Media Curmudgeon: Dirty Yellow Secret

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October 16, 2005

Dirty Yellow Secret

My wife, Julia, and I were having breakfast in our home on 95th Street in New York this Sunday morning when a young man dumped a package of six Verizon Yellow Pages books outside our kitchen door. Julia ran after him and made him take the books back. When she returned to the kitchen, she said, "Doesn't printing them cost Verizon money? This is the third package of six big Yellow Pages books we've gotten." The implications of her question got me thinking, "Why is Verizon doing this, and who is it costing?"

It came to me that Verizon was more than likely dumping millions of useless copies to fulfill circulation/distribution commitments that salespeople had made to its Yellow Pages advertisers. It reminded me of the circulation scandals of this past year in which Newsday and the Dallas Morning News fraudulently inflated circulation figures.

Newspaper advertising rates are based on circulation; therefore, as newspaper circulation nationwide has steadily declined, corporate pressure to stop or reverse the declines has intensified in order to keep ad rates up. The Belo Corp., which owns the Dallas Morning News, is a highly respected company that has put integrity high on its list of corporate values. Belo was deeply embarrassed by the circulation scandal and, justifiably, gave advertisers $230 million in rebates on ad rates that they had overpaid because of inflated Dallas Morning News circulation estimates.

Verizon's profligate dumping of Yellow Pages books is costing its unsuspecting advertisers untold millions. Some enterprising business reporter should look into this scam because Verizon's Yellow Pages are stealing ad dollars from other media (primarily local newspapers) with its unscrupulous dumping.

I know of three competing Yellow Pages companies in New York and I know that newsprint prices have increase about 15 percent this year. I also know that Yellow Pages online, especially Yahoo Yellow Pages, have given the dead-tree version of Yellow Pages additional competition. Therefore, I suspect that in the face of all of this competition Verizon has increased its Yellow Pages guaranteed circulation/distribution to naïve advertisers and is dumping copies to maintain the guarantees. I hope someone catches Verizon and forces it to give rebates to advertisers and to come pick up those 18 useless books from my house.

Posted by Charles Warner at October 16, 2005 5:35 PM

Comments

Media Curmudgeon at October 17, 2005 4:11 PM writes:

I'm sure John is right about the delivery person doing piece work. He doesn't care that a house gets 18 copies of the books and doesn't want to return any packages and lower his pay. But that doesn't explain why Verizon prints and dumps so many copies.

Media Curmudgeon at October 17, 2005 4:03 PM writes:

John Richardson writes:

"Seems like the delivery guy is probably trying to unload books that he was supposed to deliver elsewhere. I'm guessing those guys get paid piecemeal for sucessful deliveries, and if an address is vacant, he's supposed to return the books (and not get paid for them). But I'm just speculating."

Media Curmudgeon at October 17, 2005 4:02 PM writes:

Chris Warner writes:

"Verizon is the source of most of my nightmares."

Media Curmudgeon at October 17, 2005 4:00 PM writes:

Bill Grimes writes:

"Yellow Pages have the highest profit margin of any Verizon business despite inefficiencies, as you mention, and new competition from both print and Internet directories. In part because of this competition, a cautious, conservative, non-innovative Verizon managemnet is afraid of risking further erosion of revenues and profits to make changes of any significance.

Burdensome labor contracts with production unions exist throughout the Yellow Pages business and Verizon management worries that to ameliorate these union expenses the company may have to endure a strike, and it is concerned that union workers in Verizon's local phone business (fixed line local telco) might walk in support of YP production labor. Further complicating these union issues is the fact that YP ad salespeople in many of their markets are organized union members.

Not surprisingly, Verizon's share price is down 25% this year, reflecting primarily the loss of nearly 2% of its fixed land line business in the last year. This is a hugely significant loss--over one million local phone subscribers--to new cell phones customers cancelling their Verizon line account (like me, no longer a fixed line subscriber) and to cable VOIP customers, which is an increasingly competitve factor in local phone business. (In San Diego, for example, Cox Cable has taken 30% of local phone business from SW Bell(ex-PacTel). In Verizon markets Cablevision has taken over 100,000 customers and Time Warner Cable and Comcast are just beginning serious marketing of their very competitive VoIP local and long distance telephony for $39 a month, unlimited US and Canada phone calls.

So Verizon is a company with large problems, and management has demonstrated little knowledge of solutions--keep in mind that revenues from all telephone business, including cellular are diminishing because of sinking prices. Verizon is a twenty-year victim of its management fearing to make risky decisions about its base business and as a result finally today it is losing revenue daily from its fundamental local phone business.

As a result the paralysis over what to do or not do with its Yellow Pages business continues--a business which is also experiencing no revenue growth, decling margins and profits. However, the cash produced by its YP remains sizable and important to this dinosaur. Veizon today is like the broadcast networks in 1990 except that it has found no cable networks or movie-studio-type business to diversify into while the mother ship continues to slowly sink into a large deep hole."

Media Curmudgeon

October 16, 2005

Dirty Yellow Secret

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