WWD.com/media-news/memo-pad-but-enron-was-hotter-the-little-black-book-pearls-of-wisdom-1321893/
government-trade
government-trade

Memo Pad: But Enron Was Hotter…The Little Black Book…Pearls Of Wisdom

<b>BUT ENRON WAS HOTTER:</b> As the <b>Rosie O’Donnell</b>-Gruner + Jahr lawsuit heads to trial, at least the numbers may be on her side.<br><br>This week, the Audit Bureau of Circulations released its final audit of O’Donnell’s...

BUT ENRON WAS HOTTER: As the Rosie O’Donnell-Gruner + Jahr lawsuit heads to trial, at least the numbers may be on her side.

This week, the Audit Bureau of Circulations released its final audit of O’Donnell’s magazine, the results of which show massive discrepancies between what Gruner + Jahr reported Rosie’s newsstand sales to be and what they actually were.

For the first six months of 2002, the company reported to ABC that the magazine’s newsstand sales were 407,500 copies per issue. Those numbers were widely shared with its advertisers and helped to determine the ad rates for the publication. But this week, ABC’s own audit of Rosie showed those numbers to be wildly off base, and that newsstand sales actually were 278,935 copies per issue. That means that Rosie’s newsstand sales were inflated by 45 percent on each issue.

The numbers don’t singlehandedly prove the company cooked the books, as O’Donnell is asserting, since it’s not clear they were used with government filings (and they don’t disprove she made running the magazine difficult in the extreme). But they are the latest example of what was a systematic business practice at the company, which publishing industry executives said could not have occurred without the awareness of its chief executive, Dan Brewster.

As a person who worked for G+J outside Rosie told WWD last spring, “There was a wink and a nod with Brewster and Diane Potter [the company’s vice president in charge of circulation. They said everybody inflated numbers, but I don’t think everyone inflated it to that degree.” A second source close to the company added at the time that it would have been “impossible” for G+J to have inflated the numbers on several of its titles, as it did, without Brewster’s knowledge.

But the Magazine Publishers Association of America, the industry lobbying organization for which Brewster is chairman, refuses to acknowledge the company’s alleged tactics, or to distance itself from the chairman, even though the numbers at Rosie are part of a company pattern that has been reported for months in WWD and subsequently in The Wall Street Journal, Ad Age, Media Week and the New York Post. G+J was previously found by WWD to have inflated its six-month averages on YM by 220,000 copies an issue in 2001, an average of 57 percent.

This story first appeared in the October 17, 2003 issue of WWD.  Subscribe Today.

“We don’t know anything about their business dealings. There is nothing we have to say. We don’t comment on individual publications or companies,” a spokeswoman said.

Last January, when O’Donnell first charged that over-reported newsstand sales prevented her from exercising an escape clause in her contract, a G+J spokeswoman said final numbers for Rosie would show a variance of less than 5,000 copies. On Thursday, she took a step back but sidestepped the question of her chief executive’s role.

“As we have stated repeatedly, we recognize that this was a problem,” said the spokeswoman. “We have put new management responsibility in place to oversee this situation, ensuring that all circulation figures are accurately reported.” — Jacob Bernstein

THE LITTLE BLACK BOOK: Primedia’s finally separating the real bidders from the Michael’s wannabes in the never-ending auction of New York Magazine. Contenders who’ve proven they’re serious to Primedia’s bankers at Allen & Co. took receipt this week of the magazine’s “black book” — the financial documents needed to do due diligence on the title. And, contrary to prior reports, the numbers won’t be as rosy as they might have hoped.

Allen & Co. has already made an executive summary of the numbers available to bidders willing to troop over to its offices and take a look. Two sources who have seen the numbers said they’re nowhere near the $3 million to $4 million in profits and $60 million in revenue cited earlier this week in Advertising Age. “The top line is barely $50 million, and the bottom line is under $2 million,” taking overhead into account, one source said. This should dash the hopes of anyone who thought that a purchase of New York at a price of $60 million or more could make fiscal sense — which would favor the trophy hunter over the pure business player.

Bidders should also be sure to read the fine print in the black book’s circulation section — a full quarter of New York’s 400,000-plus subscribers are low-quality, low-renewal-rate filler subscriptions, according to a source familiar with the numbers. That’s not surprising — bidders for Seventeen were extremely dubious about its circulation, and Primedia was the spark of a flap at the Audit Bureau of Circulations this spring over industry-wide misclassified subscriptions. — Greg Lindsay

PEARLS OF WISDOM: In the year since Fortune deputy editor Rick Tetzeli was installed as the managing editor of Entertainment Weekly, there’s been a certain amount of head scratching as to why the company made the choice it did.

But last Thursday morning, a “morale booster” arrived in the form of Time Inc. editor in chief Norman Pearlstine.

“He pretty much recounted why he’d chosen Rick and talked about the direction of the magazine. He said he was generally happy with it but wished they broke more news,” said one source, while another recounted that he subtly asked whether the title couldn’t have found an angle on the Siegfried and Roy story. “No one laughed out loud,” said the first source. “Very anticlimatic.” — J.B.