Text size:

Circ pressure fed Newsday woes

A relentless drive to hit circulation goals and a sell-at-any-cost attitude has led to a crisis at Newsday and calls for industrywide reforms

BY STEVE WICK, JAMES T. MADORE, TOM McGINTY and MARK HARRINGTON | STAFF WRITERS

July 19, 2004

Delivery trucks behind the Newsday plant in Melville. (Newsday Photo / Jim Peppler / July 16, 2004)

Something didn't add up.

In the late 1990s, consultant Doug Wesley was hired to help Newsday revamp a stressed-out customer service operation in its circulation department.

"We found a huge amount of anger on the part of customers," he said. "We never found that at a newspaper before. We were curious as to why."

The crux of the issue, Wesley found, was the inordinate number of calls from customers who wanted to know: "Why are you billing me for a paper I never ordered?"

Over the course of a roughly two-year contract with Newsday, Wesley and his Changecraft organization, which he said had also done similar work for papers such as The New York Times and USA Today, came to a troubling judgment.

"What I saw at Newsday in the late 1990s was pressure for numbers that were impossible to hit, and having to do all kinds of cheating to hit the numbers," Wesley said, stressing that his deductions were based only on more than 120 interviews with customer service representatives. His contract was ended in 2000.

Four years later, Newsday and its parent Tribune Co. are at the center of the most widespread circulation scandal in decades. Months after a few Newsday advertisers filed suit alleging circulation fraud earlier this year, Tribune acknowledged inflated subscription figures at Newsday and its sister paper Hoy going back to 2001, but denied it was related to the alleged events in the suit.

A stunning drop

For Newsday, one of the most successful papers in the nation, the reductions in circulation were stunning: 40,000 copies a day for the weekday paper and 60,000 on Sunday.

It may be weeks or even months before the whole story is known. Newsday and Tribune executives say they expect to complete their own investigation this summer. Tribune has set aside $35 million to repay advertisers, and more circulation revisions may be on the way. Federal and local authorities have also launched investigations.

But in interviews with current and former employees, reviews of court documents and computer analysis of circulation figures, a team of Newsday reporters has found that the relentless drive to hit circulation numbers had far-reaching consequences.

From home driveways to newsstands to circulation depots and the computers in the newspaper's main offices, the circulation quest led to practices that current and former employees say ranged from aggressive exploitation of industry rules to outright fabrication of circulation statistics. Tens of thousands of copies of the newspaper were being delivered or earmarked for customers who had neither asked for, nor paid for the newspaper, according to the interviews.

Pressure was intense

One former circulation department employee who was familiar with the weekly circulation reports, said, "The whole concept of the report was to make things look good, not necessarily to show an accurate number."

She said the pressure to keep up the numbers was intense. "There were times when they would start home delivery for a thousand people or more for customers who never requested it," she said. "We would just start sending them home delivery. The day after that, customer service would get thousands of phone calls from people complaining: 'I never ordered Newsday; why do I have Newsday on my front step?' And it was because they needed those numbers. It was a mess."

But the face Newsday presented to the outside world was sharply different. In October 2003, a Newsday press release reported that daily circulation had increased by 1,260 papers to 580,069 and Sunday circulation had increased by 1,210 to 678,019, the 15th consecutive semiannual gain for the newspaper. On the surface, it was defying the serious dropoff in newspaper sales experienced by other papers due to changing consumer habits, resistance to price increases and more stringent rules on telemarketing.

Nationwide, the threats were so severe that the industry's circulation monitor, the Audit Bureau of Circulations, permitted newspapers to resort to a practice of deep discounting of prices. This allowed newspapers to sell copies for as little as one-quarter of the cover price, a practice Newsday has increasingly grown reliant on.

For the six-month period ending in March 2004, 15.5 percent of Newsday's paid circulation came in the form of deeply discounted papers -- the highest of the nation's top 20 circulation newspapers. The number of discounted papers had more than doubled in two years, a sign of trouble for the paper, according to analysts.

In an interview yesterday, Newsday publisher Raymond A. Jansen said there was a "rogue operation" within Newsday's circulation department that he believes is responsible for manipulating the circulation of Newsday and Hoy.

"There was a rogue operation -- and a violation of trust," he said. Jansen said he wouldn't speculate on how many people were involved but added, "To figure this out we've had more than a platoon of auditors" studying the department.