WSJ accused of unorthodox boost to circulation -

WSJ accused of unorthodox boost to circulation

LONDON (AP) -- The Guardian newspaper reported Wednesday that it had seen emails and documents showing that News Corp.'s flagship newspaper, The Wall Street Journal, funneled money through third parties to a company that was buying up copies of the Journal and boosting its European circulation.
The Guardian, a fierce rival of News Corp., did not make the emails and documents public but, if its description is accurate, the Journal was effectively buying its own papers and inflating its circulation figures -- something that could allow it to charge advertisers extra.
The Journal slammed the story as "inflammatory" and "replete with untruths and malign interpretations" in a statement to The Associated Press.
The Guardian claimed that the Journal had asked intermediaries to make payments to the Netherlands-based Executive Learning Partnership, which at the time was buying thousands of copies of the paper every day at deeply discounted prices.
Such discounted sales are not unusual in the newspaper business and the Guardian and the Journal both say that the purchases by ELP were approved by Britain's circulation watchdog.
However, the Guardian alleges that the Journal was indirectly sponsoring the purchase of its own papers by urging third parties to pay ELP. The Guardian also said the Journal promised to publish three stories based on ELP research. The Guardian said two such stories were then published in October 2010 and March 2011 without any warning that they were the product of a business deal. The paper now has disclaimers on the online versions owning up to that fact.
The Wall Street Journal Europe's publisher, Andrew Langhoff, resigned Tuesday over its links to the Dutch company. Publisher Dow Jones & Co., which is owned by News Corp., said that its links to ELP "could give the impression that news coverage can be influenced by commercial relationships."
In its statement, Dow Jones said Langhoff's resignation was because of a "perceived breach of editorial integrity" -- not because of circulation programs.
The company reiterated the assertion made in a previous statement that the circulation deals were "of poor appearance" and that it had since cut ties to the third parties involved. But it insisted that, while "admittedly complex," the deals were still legitimate.
It provided no details, however, about its relationship with the Dutch company or other third parties involved. ELP did not immediately return a call or an email seeking comment.
Outsell Inc. newspaper analyst Ken Doctor said the latest mess at News Corp. merits a hard look into whether the Journal has done enough to separate the commercial side of the operation from the newsroom.
Rupert Murdoch's News Corp. bought the Journal's owner Dow Jones & Co. in a highly publicized takeover in 2007.
Ever since, the paper has made boosting circulation a top priority.
The newspaper's U.S. version surpassed USA Today to grab the bragging rights that it was top-circulation daily in 2009, although both papers make generous use of heavily subsidized hotel copies in boosting their overall numbers.
"This raises the question about what kind of ethics the Journal was using in pursuit of being No. 1," Doctor said.
In Britain, News Corp. is under political and police pressure over allegations that reporters illegally participated in hacking voicemails and paying police bribes for stories at its now-defunct News of the World tabloid.
In the United States, authorities are investigating whether those alleged bribes will run afoul of the Foreign Corrupt Practices Act, which can result in hundreds of millions of dollars in fines despite activity occurring abroad.
Another media business analyst said that it's "bad practice and bad ethics" for a paper to cut business deals to write stories without informing readers of the arrangement by explicitly labeling such copy as a kind of advertising.
Rick Edmonds, with the Florida-based journalism school The Poynter Institute, added that if the Wall Street Journal Europe was essentially buying its own papers to boost sales, then that shouldn't have qualified as legitimate circulation.
"The magnitude is not as big a deal as criminally hacking into a private individual's phones, but there is once again a flavor of cutting corners in a fairly big way in pursuit of business," Edmonds said.
"I don't think that's going to cause thousands of people to cancel their Wall Street Journal subscriptions tomorrow or their advertising contracts. But in a kind of a reputation way, it's clearly one more blow to the company," he said.
According to Britain's Audit Bureau of Circulations, the Wall Street Journal Europe had an average circulation of 74,800 per issue in the six months through June, with about half coming from its biggest markets in Germany and the U.K.
Nearly 26,000 copies are bought by airlines for less than 5 percent of the cover price and 13,000 are listed as "barter copies." More than 7,100 copies that were not requested by the recipients were given away freely.
Richard Foan, the U.K. audit bureau's group executive director of communication and innovation, did not directly address the allegations but said in a statement that the bureau has a process to investigate circulation complaints but it does so confidentially until a decision has been reached.
The hubbub comes ahead of News Corp.'s annual shareholders meeting in Los Angeles on Oct. 21, where Murdoch, 80, could face shareholders with small stakes for the first time since the hacking scandal broke this summer.
Despite calls this week for him to be voted out by prominent shareholder advisory firm, Institutional Shareholder Services, he is likely to withstand any criticism because he controls 40 percent of the voting shares with solid backers giving him a near-majority.
On Wednesday, News Corp.'s widely traded Class A shares rose 28 cents, or 1.7 percent, to close at $17.09, buoyed in part by a $5 billion share buyback plan put in place after the crisis that is now about a third complete.

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