Circ Fraud Not Likely at Small Newspapers

By: David Horchak

With the recent unveiling of fraud in circulation numbers at two of the country’s largest newspapers, we are not likely to see similar problems in smaller markets.

The first reason: It is hard to cover up anything at a small paper. Due to the fact that everybody works together and in a confined space, and most people wear many hats, very little goes on that everyone is not aware of. At my paper I report our home delivery circulation numbers to the Operating Committee three days a week. All other numbers are reported every week, and on a regular basis circulation meets with advertising and together they work up our circulation by zone for FSI (free standing insert) purposes.

Even if the circulation department was willing to cheat, the advertising group would catch us in weeks and protest because they do not want to be out in the field talking to an advertiser only to hear that they have been lying to them. It is a lot easier to cheat when you don’t see the victim.

The second reason: There is no place to hide the papers. You can print up as many copies as you want, and have them taken out of the building by an agent or accomplice, but you still have to be able to say where they went. If you are a large market newspaper with less than 50% coverage of your market and with hundreds of thousands or even millions of households that do not receive your newspaper, it is easy to say you delivered an extra 30,000 papers a day and that number looks very reasonable in relation to your overall market. However, if you have circulation of say 30,000 and this represents 70% of your market, that leaves less than 13,000 people left in your market who you can deliver to in the best-case scenario.

Sure, it might be possible to claim that you are doing this on an occasional basis but if you try to do it every day, the advertiser sooner or later is going to hear of someone who is not getting the paper, and thereby know that you are lying to him. In addition, if you are a small market and you plan on drastically boosting circ, the advertiser is going to expect to see some promotion of this huge event. Your market will expect the product and word will soon get around that you are not doing as you claim.

The third and most logical reason small markets are not likely to engage in circ fraud is that they simply cannot afford to. At a small newspaper circulation can account for up to 35% of the newspaper’s total revenue. There are only a few ways to run these programs and make them appear legitimate to the Audit Bureau of Circulations (ABC) auditor.

One way is to sell them to actual subscribers dirt cheap. There have been cases of newspapers selling subscriptions for less than $5 a year and this is permissible with ABC rules, and a good example of how ABC rules are slanted towards large papers.

The other way is to print thousands of extra papers, pay someone to deliver them and not let anyone catch on. Either way a small market newspaper cannot afford it. The revenue that circulation brings in is too valuable to the overall health of the newspaper. In a large market you can afford to disregard circ revenue because you make it up 100 times over with the advertising revenue the bogus newspapers are bringing in.

The only way to make sure these types of abuses are stopped is to revamp ABC rules and regulations. Large papers should not be allowed to take advantage of small newspapers by leveraging circulation revenue. A start in the right direction would be setting a minimum price per paper or a minimum percentage that circulation needs to contribute to the total revenue of a newspaper’s bottom line.

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