The sleazy business practices of America’s most self-righteous industry
We have written previously of the temptation to corruption in declining industries, how companies use gimmickry, concealment and sometimes outright fraud to mask their waning fortunes. Most industries and companies do not come to this point with the kind of overweening sense of self-importance of the MSM, however. For example, consider this, from the ethics handbook of the New York Times:
The goal of The New York Times is to cover the news as impartially as possible — “without fear or favor,” in the words of Adolph Ochs, our patriarch — and to treat readers, news sources, advertisers and others fairly and openly, and to be seen to be doing so. The reputation of The Times rests upon such perceptions, and so do the professional reputations of its staff members…..In keeping with its solemn responsibilities under the First Amendment, The Times strives to maintain the highest standards of journalistic ethics.
The self-regard of the Times may be higher than that of other newspapers, but the lot of them seem quite taken with their status as the only constitutionally protected private sector job. Yet while the editors and reporters preen, they seem little bothered that their stance of moral superiority rests often on a corrupt foundation.
The primary source of newspaper revenue is advertising. Advertising rates are determined by circulation. Newspaper circulation is in decline. Hence revenues are declining. So newspaper employees engage in unethical or illegal behavior to mask the decline and thus keep advertising revenue as high as possible (which, perhaps not coincidentally, keeps the non-outraged editors and reporters from being laid off). Consider a few examples:
Newsday: June 16, 2005 “The first arrests in Newsday’s circulation scandal represent a milestone in a yearlong saga, but experts said it would likely take many more months to fully unravel the complex fraud. The specter of three former midlevel managers of Newsday and its Spanish-language sister Hoy being led away in handcuffs by police came just two days shy of the one-year anniversary of the papers’ first public disclosure that circulation numbers had been inflated….Newsday and Hoy now are attempting to rebuild their distribution systems and placate angry advertisers. The papers have set a deadline of June 30 to conclude a $90-million rebate program; more than 30,000 advertisers out of an estimated 40,000 have accepted settlements so far.”
Chicago Sun-Times: “Inflation of The Chicago Sun-Times single-copy circulation began modestly and increased over time. The average inflation that occurred in the twelve-month period ending March 1997…was 2,814 copies per day during the week, and 672 copies on Sundays. In the most recent report of The Chicago Sun-Times circulation published…the average single-copy inflation had grown to 50,191 weekday copies and 17,318 Sunday copies…..Hollinger has set aside $27 million to pay back advertisers who were misled by the fake numbers.”
NY Post, according to rival Daily News: “In a frantic, desperate effort to jimmy up circulation numbers, the Post has been littering New York City with free copies encased in red plastic bags – 50,000 copies each weekday….Such a scheme is sometimes permitted under weak, arcane industry rules regarding “third-party sales,” but only if the practice is not abused. In the Post’s case, much of what spokeswoman Suzi Halpin said would be counted as “paid circulation” under the third-party sales program is ending up in gutters, garbage cans and alleyways – unread, never removed from the delivery bags. Most of the Post’s dump-and-pump is taking place in the final month of the current six-month circulation reporting cycle, which concludes Thursday. The final tally will not become official for months. If the paper that promised us Richard Gephardt as John Kerry’s runningmate gets to count an extra 50,000 papers each weekday for the month of March, it would boost its overall average weekday circulation for the current six-month reporting period by 7,700 copies a day.”
The Strib: “The Minneapolis-based Star Tribune has agreed to pay $55,000 to end a lawsuit accusing it of cheating advertisers by inflating circulation numbers, according to a lawyer for two plaintiffs….Masterson Personnel and Alternative Staffing were among four personnel companies that sued the Star Tribune and its California-based owner, the McClatchy Co., in June. The suit alleged that the newspaper and the company had manipulated paid-circulation figures to increase advertising prices. Two of the original four plaintiffs dropped out of the suit and charges against McClatchy were dismissed in November.” [This one sounds pretty flaky -- ed.]
Dallas Morning News: “The Dallas Morning News has undergone a series of setbacks the past several years that have rocked the faithful and enlivened the cynical….This was capped off earlier this year by a circulation scandal that has cost the paper nearly $30 million in settlements to advertisers [revised to $23 million -- ed.]. A scandal in which management places the blame on the drivers who delivered the paper. But, according to management, the scandal had nothing to do with this month’s layoffs–250 people Belo-wide, about 150 at the News alone…”
Lest you think that we have forgotten our favorite bête noire, we are currently looking into the $70 million purchase of 50% of the International Herald Tribune by the NYT in January 2003. According to the Times’ story on the purchase, “The takeover ends an anomalous 35-year partnership between The Times and its domestic competitor The Washington Post that produced a journalistic hybrid consisting mainly of articles and editorials from both papers compiled by editors in Paris. In October, The Times reached an agreement to buy The Post’s 50 percent stake in the venture for about $65 million — in part, The Post said, by threatening to start a rival paper overseas. ” It is very interesting to us that the Post believed it was forced into the deal with the Times. Jack Shafer reported in Slate at the time that that Howell Raines “claims there are no plans to remake the IHT” — a claim he found preposterous. But what if it were true?
Could it be possible that the NYT would spend $65 million to be able to consolidate at least 50% of the 264,000 or so circulation of the IHT with that of the NYT in order to keep its flagging circulation up at the 1.1 million level to support its advertising rates? Is that why the Times forced the deal on the Post? No, that does not appear to be the case, but the Times consolidated new revenue equal to 4% of its total advertising revenue by changing from equity method to consolidated financials after the purchase of the WaPo’s IHT interest.