The revelation of another journalistic lapse at News Corporation — though minor compared with the phone hacking scandal in Britain — further complicates matters for the leadership at News Corporation as it prepares for its annual shareholder meeting next Friday.
“No news of impropriety at News Corporation is a blip when they’re under such scrutiny,” said Doug Creutz, a senior research analyst at the Cowen Group. “This adds to the general question of how the company is being run.”
He pointed to several independent investor advisory groups that have recently recommended that shareholders vote against some members of the News Corporation board, “especially those whose name ends in Murdoch,” he said. Rupert Murdoch is the chairman and chief executive of News Corporation, and his sons James and Lachlan, have large roles in the company.
The scrutiny on the company increased on Thursday when the bureau that audits newspaper sales in Britain said it was reviewing new information about The Wall Street Journal Europe’s circulation arrangement that could lead to further investigation. Under the deal, The Journal used a third party to channel money to a Dutch consulting firm, which bought thousands of copies of The Journal each day for as little as one euro cent (1.37 American cents). The practice helped bolster The Journal’s subscription rate in Europe.
The publisher of The Wall Street Journal Europe, Andrew Langhoff, resigned on Tuesday after an internal investigation revealed that the circulation deal also led to an agreement that provided the Dutch company, Executive Learning Partnership, with two positive articles in exchange for its financial support.
“We have always been transparent with the A.B.C., and they have certified this program over recent reporting periods,” Dow Jones Company, which owns The Journal, said in a statement, using an acronym to refer to the circulation auditing agency in Britain. “We plan to meet with them soon and review all the details with them again.”
The incident at The Wall Street Journal Europe also puts the spotlight on how newspapers report circulation numbers, which are crucial to determining how much publications can charge for advertisements. At a time when the industry is struggling, many newspapers rely on heavily discounted copies to prop up circulation numbers.
Last year, the Audit Bureau of Circulations, the regulatory agency in the United States, added a new category on how publications should report copies that are sold to schools, bought by businesses for their employees, or bought in bulk by third parties, like advertisers, which include promotional inserts or wraps and distribute the copies free. The new category, called “verified,” is separate from paid circulation totals that include home delivery and newsstand sales.
Michael J. Lavery, the president and managing director of the Audit Bureau, said the popularity of the third party bulk sales that are considered verified had waned over the last several reporting cycles. He said the bureau no longer included third-party sales as a paid category that could determine advertising rates.
“There are other distribution channels that helped media buyers and advertisers get their message to their target audiences,” Mr. Lavery said, citing new programs, like Sunday Select by the Gannett newspaper division, where nonsubscribers could opt to have advertising circulars delivered to them directly.
The New York Times does have third-party agreements but does not include those sales in its report to the bureau, the company said Thursday. Around 9 percent of The New York Times’s print and digital circulation of 917,000 comes from verified subscriptions, though that figure does not include Web site subscriptions.
Eric Pfanner contributed reporting.
This article has been revised to reflect the following correction:
Correction: October 13, 2011
An earlier version of this article misstated the price of the discounted papers. It was one euro cent, or 1.37 American cents, not $1.37.
Article source: http://www.nytimes.com/2011/10/14/business/media/news-corp-hits-a-bump-as-investors-prepare-to-meet.html?partner=rss&emc=rss