Potter Exit Sparks Ethics Debate

Circulation Management, Jan 1, 2004

Byline: BARBARA LOVE

Circulation directors will not soon get over the abrupt exit of Diane Potter, Sr. VP-consumer marketing at Gruner Jahr USA.

They are not-so-quietly pondering what the incident means as they try to do their jobs in a difficult environment.

It is now clear that manipulating the numbers to serve an advertising-driven strategy can lead to a circulator's downfall.

It certainly did with Potter, a respected circulation veteran, who "resigned" on November 21 after depositions showed that G J misrepresented its newsstand numbers on Rosie to the Audit Bureau of Circulations in 2002. This came out as part of the well-publicized lawsuit between G J USA Publishing and Rosie O'Donnell.

Every circulator contacted in an informal survey by Circulation Management feels that Potter was a scapegoat, and that "she took the bullet for a situation that the corporation was well aware of," as one observer put it.

"Being aware of the audit process, no circulation professional would grossly misrepresent numbers independent of corporate pressure," says Carole Mandel, strategic magazine consultant. "Diane Potter is one of the most professional in the industry."

As it turns out, Potter did not sign the Publisher's Statement in question. It was signed by the publisher of the magazine, and by the circulator in charge. But as the top circulator in the company, she was responsible for what was in the statement, and had to be aware of it.

But most feel that she could not have operated in a vacuum, and there is some evidence that Potter, who was unavailable for comment, does not think she was treated fairly. At press time, she reportedly was in settlement negotiations with G J USA.

Some are astounded that this should happen to Potter, who had been close to Daniel B. Brewster, Jr., the president of G J USA. He mentored her at American Express Publishing and lured her away to G J when he made the move in May 2000.

But sympathy for Potter only goes so far. Even if she was pressured to alter the numbers, it would appear from the outcome that she complied.

NUMBERS GAME

The word "fudged" is much too timid to describe what went on in circulation reporting for Rosie in the last year of its life.

As Brewster pointed out, Rosie's overall numbers for 2002 were within ABC guidelines. These rules state that you can vary your total circulation by up to two percent for the year without flagging a variance report. But that's not the issue.

"The big lie," as one CD put it, occurred in the first half of 2002 (see chart on the next page). According to numbers on file with ABC, the Publisher's Statement (estimate) of newsstand sales for January was 350,000, when the audit showed they totaled only 226,000. For February, the estimate was 450,000, when the actual audited number was 281,000. And for March, estimated newsstand circ for Rosie was 470,000, but the reality, according to the ABC audit, was 260,000.

The estimates veered close to reality during the second half. The only exception was December, when the magazine was going out of business. For that issue, the estimate for newsstand sales was 100,000 when the audited number was 238,000.

But even friendly colleagues consider these differences beyond the pale.

"Newsstand has been on a wild ride and I think every circulator has lost some sleep filing a statement," said one VP of circulation, who asked not to be named. "But it's impossible numbers could be off that much," says another circ VP.

Why would anyone change numbers?

In her deposition in the Rosie suit, Potter said if the bad newsstand sales were reported accurately "the advertising community would react so negatively that the magazine would be in great difficulty."

Much has been written about this "tragedy," as one consultant called it, but many questions remain unanswered.

ETHICAL DOUBLE BIND

One is what circulators can do to protect themselves in this new environment. The high-level publicity of Rosie and the enormous respect in the industry for Potter have focused everyone's attention on ethics.

Many circulators say that a person who refuses to agree to cooked-up estimates is asking to be fired. "I can't tell you what fights I had over this at 'x' magazine," says one source. "But it's your job. You have to go along with it."

That's especially true if they have "been forced to do it before and yielded," says another circ professional. "Management could just say they'll hire someone else who will do it."

But circulators know that estimates for per issue sales by subscriptions and newsstand reported in the ABC Publisher's Statement will be revealed in the audit 10 months later. They do not want to make statements that they know they will be called upon to explain.

Moreover, the ABC audit statement policy now makes variances more obvious. The regulations, which were changed a year ago, now require that audits completed after June '03 show the differences between estimates and the audited numbers for subscriptions, single copy sales and total circulation. This change is expected to discourage the practice of overstating newsstand sales while understating subscription sales.