Inflating Circulation . . . It's as Simple as ABC | Media | Chicago Reader

Inflating Circulation . . . It's as Simple as ABC 

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What's this fresh catastrophe at the Sun-Times?

The parent company, Hollinger International, announced last week that the paper had been cooking its books for years, inflating its circulation figures. If true, that's fraud. Not just shameful but criminal.

How's the staff taking it?

"This one is darker than any I can remember," said a lugubrious veteran. "People were sort of comparing other low points--Murdoch coming, [former editor] Matt Storin leaving. Nothing compares to the incredible, almost physical feeling that this one has engendered. It cuts across all departments, ages, and tenures."

So now what?

The Hollinger board's audit committee is running an investigation--and the audit committee's led by Jim Thompson, a U.S. attorney before he became governor. The Securities and Exchange Commission is investigating. And the Audit Bureau of Circulations is about to begin what might be the most exacting, if oddest, audit it's ever done.

Exacting, why?

Because its reputation's on the line. Hollinger said the rigging of circulation figures was going on for years at the Sun-Times, apparently starting small and becoming more extreme, as the gap between illusion and reality widened. And the ABC didn't catch it. Once a year the ABC audits client papers so that advertisers can trust the circulation figures they're given. John Payne, who's an ABC vice president, told me the ABC runs the numbers "through an extensive computer analysis, looking for anomalies," interviews distributors, shows up at mom-and-pop groceries to ask about single-copy sales, follows the trucks, even calls up listed subscribers to make sure they're legit. If the ABC took those measures at the Sun-Times, they obviously didn't work. "It's certainly embarrassed us," Payne told me. "We have every motivation to find out what the facts are, and we will."

Oddest, why?

When the ABC audits a newspaper, it's looking for evidence that the paper exaggerated its circulation. But Hollinger's already admitted to doing that. In this case, the ABC's duty is to consider the possibility that it's the admission that's exaggerated.

You mean Hollinger could be telling some kind of Machiavellian lie?

I don't think anyone inside the ABC believes for a second that's the case. But the situation is so strange already, why not imagine it even stranger? The list of usual suspects at the Sun-Times is two names long: Conrad Black and David Radler. Black was never around, but during the years when circulation figures were allegedly manipulated Radler was both the Sun-Times's publisher and the president of Hollinger International. Late last year Radler quit those jobs under fire. Now he and Black are being sued by Hollinger's board for ripping off the company to the tune of tens of millions of dollars. A fraud accusation is one more stick to beat them with--which is why the ABC needs to keep an open mind about ulterior motives.

How's Radler taking it?

I called him in Vancouver. "I'm preparing a response to all that crap," he said, but it wasn't ready yet, and he wasn't sure when it would be. Radler used to say whatever was on his mind without thinking twice. Now lawyers are involved.

Had he read Roger Ebert's piece in the Sunday paper? Ebert wrote, "Who would have thought such a penny-pincher might possibly be pinching millions for his own pockets?"

"That's what I'm responding to," Radler said. I told him that around the Sun-Times these days he enjoys roughly the status of original sin. He knows. "When it comes to profits, no one blames me for that. I quadrupled profits," he said. "Does anyone give me credit for the Trump deal? You realize that was my deal. Who had faith in Trump?"

Radler claims that when he was still in Chicago he didn't know of any problem with circulation numbers. And Hollinger Inc., the holding company Black still controls, issued a statement insisting that it knew nothing of circulation practices that were "outside industry norms." If circulation's dropped, said Black's office, blame the new bosses: the old ones knew better than to raise the single-copy price from 35 cents to 50.

Which the Sun-Times did on April 1.

Right. And naturally the new publisher, John Cruickshank, was watching closely to see how the hike would affect circulation and revenues. The numbers he got back didn't make sense--given the circulation he thought he had. About seven weeks ago he told Hollinger's new CEO, Gordon Paris, "We have a real problem here."

