ABC Board Reduces Audit Costs, Freezes Rates, Modifies U.S. and Canadian Newspaper Rules

Sanctions Toronto Sun, Elects New Directors

SCHAUMBURG, Ill., (July 29, 2008)—The board of the Audit Bureau of Circulations (ABC) took several important steps to respond to current market conditions, nearly cutting audit costs in half for some U.S and Canadian newspapers and freezing costs for most other newspapers and magazines.

ABC had previously announced in March that U.S. newspapers with paid circulation below 50,000 would have the option to be audited every other year beginning in April 2009, raising the eligibility ceiling from its current 25,000 level. This week the ABC board agreed to advance this timeline by six months, to Oct. 1, 2008, and expand the option to Canadian newspapers.

The board also gave its initial approval to rules allowing all U.S. and Canadian newspapers with paid circulation between 50,000-75,000 to have this same biannual audit option next year, beginning April 1. To take advantage of this, a newspaper’s most recent audit cannot contain an adjustment of more than two percent and its third-party circulation (e.g., copies purchased by a business in bulk quantity and distributed to customers) cannot exceed five percent of its total paid circulation.

Newspapers with circulation between 50,000-75,000 will also be required to participate in ABC’s Preprint Projection Center, a free online tool that allows publishers to provide confidential circulation forecasts to help advertisers better plan media purchases and insert-printing requirements. All newspapers are still required to file six-month Publisher’s Statements, with top-line numbers reported in ABC’s FAS-FAX report.

ABC’s board chairman, Don Miceli, vice president of global media resources at Kraft Foods, noted that the board wants to send a clear message to the market. “All of us at ABC recognize the challenging environment we operate in today,” he said. “We are committed to streamlining the audit process and reducing costs where we can to accommodate the needs of our members.”

The ABC board also gave final approval to a set of sweeping rule modifications for U.S. newspapers. The changes, which received initial approval in March, are intended to simplify ABC rules, reduce audit costs and provide greater pricing and marketing flexibility to publishers. Several rules, including flexible pricing, take effect in April 2009. The remaining rules, which include reporting “other paid circulation” (copies purchased by sponsors or distributed to schools and newspaper employees) as nonpaid “verified circulation,” take effect in October 2010. Complete details are available on ABC’s Web site.

Billing Model Changes

The ABC board also approved a new flat-rate billing model for field audit services for fiscal 2009, effectively freezing audit costs for most other ABC newspapers and magazines. In addition, ABC will unveil several new online filing tools in September that allow publishers to further lower their costs by submitting advance audit documentation and worksheets via ABC’s Web site.

“ABC has typically billed publishers based on an hourly rate,” said Michael J. Lavery, ABC’s president and managing director. “Our new structure uses a flat rate based on the most recent ABC audit. By streamlining some aspects of the audit and automating more processes, most publications will be able to accurately forecast and control their costs.”

Lavery added that large metropolitan newspapers would continue to be billed on the hourly model due to the complexity of their audits. Those rates, however, will remain frozen at their 2007 level.

Toronto Sun Sanctions

The ABC board unanimously voted to sanction the Toronto Sun for a significant audit adjustment exceeding five percent related to its Sept. 2007 audit. Although the Toronto Sun resigned its membership in ABC on April 16 of this year, the board voted to apply sanctions because the audit was conducted while the newspaper was still an ABC member and because the Sun was aware of the discrepancies before it resigned from ABC.

ABC expects to issue the Sun’s Sept. 2007 audit report within the next 10 days. The report will show downward circulation adjustments of 21,004 average daily copies (11%), 18,191 average Saturday copies (12%), and 49,869 average Sunday copies (15%).

Should the Sun choose to rejoin ABC in the future, it would be required to submit a plan of corrective action and undergo semi-annual audits for two years.

Modifications to Canadian Newspaper Rules

ABC’s Canadian members continue to review the U.S. newspaper rule modifications for applicability in Canada. In that regard, the ABC board gave its initial approval to several rule changes, based on the recommendations of Canadian advisory committees.

In addition to the earlier-noted option of biannual audits for newspapers below 75,000 paid circulation, Canadian newspapers may also immediately upgrade current home subscribers to a greater frequency, provided the subscriber has the option to decline the offer.

All Canadian newspapers may immediately establish separate basic prices for their replica electronic editions.

Finally, to simplify organization and understanding of all newspaper rules, a new section of ABC’s bylaws and rules, Article 20, was created to house the rules governing Canadian newspapers and Article 10 was dissolved.

Other Board Actions

The ABC board agreed to allow consumer magazines to test new circulation marketing programs (e.g., partnership programs where audit documentation parameters are not yet defined) while working with ABC to determine the appropriate audit procedures. Circulation generated during the one-year test period would be reported as verified or analyzed non-paid, as appropriate.

The board voted to adopt a new multimedia publisher’s statement for business magazines. The new optional report, available for the Dec. 2008 reporting period, allows publishers to report print circulation, Web site activity, e-newsletter activity and pass-along receivership in a single ABC statement.

The board also agreed that, effective immediately, paid Web site subscriptions could qualify as paid digital editions of business magazines.

Recognizing that a newspaper’s reach encompasses more than just the traditional print product, the ABC board agreed to test a new optional consolidated report that would allow newspapers to display a variety of print, online and audience data. For example, a publishing organization may feature its daily newspaper, a free distribution product that features real estate or job classifieds, a free newspaper targeted at commuters, and its Web site audience. ABC must audit all of the data on the report, which will be available as a test for the Sept. 2008 reporting period.

At the request of the Newspaper Association of America’s Newspaper Audience Leadership Committee, the ABC board agreed to modify the requirements for newspapers that participate in its Audience-FAX initiative. Larger (tier 1) publishers will now be required to report Web site unique visitors using panel-based sources like Nielsen Online or comScore, when available.

ABC also agreed to form a new Digital Advisory Committee to help it examine trends, business opportunities and ABC’s role in auditing emerging media. The move follows ABC’s successful launch in June of its new Digital Technology Accreditation program.

New Directors Elected

The ABC board elected five new directors at its recent meeting: Irene Grieco, manager of media investment and strategic partnerships at Unilever US; Suzanne Silber, group director of strategy at OMD; Bill Stabile, senior director of brand and marketing communications at Siemens Corp.; Lindsay Valk, senior vice president of analysis and planning, consumer marketing, Hearst Magazines; and Brenda White, senior vice president, Starcom Worldwide.

The ABC board of directors meeting was held July 23-26 at Manchester Village, Vt. For a complete summary of board actions, visit ABC’s Virtual Pressroom.

With nearly 4,000 members in North America, ABC is a forum of the world’s leading magazine and newspaper publishers, advertisers and advertising agencies. The organization provides credible, verified information essential to the media buying and selling process. ABC maintains the world’s foremost online database of audited-circulation information and a growing array of readership, audience and Web site usage data. To learn more, visit http://www.accessabc.com.