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Thursday, February 18, 2010

Are Newspapers Stealing a Page From Banks' Playbook?

Don't Hold Your Breath
Waiting for the Newspaper Expose

I first noticed it when my Wall Street Journal subscription continued -- and continued -- well past the renewal date (I didn't).

Then, a client whose home I'm listing reported that he couldn't terminate his New York Times subscription, despite repeated efforts.

Are newspapers stealing a page from the banks' playbook?

Accounting Games

Banks, you'll recall, were able to defer mortgage losses simply by acting as if borrowers were temporarily in arrears.

So, instead of writing down their increasingly impaired loans, the banks kept adding accrued (but unpaid) interest to the loan balance.

The result: "healthy" bank revenues, "healthy" bank balance sheets (in fact, growing!) -- just no cash coming in the door.

Eventually, the accounting fiction caught up to the banks, and the tide of red ink and write-offs engulfed them (at least until the government rode to the rescue).

Phantom Subscribers?

Newspapers, of course, live and die by their circulation statistics.

Pretending that ex-subscribers are still current keeps those statistics -- and therefore advertising revenues -- artificially high.

Just like the banks, it also lets newspapers continue accruing subscription revenue today that they will have to reverse tomorrow.

Ultimately, sending newspapers to people who don't want them could very well be a testament to newspapers' current business model: they're not selling papers to subscribers, they're selling subscribers . . . to advertisers.

Ten Million Multiplied by $.0145

Isn't extrapolating from a sample size of two risky? Perhaps.

And it's certainly possible that the problem is nothing more than sloppy customer service on the newspapers' part.

But it reminds me of a 1980's bank fraud in California that was detected by an especially persistent grandmother.

Determined to balance her monthly statement exactly, she insisted that the bank was shortchanging her one penny . . . every seven months!

It turns out that the perpetrators were lifting an infinitesimal amount from millions of accounts monthly.

P.S.: And who should call on my home line, at 9 p.m, just as I'm typing the last keystrokes on this post? Telemarketing for the local newspaper!

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