Shouldn't the ABC have detected fraud if it went on for years?

Touchy subject. Payne says the ABC would have fingered the Sun-Times sooner or later, hopefully sooner--like this year. He also says that when newspapers set out to intentionally deceive the ABC, they can, especially if distributors are in on the scheme.

What's unnerving is Newsday, which Payne's touting as an ABC success story. Last week Newsday also confessed it had been overstating circulation. The paper's knocking 7 percent off the daily circulation it declared last September, or about 40,000 copies, and 9 percent off its Sunday circulation.

Payne says the truth emerged during an ABC audit that began in February and will be made public in mid-July. And maybe it did. But here's the thing. On February 10, Newsday and a sister paper, Hoy, the parent Tribune Company and Tribune Publishing Company, and four distributors were sued for $100 million by advertisers who claimed the papers had been faking circulation numbers for ten years. According to the suit, the distributors accepted more papers than they could ever hope to sell, then dumped the leftovers instead of bringing them back unsold. Allegedly, a computer program known internally as "Fudge ABC" was set up to help hide the truth.

Would the ABC have penetrated the deception on its own? There's nothing like a $100 million lawsuit to send auditors a heads-up that everything might not be hunky-dory.

This sounds like a bigger scandal than the Sun-Times's!

Could be. Let me tell you, circulation's worse than demon rum at driving the upright into the jaws of perdition.

What's the real Sun-Times circulation?

Hard to say. This spring the ABC, working off the Sun-Times's own figures, reported a 486,936 weekday average. But now the ABC has "recalled" that report.

The Tribune's Jim Kirk wrote that his sources told him the Sun-Times had been overstating newsstand sales by "at least 25 percent, or more than 78,000 a day." Cruickshank insists Kirk's number is too high, but says the real number's bad enough. Canada's primary national paper, the Globe and Mail (which pays rapt attention to all of Black's follies because Black's a product of Canada and launched the competing National Post) said it was told the Sun-Times inflated its circulation by about 10 percent. That's about 45,000 copies daily.

Whatever the number, the Sun-Times seems to have been secretly hemorrhaging tens of thousands of readers. Why?

"I think it was a bunch of things," Cruickshank said. "We had tremendous disruptions when we put in the new [printing] plant--two to three years of late papers, really spotty service. And then, yeah, we didn't have any marketing [the present "Bright One" campaign is the first in seven years]. We had a really stripped-down circulation department, almost no merchandising, a very, very small number of district managers. We have almost the same number of people handling single-copy sales as the Tribune. [The Trib's a subscription-driven paper, whereas the Sun-Times survives off street sales.] And then, of course, we took the size of the newsroom down by 20 percent between the end of 2000 and the beginning of 2004. We disinvested! We made it harder to get the product. We went through a period of really poor service."

Don't forget, the editorial page made a hard right.

That too--though one reporter told me this didn't matter because nobody reads the editorial page. But Cruickshank considers it a factor. "I don't think," he told me, "there's any doubt that on some issues the paper was not in sync with the city and certainly not in sync with the readership. You can't preach at your readers and expect them to be your readers. You can lead, but you can't lead them into positions that don't make any sense to them. This is a Democratic town. You really do have to be engaged with the thoughts and feelings and life of your market--and I think in some ways we got a little detached."

Is this a darkest-before-the-dawn situation at the Sun-Times?

Some people see nothing ahead but more night. "It's hard not to assume the worst," said the lugubrious veteran. "So many things are looming in the future, not least of which are union negotiations that just got under way, and the planned move to the new building, which we've been promised will be a first-class facility. Now it makes you wonder where that money's going to come from."

I'm not sure what would cheer him up except the sight of Radler taking a perp walk. But not everyone's so dour. Contract talks haven't actually begun yet--though the present contract is up October 1 and they're about to. And Bob Mutter, cochair of the Newspaper Guild unit at the Sun-Times, is cheerier. He noticed that when Cruickshank was interviewed on WTTW last week, "he could have cried poor but he did not say those things. He talked about a fair and equitable settlement and what a hardworking newsroom we are. It was very encouraging."

