Circulation woes

Newspaper circ figures are out for the six months to March 31. The news is not good ... and the spin, predictably, is furious.

But how reliable are these figures anyway?

After a recent scandal in the US over circulation fraud Newsday was forced to cut more than 100,000 phantom papers from its reported daily circulation of nearly 600,000 and the Chicago Sun-Times reduced its daily claimed circulation by 72,000 papers. Other papers were implicated in the fraud and all of the companies involved took millions of dollars in corporate write-downs to reimburse advertisers for overcharging them based on the faulty numbers, and each of those parent companies has been sued by investors.

This week Crikey.com.au has been running an anonymous insider's account of Australian newspaper circulation fraud. The explanation goes like this:

"Just before the audit period is complete, Circulation do not process some newsagent returns, enough to obtain a satisfactory audit figure for the various products management need. The poor old newsagent is told that a virus has affected the Circulation system and it will take a few weeks to rectify.

Auditors arrive and review the figures, these are all good. Auditors leave with the good figures, Circulation then process the returns after the auditors leave, and newsagents are happy. The Circulation Department get the great audit figures and charges accordingly for advertising in their fine products.

The next option is to have a Company that supplies services to buy bulk copies of the products, not ten or 20 per day but thousands, and dispose of the product, if they actually even print it. The invoice is then paid by Circulation so that the Company does not have to pay it themselves. I understand this Company was then rewarded with a lucrative contract for their participation.

The word is events are big for hiding sold copies. Sponsor an event or 'sell' copies to the event organiser, hand out your product and then claim whatever figure you like, provided it does not exceed the attendance and nobody would ever know.

School teachers are very big on the hit list, with this poor profession targeted. Teachers are sold the daily paper for the year at $10 delivered to the school. If the required figures are not reached, they pay newsagents to sponsor the school and the newsagent supplies the papers at no cost to the teacher or newsagent. How long before teachers catch on that the company is paying to supply teachers for free?

Again they target this area by selling papers to schools on the assumption that a reference or an insert in the paper relates to the curriculum that the schools are studying will sell the school papers. Again if the school does not willingly participate, the company pays incentives to the newsagent to sponsor and deliver to the school regardless."

The Financial Review today reports that the Media Federation of Australia, which represents media planning and buying agencies, is concerned about newspaper publishers using heavily discounted copies to inflate their sales. This follows an earlier campaign by the MFA in 2003 at which time publishers were presented with a list of demands, including more frequent audits and more detailed information about readership, greater accuracy in circulation figures and diligent observation of the requirement to include only 1% of promotional copies in audited figures.

The publishers apparently satisfied the MFA which said in January this year that it was no longer concerned about loopholes and irregularities. But MFA president John Sintras has now asked the Audit Bureau's chairman, News executive Stephen Hollings for a full investigation of the recent claims.