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The Honolulu Advertiser
Posted on: Saturday, May 4, 2002

Newspaper quits audit of annual circulation

By Frank Cho
Advertiser Staff Writer

The Honolulu Star-Bulletin has pulled out of the Audit Bureau of Circulations' annual audit of newspaper circulation because it believes it has been treated unfairly by the firm.

The Star-Bulletin said yesterday that it has instead hired the financial accounting firm of KPMG LLP to audit its circulation for April.

"We had a lot of concerns about the way we were being treated," Star-Bulletin Publisher Don Kendall said.

A spokeswoman for the Schaumburg, Ill.-based circulation bureau said yesterday that the bureau treats all of its members fairly but declined to comment further.

The move by the Star-Bulletin to withdraw from the ABC audit has raised questions among some advertisers about the paper's circulation figures, which could make it more difficult to win advertising dollars in its ongoing newspaper war with The Honolulu Advertiser.

"This is a major move in what it says about the Star-Bulletin, and what it says is they can't come up with sufficient numbers in an ABC audit to justify their continued participation in it," said Darrel Kloninger, president of Honolulu advertising agency ADWorks Inc., whose clients have worked with both newspapers.

Kendall said KPMG will audit the Star-Bulletin's circulation for April and those figures will be released to advertisers later this month.

John Morton, a columnist for American Journalism Review and president of Morton Research, a Silver Spring, Md., media consulting firm, said the decision to drop ABC will hurt the Star-Bulletin's chances to lure lucrative national advertising.

"An ABC audit is the gold standard and there is no getting around that," Morton said. "How persuasive the replacement audit will be remains to be seen, but national advertisers are used to seeing an ABC audit and don't have time to analyze audits they may not be familiar with."

The bureau, a not-for-profit organization, is the leading auditor of newspapers and magazines, reviewing the circulation of more than 900 daily newspapers in every major market. Morton said there are about 1,400 daily newspapers in the United States. Those that do not use ABC audits typically are very small papers, he said.

"The ABC statement is the accepted currency in the industry. We may not all embrace the methodology, but it is the accepted neutral arbitrator," said Chuck Cohen, senior vice president and executive media director at Starr Seigle Communications Inc., Hawai'i's biggest advertising agency. "It's difficult to place clients' dollars in a publication or on a TV station that will not subscribe to the accepted research tool in the marketplace and ABC happens to be it for the time being. This will make it more difficult for the Star-Bulletin to generate needed advertising dollars."

But Kendall said The Advertiser's owner, Gannett Co., has a seat on the bureau's board of directors and has been unfairly influencing the auditing agency. Kendall said the bureau has cited the Star-Bulletin for a number of violations of bureau rules in the past year, which have become the basis for the paper's withdrawal.

"We complied with ABC immediately upon notification of the alleged infractions. Even though we did not agree with two of the rulings, we responded by doing everything ABC asked us to," Kendall said. "Gannett is one of the largest, perhaps the largest, member of ABC and it is clearly using its influence with the audit bureau."

The Advertiser's general manager, Dennis Francis, denied that The Advertiser or Gannett has any special influence with ABC.

"There are probably a dozen or more board members (on ABC) that are from major retailers across the country," Francis said. "Nobody controls ABC."

Francis said the Star-Bulletin's withdrawal from the ABC audit, which The Advertiser still uses, will likely cast doubt over future circulation claims by the Star-Bulletin.

"It's like radio without Arbitron or TV without Nielsen," Francis said. "If the Star-Bulletin has an issue with ABC rules, it's the same rules that apply to The Advertiser and every other newspaper in the country.

"I don't know what auditing just one month tells you. ABC audits 12 months of circulation claims and will obviously employ different rules about what a newspaper can claim as paid circulation than an outside company like KPMG.

"Only looking at one month could potentially allow for temporary circulation-building, as well as skewing for significant news events that may spike single-copy purchases."

The Star-Bulletin and The Honolulu Advertiser ended their joint operating agreement in March 2001 with the purchase of the Star-Bulletin by Canadian publisher David Black.

The two papers have since been locked in a bitter war over circulation and advertising dollars.

In an unaudited report, the Star-Bulletin last year said it had a daily circulation of 63,342 for the six months ended Sept. 30, the most current figures available. The paper's Sunday circulation was reported as 63,344.

The most current figures available for The Advertiser — preliminary figures reported to ABC by the paper — show The Advertiser's daily circulation was 150,277 for the six months ended March 31, up 32 percent from a year ago. The Advertiser's Sunday circulation fell to 170,009, down 8.7 percent from 186,371 in the same year-ago period.

Circulation figures are a key measure for companies tracking the effectiveness of their advertising dollars and are used by publications as a measure to set advertising rates.

"For me, (the ABC audit) is very important. I want to know what kind of bang for my buck I am going to get," said Russell Wong, general manager of the Jackson Auto Group, which advertises in both daily papers. Wong said he typically will not advertise in publications that do not provide ABC-audited circulation reports.

"It's the first thing I ask for. I hope this is a temporary decision and the Star-Bulletin will rejoin ABC because the more competition out there the better my advertising rates are," Wong said. "I want two successful newspapers, but I also want to be able to compare them fairly."