It's been decades since anyone at the Sun-Times could place much faith in the future, and at the moment it's a complete mystery. This Tuesday Cruickshank held a series of staff meetings where he predicted the paper would be sold to somebody in two years. But there's a bracing we're-all-in-this-foxhole-together camaraderie shared by labor and management alike. "I think basically everybody here has been on the same side for a long time," Mutter told me. "Our common enemy has departed, hopefully never to come back."

That being Radler?

Radler here, and Black living large in London.

What is it about Radler?

The other day I was talking to Dennis Britton, the editor of the Sun-Times when Hollinger bought it ten years ago. I asked Britton how he remembered Radler.

"I thought he was a snake, and you can put that on the record," said Britton. "The most interesting example of Radler to me was, he came into an executive meeting once and threw a sheaf of papers down and said, 'I want 100 people laid off.' We said, 'What are you talking about?' He said, 'See this sheaf of papers? There were 100 people off work last week and we got the paper out without them.' That's the kind of guy he was. He was ruthless."

Britton lasted only a few months after Hollinger took over, but it was a time when Black and Radler were taking the company public and courting investors. "I had to go to one of those dog and pony shows," said Britton. "Everything they said was a lie. One of the [labor] contracts was about due and it was going to be ugly and they said, 'Oh, we have labor peace.'"

Why were you talking to Britton?

To hear him reminisce. As I said, newspapers are obsessed with circulation. For example, the Tribune's been obsessed with keeping its Sunday circulation above a million, though this could be the year it loses that battle. When Britton was editor the Sun-Times was obsessed with keeping daily circulation above 500,000. Leonard Skaykin, an investment banker with a knack for fancy financing, had bought the paper from Murdoch, and the loans the deal required came with all sorts of conditions. One stipulated that circulation could never drop below half a million. "There was one thing we talked about at every executive meeting," Britton remembered, "and it was that 500,000 was the key to our continuing." At one point he and publisher Sam McKeel personally hit the bricks to sell the paper.

I thought the Sun-Times downplayed circulation.

Actually, it does. It much prefers to brag about its total readership, which a company called Scarborough Research measures by doing random telephone interviews. The Sun-Times is standing by its readership claims. Trouble is, the rate card it shows advertisers is pegged to circulation, not readership.

And advertisers are already suing.

Oh, yes. The first two suits were filed June 17 in circuit court. One of the plaintiffs is Central Furniture. "I'm sure they won't go to court," Mike Jacobson, Central Furniture's owner, predicted, no doubt accurately. "And I hope they won't go out of business, because they reach my customers."

If the ads work, what's his beef?

Savor the irony. I happened to talk to an ad rep who used to have the Central Furniture account. "He wasn't paying anywhere near the rate-card rates," she said. In fact, hardly any advertisers were. "The Sun-Times works totally off the rate card," she explained. "One guy was paying one-eighth of the rate card, another guy half. Because the Sun-Times is the underdog, they work deals."

In other words, the advertisers now griping that they didn't get the 480,000 circulation they paid for didn't actually pay for 480,000 circulation?

Some of them paid a hell of a lot less. But so what? When I told Jacobson I'd heard he was a hard bargainer, he snapped back, "What kind of a bargain am I getting?" He thought he was getting a 480,000-paper bargain, and he wasn't.

All Cruickshank can do is shrug. "We're going to be sued by people who owe us money," he told me. "We're going to be sued by people who never paid us in the first place."

Let's try to look at the bright side.

Well, all of a sudden the marketing department couldn't be more important. As Jaclene Tetzlaff, who runs it, told me, "I think I have job security."

Art accompanying story in printed newspaper (not available in this archive): illustration/Tom Chalkley.

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