The chairman of the newspaper industry's circulation-auditing body said Thursday that the organization would work to repair its image, tarnished by circulation scandals over the past year at four large U.S. newspapers.
In an address to the annual conference of the Audit Bureau of Circulations (ABC), which examines and reports circulation figures provided by newspapers and other periodicals, Robert Troutbeck said the circulation-inflation scandals apparently were confined to the Tribune Co.'s Newsday and Hoy newspapers, Hollinger International Inc.'s Chicago Sun-Times and Belo Corp.'s Dallas Morning News, and were not the "tip of the iceberg" of an industry-wide scandal.
Nevertheless, Troutbeck said: "You -- as publishers -- must dedicate yourselves to ensuring that there will never be any circulation fraud for us to catch."
Newspapers regularly report circulation figures to the ABC, which audits the numbers yearly, a process that can take several months. ABC auditors take up residence at a newspaper while verifying the documents. Auditors also call some subscribers at home to check if they pay to receive newspapers.
After the circulation-inflation disclosures, the ABC censured Newsday, Hoy and the Sun-Times, meaning they will be audited every six months for the next two years. Future ABC censures would carry stiffer penalties, including cash fines.
The board of directors of the ABC, a nonprofit organization that includes members of the publishing and advertising industries, are meeting over the weekend and expect by late next week to issue tougher standards and harsher penalties for members that provide phony numbers.
"Together we will fix the data confidence issue," Troutbeck said.
Beginning with the Sun-Times last November, the four papers admitted to providing inflated circulation figures to ABC. After an internal investigation, Newsday shaved more than 100,000 phantom papers from its reported daily circulation of nearly 600,000. The Sun-Times admitted it had been pumping up its numbers for seven years and, as late as 2003, was inflating its circulation by more than 10 percent. In August, it reduced its daily claimed circulation by 72,000 papers.
All of the companies are taking millions of dollars in corporate write-downs to reimburse advertisers for overcharging them based on the faulty numbers, and all of the parent companies have been sued by investors.
Yesterday, Newsday said it would cut 100 jobs, 3 percent of its workforce.
Last month, the Securities and Exchange Commission began an investigation to determine if the phony numbers were confined to the four papers or reflect an industry-wide problem.
A small group "of wayward publishers cannot be allowed to undo what we have collectively spent 90 years doing, and to jeopardize the non-negotiable trust between buyers and sellers," Troutbeck said in his address at Toronto's Fairmont Royal York Hotel.
Troutbeck's comments came one week after the SEC subpoenaed the New York Daily News regarding its home delivery circulation practices.
The Daily News, owned by Mort Zuckerman, has been in a circulation war with the New York Post, owned by News Corp., which gleefully has detailed a $12.5 million lawsuit against the Daily News by home-delivery distributors. The distributors claim they were forced to deliver the paper to non-subscribers.
The circulation scandal was in the forefront on the first day of this conference.
Sunni Boot, president of ZenithOptimedia Canada, a media-buying firm, said the ABC should advertise to explain its practices to outsiders and help repair its image. Last week, the ABC attempted to shore up support with an open letter to ad buyers and publishers in some publications, arguing that its methods are sound and advertisers can count on the circulation numbers it provides.
Jay R. Smith, president of Cox Newspapers Inc., which owns the Atlanta Journal-Constitution and several other papers, called the scandal "heartbreaking, sickening" but said the ABC system generally has worked.
Troutbeck also blamed an "irresponsible" news media for fanning the controversy while covering the scandal, saying they "care more for the angle than getting it right."