The Rosie Trial | Day Seven

'ROSIE' PUBLISHER CHARGED WITH FALSE ABC REPORTS

Gruner & Jahr Trial Opens Can of Circulation Worms

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NEW YORK (AdAge.com) -- Testimony and documents entered into evidence in the Gruner & Jahr USA Publishing vs. Rosie O'Donnell case over the last week suggest
Diane Potter, G&J's senior vice president for consumer marketing, testified that 'if we reported [newsstand sales] accurately, the advertising community would react so negatively that the magazine would be in great difficulty.'

Previous Courtroom Stories:
GRUNER & JAHR CHARGED WITH COOKING 'ROSIE'S BOOKS
Memo Cites Potential to 'Somewhat Control The Financials'
ROSIE O'DONNELL'S FINAL DAY OF COURT TESTIMONY
Wisecracks, Anger and Publishing Naivete
G&J EXEC REBUTS ROSIE O'DONNELL CLAIMS
Says There Was No Apology for Breast Cancer Insult
THE STAR TAKES THE STAGE AT THE ROSIE TRIAL
Ms. O'Donnell Begins Testimony About a Magazine Deal Gone Sour
ROSIE'S CHIEF ADVERSARY TAKES THE STAND
CEO Dan Brewster Fiercely Defends Gruner & Jahr Actions
GRUNER & JAHR EXEC BREAKS DOWN ON WITNESS STAND
CMO Describes Breast Cancer Insult by Rosie O'Donnell
ROSIE'S COURTROOM DAY 3: LEGAL LUMPS AND HIGH ABSURDITY
Gruner & Jahr Appears to Strengthen Case on Editorial Control Issue
ROSIE O'DONNELL'S BATTLES WITH EDITORS DETAILED
Testimony Describes Screaming Matches, Struggle Over Magazine Focus
ROSIE O'DONNELL AND GRUNER & JAHR TRIAL OPENS
Opponents Flail Each Other Over Who Did What at 'Rosie' Magazine

the publisher knowingly provided inaccurate Rosie magazine circulation information to the Audit Bureau of Circulations.

'A violation'
Michael Lavery, president and managing director of ABC, said in his testimony yesterday that what G&J is alleged to have done concerning its reporting of Rosie newsstand sales "would be a violation of our rules."

G&J and Ms. O'Donnell both seek at least $100 million in competing breach-of-contract lawsuits. G&J's claim centers around Ms. O'Donnell's withdrawal from the venture. Ms. O'Donnell's counterclaims accuse G&J of breaches related to editorial control, as well as financial reporting about the magazine's operations. The trial entered its seventh day yesterday.

Excerpts from the deposition of Diane Potter, G&J's senior vice president for consumer marketing, were read into the record yesterday. She was grilled over circulation information that came to light in the trial late last week. That evidence and testimony indicated that G&J significantly overstated newsstand sales of Rosie, while their internal figures for Rosie's newsstand sales proved remarkably close to the numbers reached by an audit conducted by ABC. Ms. Potter said G&J was aware of the discrepancy all along.

Overstatement
G&J claimed, in figures filed to ABC, that Rosie's average newsstand sale was 415,000 for the first five issues of 2002, although internal estimates pegged newsstand sales at 283,000. An audit later found the real figure was 272,008 -- remarkably close to G&J's original projection, but a whopping 52.5% off what it represented to ABC.

"The numbers you submitted [to ABC] differed significantly from G&J's internal estimates, did they not?" Ms. O'Donnell's attorney asked in the deposition. Ms. Potter conceded that "they did," and said that she knew this when she submitted them.

Ms. Potter went on to express concern that "if we reported [newsstand sales] accurately, the advertising community would react so negatively that the magazine would be in great difficulty."

Advertisers
A magazine's newsstand sales figure is the preferred metric to gauge any title's heat in the marketplace, and as such is a number of paramount importance to advertisers.

Mr. Lavery, of ABC, told the court: "This would be an offense [if G&J] filed inaccurate statements knowingly."

As reported in Monday's Advertising Age, Ed O'Donnell, senior vice president of marketing at NBC and brother and business adviser of Rosie O'Donnell, testified Friday that Cindy Spengler, G&J's chief marketing officer, told him the publisher had provided false circulation numbers to ABC.

'The real numbers'
He had been in contact with Ms. Spengler around the time G&J was hiring new Rosie editor in chief Susan Toepfer -- with whom Ms. O'Donnell clashed loudly and often -- in June of 2002. Mr. O'Donnell said he was responding to Ms. Spengler's concerns over poor newsstand sales and told her he felt the numbers "didn't look that bad." But he said Ms. Spengler warned him off numbers provided to Audit Bureau of Circulations and said, "We have the real numbers. They're much lower."

Mr. O'Donnell testified he "never heard" of such a thing, but said Ms. Spengler told him "everyone does it all the time."

Cross-examination
In a cross-examination, G&J attorney Jeff Golenbock successfully challenged Mr. O'Donnell's contention that he had been looking at ABC newsstand numbers for the first half of 2002, as he had stated, since those numbers were not available until well after he'd spoken with Ms. Spengler.

But Ms. O'Donnell's attorney, Lorna Schofield, flashed on screen a fax sent to Mr. O'Donnell on July 16, 2002, identified as "competitive newsstand data" from major distributors. The document stated that Rosie's average newsstand sale for its January through May issues was 283,000. She then placed it side-by-side with figures G&J provided to the audit bureau, dated July 28, 2002. Those figures claimed an average newsstand sale of 415,000 for the same issues.

"[Ms. Spengler] said the numbers [G&J] provided to [the Audit Bureau] were not internal numbers," Mr. O'Donnell insisted during cross-examination.

G&J declines comment
A spokeswoman for G&J declined to comment, saying it was "an ongoing legal matter."

An executive familiar with the situation, though, questioned when the newsstand figures provided in the fax to Mr. O'Donnell were calculated, saying they were merely "newsstand estimates from different points in time" and not confirmed final figures. When confronted with the similarity of numbers provided to Mr. O'Donnell compared to the ABC audit, the executive declined to comment beyond saying it was "somewhat of a coincidence."

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