The Guardian has just broken a new story about News International: Wall Street Journal circulation scam claims senior Murdoch executive: Andrew Langhoff resigns as European publishing chief after exposure of secret channels of cash to help boost sales figures.
To quote a little bit of the extensive — and hair-raising — article:
One of Rupert Murdoch's most senior European executives has resigned following Guardian inquiries about a circulation scam at News Corporation's flagship newspaper, the Wall Street Journal.(Go read the rest.) To put this in perspective: it's dynamite — not as emotionally loaded as the Milly Dowler phone bugging horror, but from a business standpoint it may be considerably more damaging.)
The Guardian found evidence that the Journal had been channelling money through European companies in order to secretly buy thousands of copies of its own paper at a knock-down rate, misleading readers and advertisers about the Journal's true circulation.
What does it mean?
For those without a background in publishing, the reason they might want to do this is that audited circulation figures are the bedrock on which advertising revenue is based — the higher the ABC figures, the more the publisher can charge advertisers per inch of paper. Note that for many newspapers or periodicals, advertising accounts for up to 80-90% of revenue; you, the reader, are merely there as a draw for the real customers, the advertisers, who will pay more for pages that are seen by more eyeballs.
This kind of circulation ramping looks like bare-faced fraud.
What's significant about this revelation it that it comes from the opposite end of the organization — advertising and circulation — from the previous allegations — of journalistic and editorial corrupt practices — that shut down the News of the World and got Rupe up in front of a Commons Committee. Previously, NewsCo could maintain that it was just the misdeeds of a few bad apples in the news side of the business. With this latest revelation it looks as if the whole organisation has out of control, to the point of committing what looks very like circulation fraud.
And while the large corporate advertisers might be willing to put up with dirty tricks aimed at the readers, this is something else. (I expect a collapse in NewsCo's advertising revenue, not to mention an imminent FBI investigation ...)
Personal interest note: this may eventually afflict HarperCollins, a rather large book publisher that publishes these imprints and which just happens to be owned by News Corporation. My sympathy to any of the (innocent) novelists who may find themselves in the firing line ...