• by Ross Fadner , November 23, 2003

Diane Potter, a Gruner + Jahr executive whose testimony during the Rosie magazine breach of contract trial raised questions about the veracity of the publisher's circulation reporting, resigned from her post as senior vice president and director of consumer marketing Friday amid a flurry of speculation.

Potter, whose controversial testimony may have contributed to the presiding judge's pronouncement of a stalemate in the trial of Gruner + Jahr vs. Rosie O'Donnell earlier this month, left "because she believes it is in the best interests of the company," said G+J President and CEO Dan Brewster in a memo to his staff on Friday.

In a pre-trial deposition, Potter admitted that the publisher knowingly fixed circulation numbers and inflated newsstand figures for Rosie magazine. According to Potter's deposition, "Rosie's newsstand sales were so low compared to what we had seen previously," that G+J was forced to misrepresent its circulation data. "If we were to report them accurately, the advertising community would react so negatively that the magazine would be in great difficulty," Potter stated in her testimony.

In his staff memo, Brewster acknowledged that the Rosie trial "revealed that in several instances our company overestimated its newsstand sales in 2002." Other trade publications claim that Rosie magazine's newsstand sales were "overestimated" by as much as 32 percent in 2001, while Potter admitted to a newsstand spike of more than 50 percent in her testimony.

Brewster has taken steps to quell the concerns of G+J's advertisers, sending them a letter defending G+J's circulation practices and asserting that "overestimates were discontinued, will not affect 2003, and will not recur in the future. We are absolutely confident that an audit of our first half of 2003 will show estimates that are conservative." He further claims that G+J's executives never improperly accounted for any of the publisher's magazines.

While Brewster admitted to "optimistic" estimates for Rosie magazine's 2002 newsstand sales, he maintains strenuously that the difference between the "publisher's estimate" and the Audit Bureau of Circulation's audited statement for total circulation was 1.6%, within the 2% variance allowed under the ABC guidelines.

However, the ABC implements a variance of 2% to account for the possibility of human error. The numbers reported by publications are supposed to be accurate reflections of internal circulation numbers. Any variance is supposed to happen by accident, and according to testimony from both Diane Potter and G+J chief financial officer Larry Diamond, G+J was well aware of the numbers they reported versus their actual circulation findings.

In a way, none of this is news to members of the media community, who have been suspicious of many publishers' ABC reports for a long time, but the public revelations by G+J executives may cool relations further between agencies and publishers.

"We are dependant on (the publisher's) word, because we are dependant on the pink sheet and the pink sheet is only as good as its word," acknowledged Susan Nathan, senior vice president of and director of media knowledge at Universal McCann, adding, that publishers ought to sign affidavits attesting to their pink-sheet estimates.

Meanwhile, G+J has hired an independent circulation auditor to evaluate the business practices of G+J's consumer marketing practices last week. Brewster followed that by asking ABC to conduct an audit of all G+J magazines for the first half of 2003. It is expected to be completed by year's end.