of the “ticking time bombs” in the Australian media industry is how
major newspaper and magazine publishers cook the books to inflate their
official circulation figures. It’s an extensive, widespread but
secretive practice overseen by the most senior management, but never
discussed, never acknowledged and justified internally on the basis
that everyone else does it.

But it’s becoming harder to pull off. In the US, several major
newspaper groups (including Conrad Black’s Hollinger and the giant
Times Mirror) who were recently caught fudging their circulation
figures were forced to pay tens of millions of dollars in refunds to
advertisers who were buying advertising space under false pretences.

Here in Australia, advertising agencies have had suspicions about the
practice for years and have been pressuring the “independent”
circulation body, the Audit Bureau of Circulations, to clean up its
act. This is happening slowly, even though media insiders know that
many of the country’s leading newspapers and magazines still have a
substantial “fudged” component to their circulations.

Whenever you hear a newspaper or magazine publisher explain a drop in
circulation with words like “we’re shedding unprofitable copies” or
“we’re concentrating on our core audience”, you know they’ve been
sprung cooking the figures. Examples include the weekly women’s gossip
magazines, which have shed hundreds of thousands of circulation over
recent years, and the broadsheet newspapers, who are losing circulation
and “holding” it with free and fictitious copies.

Apart from the obvious ethical problem with presenting false figures,
and apart from the fact that it cheats advertisers who pay for
advertising based on the official circulations, publishing executives
have a much more personal problem with the practice — some of them
could go to jail if it were ever properly investigated.

That’s because management at media companies have to sign the forms
that verify the circulation figures every six months. And having signed
those forms knowing the circulation is rorted, they would face criminal
charges if the ACCC or police ever investigated the matter. Not to
mention the rebates that would have to be paid to advertisers, and of
course the shattered credibility.

So how do publishers cook the circulation books? Crikey has been given
a detailed insider’s account of how a major Australian newspaper
publisher goes about the practice of inflating its circulation figures.
Who does what, where and when.

Tomorrow in the Crikey Daily we will publish the inside story on how it happens.