The broadsheets reported at length today on circulation rorts – in the
wake of Crikey’s ongoing reports on how Australia’s major newspapers
and magazines cook their circulation books – following an announcement
by the Audit Bureau of Circulations that it had “ordered a review of
audit rules be accelerated”.

The Australian

led its media section with this report

, while The Smage

(Age

and Sydney Morning Herald

combine) ran this story

in its business sections.

ABC chairman Stephen Hollings told The Oz

that a special
meeting of the ABC’s 24-member general committee, which includes
representatives of publishers, media buyers and advertisers, would be
called to discuss the review, saying: “I don’t want the industry to
have its confidence in the audit process diluted in any way.” He said
he hoped it would be completed by the ABC’s September annual meeting.

Hollings told the Smage

that the process had been “accelerated” in light of recent claims that
newspaper and magazine publishers were still using free or discounted
copies to bulk up circulation figures.

And he told The Australian

there was no evidence of promotional copies being illegitimately
counted towards a publication’s paid circulation.”I’ve never seen any
proof and if I did see any proof then obviously we would want to take
action… Senior auditors are signing off on these [audits] – are
putting their signatures on them – as are senior publishers. So the
sort of thing appearing on Crikey in essence defames those people.”

CRIKEY:

The
publishers who control the ABC (Stephen Hollings is News Limited’s
strategic director) are deeply worried that the circulation fraud that
has been widespread throughout the industry for years is about to be
investigated by regulatory authorities over whom (unlike the ABC) they
have no control.

And they’re desperate to prevent what happened in the US last year,
where a handful of major newspapers and magazines were ordered to pay
back more than $150 million to advertisers after circulation fraud of
more than 20% was uncovered by authorities.

The response of the
Australian media companies is predictable: try to bury the issue by
sending it off to an internal committee for five months and making
fine-sounding comments about “confidence in the audit process”.

Just
so there’s no confusion, these are the allegations being made by
industry insiders (anonymously, for obvious reasons) to Crikey:

  • The “audited” circulations of many major Australian newspapers
    and magazines are inflated by tens of thousands of copies – vastly more
    than the 1% leeway allowed under ABC rules.

  • This is achieved by a range of measures. It’s done by including
    hundreds of thousands of copies given away or almost given away – but
    included as “paid” circulation on the audit – through schools, hotels,
    airports, museums, sporting events, conferences and cafes under
    arrangements where there is an “invoice” supplied; it’s done by dumping
    copies in foreign countries and providing auditors with an invoice;
    it’s done by hiding or slowing down returns from newsagents so they’re
    not debited against the circulation; it’s done by amending or
    witholding printers’ invoices; it’s done in dozens of inventive ways by
    the circulation departments of media companies.

  • The audit reports are signed off by auditors who inspect the publisher’s records – but the fraud takes place before

    the auditors see the records, through the exclusion or massaging of information.

  • The practice is widespread, it occurs at most of the largest
    print media companies, and it has been quietly condoned for years.

For the most obvious reasons, the only way this circulation fraud can be identified is by an independent

investigation with the power to scrutinise all internal records and
question relevant executives. Independent, meaning independent from the
Audit Bureau of Circulations, the body which has as much to lose as the
publishers if these practices are revealed – and in theory should be
the first to support an independent investigation.

Tomorrow Crikey will publish more information.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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