The scandals have exposed weaknesses in the Audit Bureau of Circulations (ABC), the nonprofit body responsible for verifying and publishing newspaper circulation numbers, which are used to set advertising rates. In response, the organization has tightened some of its rules and crafted stiffer punishments for papers that fake their numbers.
The scandals also prompted the SEC to launch a "sweep" of other large newspapers, including The Washington Post Co., asking each to provide more information about reported circulation. The Post said it has checked its numbers to verify that they are valid.
Tribune Co. found circulation errors in its two New York area newspapers, Newsday and Spanish-language Hoy.
(Jennifer S. Altman -- Bloomberg News)
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Fewer Read All About It U.S. newspapers have been losing readers for nearly two decades. Morning newspapers absorbed some of the readers of dying evening papers, but daily circulation as a percentage of total adult population is down dramatically.
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Bad News A Chicago Sun-Times internal investigation revealed that the paper had been inflating its circulation figures for years before it was discovered late last year. A look at the paper's claimed Monday-Friday circulation and how many of those copies were fictional sales, as reported in April of each year.
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An internal investigation at the Dallas paper concluded that "pressure related to the attainment of circulation growth" led managers to fudge the numbers by giving bonuses to meet circulation goals without verifying the numbers had actually been met. From April to September 2003, the Morning News inflated its daily circulation by about 5 percent, 10 percent on Sundays, the paper reported.
Last week, the ABC released the results of its investigation into Newsday and found nearly 100,000 ghost readers. Between September 2002 and September 2003, Newsday claimed it sold an average of 579,599 weekday papers. The audit found the actual number was 16.9 percent lower, or 97,783 papers fewer. The paper overstated its Sunday sales during the time by about the same, claiming 671,820 papers sold, when the real number was 14.5 percent lower, or 97,739 papers fewer. Saturday sales were overstated by 5.8 percent, the ABC found.
As a result, the ABC censured Newsday, meaning the paper is subject to twice-yearly -- as opposed to annual -- audits, is excluded from certain ABC services and must provide a plan to show how it will correct the practices that led to the problems. Future censures can carry fines.
Though the ABC audits circulation figures of 1,384 U.S., Canadian and Caribbean newspapers, it has only 120 auditors, five of whom are certified public accountants. In the wake of the scandals, the ABC said it will add about a dozen auditors and hopes to double its number of CPAs.
At Newsday, as in Chicago and Dallas (which also have been censured), the source of the improper numbers centered on single-copy sales, a category of sales that is often easiest to fudge, according to industry officials. That's because subscription sales can be verified easily by calling subscribers and asking not only if they receive the paper but if they pay for as many copies as the newspaper claims.
But single-copy sales involve middlemen such as distributors and hawkers, and they get cash incentives to not return unsold papers. Eliminating returns puts money in their pocket and raises circulation.
Some papers, such as the Sun-Times, created elaborate schemes to fool ABC auditors or take unfair advantage of their sometimes-byzantine rules. For instance, the ABC rules allow papers to eliminate certain low-sales days when computing average weekly circulation. The rule is designed to allow newspapers to use these "elimination days" to deal with papers sold on holidays or on days when sales are hampered by bad weather.
But the Sun-Times said it abused the process by claiming a number of Saturdays (typically, a low-sales day) as elimination days, then taking unsold papers from other days and attributing them to Saturdays. This further drove down the Saturday circulation but, because it was an elimination day, it did not count against the Sun-Times' average circulation.
