Dallas M-News to compensate advertisers $23 million after circulation overstatement
The Dallas Morning News will pay approximately $23 million to advertisers as part of a compensation plan developed by Belo Corp. management following the discovery of a circulation overstatement at the newspaper.
Belo also announced last month (read the press releases) that class action lawsuits have been filed against the company alleging violations of federal securities laws in connection with the circulation overstatement.
The advertiser compensation plan includes a combination of cash payments and future advertising credits to ROP, preprint and private-party classified advertisers.
An additional $3 million will be included to cover costs related primarily to the ongoing internal investigation of the circulation overstatement being supervised by the audit committee of the Belo board of directors.
Belo also expects The Morning News to incur approximately $4 million in incremental newsprint expense associated with the advertising credits provided to advertisers.
Belo announced on Aug. 5 that The Morning News will report a greater than expected decline in its September 2004
circulation after an internal investigation disclosed practices and procedures that led to an overstatement in circulation, primarily in single copy sales.
Belo estimated the decline in circulation to be approximately 1.5 percent daily and 5 percent Sunday. This decline, coupled with a previously announced reduction in state circulation of approximately 2.5 percent daily and 3.5 percent Sunday, and anticipated lower circulation volumes for the six month period ending Sept. 30, will result in a total decline in circulation of approximately 5 percent daily and 11.5 percent Sunday when compared with reported September 2003 figures.
In a Sept. 9 three-page letter to employees, Belo chairman Robert W. Decherd said the responsibility for counting circulation at the News has been transferred to the finance department. Decherd also recommends in the letter that executives in circulation at The Morning News and some management team members, including himself, not receive 2004 bonuses and no base salary increases in 2005.
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Elements of the advertiser compensation plan
• Advertisers will receive a cash payment equal to 10 percent of their total Sunday advertising expenditures from Aug. 1, 2003 through July 31, 2004.
• All advertisers will receive a “credit bank” for future advertising purchases equal in value to 5 percent of their total advertising expenditures (including Sunday) from Aug. 1, 2003 through July 31, 2004. This credit bank can be used between Sept. 1, 2004 and the end of an advertiser’s current contract or Feb. 28, 2005, whichever is later. If an advertiser does not have a contract, this credit will be matched dollar for dollar with advertising placed during this period until the credit is fully used.
• Preprint advertisers will receive an additional cash payment for estimated excess preprint printing costs incurred between Aug. 1, 2003 and Sept. 30, 2004.
• All private-party advertisers who placed classified advertisements between Aug. 1, 2003 and July 31, 2004 will receive one five-line advertisement upon request, for publication between Oct. 1, 2004 and March 31, 2005.
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Belo also announced last month that class action lawsuits have been filed in the U.S. District Court for the Northern District of Texas against the company and its chairman, president and chief executive officer, together with Barry Peckham, former executive vice president circulation of The Morning News.
The suits allege Belo and the named individuals violated federal securities laws in connection with The Morning News’ circulation practices and related company disclosures. The suits seek to recover damages for purchasers of Belo common stock between May 12, 2003, and Aug. 6, 2004.
Belo officials said the suits are without merit.
In response to the News’ announcement of circulation overstatement, Belo’s stock price fell from a close of $23.21 per share on Aug. 5 to close at $21.55 per share on Aug. 6, on a trading volume of more than 4.6 million shares, according to the complaint.
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