Tribune Co. further reduced circulation figures at two of its newspapers yesterday and said it expects to increase compensation payments to advertisers by as much as $60 million.
The media company said its third-quarter earnings would be cut by $45 million to $60 million as a result of circulation inaccuracies first disclosed in June at Newsday of Long Island, N.Y., and the New York edition of Hoy, a Spanish-language daily.
The new outlay follows a $35 million charge that the company took against second-quarter earnings to settle an initial round of advertiser grievances. Newsday has begun offering advertisers discounted rates, a policy that the paper said would remain in effect until the end of next year.
Since the start of this year, the circulation errors and a sluggish advertising market have contributed to a nearly 20 percent drop in the stock price of Tribune, which also owns the Chicago Tribune, The Sun, Los Angeles Times and 11 other daily newspapers.
Wall Street appeared to take the new revelations in stride. Tribune shares slid less than 1 percent, or 14 cents, to close at $41.33 a share yesterday on the New York Stock Exchange. Tribune stock began the year at $51.60 a share.
In a message to company employees, Tribune Chairman, President and Chief Executive Officer Dennis FitzSimons said, "The unethical behavior that created the problems at Newsday and Hoy is inexcusable."
To prevent similar problems at the company's newspapers, Tribune has put in place new rules requiring top circulation executives to verify the accuracy of the counts each quarter. Those found to have inflated figures now face the loss of their stock options and bonuses, along with other punishment.
The latest tabulations at Newsday and Hoy reveal that the miscounts at both papers were deeper than Tribune believed when it disclosed the problems in June.
The company now says that, for the 12-month period that ended last Sept. 30, Newsday's daily circulation was between 480,000 and 490,000, or about 16 percent less than the 579,729 the paper gave in its filings with the Audit Bureau of Circulations.
Tribune also says it believes that Newsday's Sunday circulation for the same period was 570,000 to 580,000, or about 14 percent less than the 671,819 the paper had earlier claimed. Daily circulation at Hoy for that period now is expected to be between 45,000 and 55,000, according to Tribune - about 46 percent less than the 92,604 filed with the audit bureau.
The company also restated some numbers that both papers filed for the six-month period ending March 31. Newsday's Sunday circulation was revised to between 540,000 and 550,000. Hoy's daily circulation was lowered to between 40,000 and 50,000.
The new figures were based on a continuing review by the bureau, the newspaper industry's recognized circulation auditor, and Tribune's own investigation.
In July, the audit bureau censured Tribune for what it called "deceptive and fraudulent circulation practices." It was the first such punishment taken in more than two decades against any of the bureau's 4,300 members. At the same time, the bureau also censured the Chicago Sun-Times for exaggerating its circulation.
This year, the Sun-Times said it discovered substantial circulation overstatements going back several years. But the company has not released details from its investigation and has not said how it plans to compensate advertisers.
Concern rose last month that circulation miscounts might be even more widespread across the newspaper industry after Dallas-based Belo Corp. said it would pay $23 million to compensate advertisers for overstating circulation at its flagship Dallas Morning News.
Belo spokesman Scott Baradell said yesterday that payments to advertisers began last month.
The Chicago Tribune is a Tribune Publishing newspaper.