• by Michael Shields , August 16, 2004

The Belo Corp., parent company of The Dallas Morning News, presented details on Monday of an elaborate and potentially quite burdensome advertiser compensation plan following the recent discovery of circulation overstatements. Those overstatements, disclosed earlier this month, have revealed discrepancies of five percent for the paper's daily edition and 11.5 percent for its Sunday edition for the six-month period ending Sept. 30, compared to a year earlier.

The compensation plan includes a combination of sizable cash payments and future advertising credits.

Belo will record a total pre-tax charge of $26 million in the third quarter of 2004, anticipating that the compensation plan will result in cash payments to Dallas Morning News advertisers of approximately $23 million. An additional $3 million is included to cover costs related primarily to the ongoing internal investigation of the circulation overstatement being supervised by the Audit Committee of the Belo Board of Directors.

Robert W. Decherd, Belo's chairman, president, and chief executive officer, spoke of the importance of maintaining trust with the paper's business partners. "When our discovery of the circulation overstatement at The Dallas Morning News was announced on August 5, I committed to providing compensation to advertisers in a fair and expeditious manner," he said in a statement. "The plan announced today delivers on that commitment. The trust of our advertisers is a pillar of the economic value Belo has built for our shareholders, and this compensation plan should be regarded as an investment in the company's future."

When the subject of potential lawsuits by advertisers--something that has roiled Newsday following a serious circulation scandal--was raised, Carey Hendrickson, Belo's vice president of Investor Relations, said only: "We believe that the plan provides fair compensation to our advertising partners. We anticipate moving forward together to build our respective businesses."

As for whether these moves will garner the Dallas Morning News any sympathy during its upcoming Audit Bureau of Circulation investigation--which could result in censure as it did with Newsday and the Chicago Sun Times--that remains to be seen.

"The audit hasn't started yet, so it is a bit premature," said ABC spokesperson Heidi Chen. The ABC board will reconvene in November.