in the circulation department. The company would allegedly send tens of thousands of copies to homes that had not requested them to boost figures. There was also allegedly blatant fabrication of numbers.
”The point was to drive up circulation,” one distributor is cited as saying. ”We were told not to take any names off the computer even if they were dead. We could not get customers off the records. We even delivered to addresses where the house had burned down.”
The figures were reduced by 40 000 copies for the daily edition and 60 000 for the Sunday edition in the June restatement. Newsday had claimed circulation of about 580 000. Tribune has set aside $35-million to repay advertisers and federal and local authorities have launched investigations.
Newsday publisher Raymond Jansen told his own reporters in the July article there had been a ”rogue operation” in the circulation department. ”I’m concerned about what happened at Newsday and Hoy,” he said. ”I feel totally sick.” Just hours after the exhaustive investigation was published, he had more reason for feeling queasy. He was removed, as was Hoy publisher Louis Sito.
The size of the overstatements vary. Belo said the daily Dallas Morning News had been inflated by 1,5% and the Sunday by 5%. Tribune admitted Hoy had been inflated by as much as 19%. The Chicago Sun-Times, which has a reported circulation of 480 000, has yet to quantify the size of its discrepancy.
The American newspaper business is already reeling from damage to its journalistic credibility. Two of the best-selling newspapers, the New York Times and USA Today, have been shaken by revelations that reporters had faked stories. At the New York Times, it was Jayson Blair, a self-confessed fantasist. At USA Today, the allegations were even more damaging. The paper claims that star foreign reporter Jack Kelley had invented elements of dozens of stories.
Now the New York Times and more recently the Washington Post have challenged their own failure to put tough questions to the White House as it promulgated its reasons for war in Iraq.
Faking circulation figures, though, has a more immediate economic impact. Advertising rates are tied to the number of copies sold, and if confidence in the veracity of those figures is undermined it could have a devastating effect.
Tribune is already facing two lawsuits related to circulation overstatements, including one filed last month on behalf of 50 car dealers who advertised in Newsday.
Robert Decherd, the Belo chief executive, told analysts during a conference call that the company would try to rebuild trust ”with every ounce of effort we have”.
The Audit Bureau of Circulation has acted quickly to tighten its rules, introducing fines and doubling the frequency of audits of censured newspapers. The affected titles are also required to submit plans for corrective action. ”Any kind of intent to misstate figures is taken very seriously,” said ABC spokesperson Heidi Chen.
Morton said he would not be surprised if other newspapers come forward. ”It is part of the decline of ethics in every part of the business world. It’s symptomatic of what has been going on in lots of places, including the likes of Enron, and it’s sad.
”This appears to be a few rogue employees, and let us hope it stays that way,” he added. ”But you have to ask, when did it begin, why did it happen — and you wonder were they working in an environment where they felt it was OK to do this.” – Guardian Unlimited Â