'Daily Mirror' counts cost of fake photos as sales slide

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Tens of thousands of readers have deserted the Daily Mirror because its Iraqi torture pictures were exposed as a fake, the newspaper's owner admitted yesterday.

Trinity Mirror warned investors to expect disappointing revenues from its flagship national title, and said it did not expect circulation to climb back over the 2 million mark.

The company said its internal market research had showed the Iraq pictures hoax was behind the accelerating circulation decline seen at its national daily. "While circulation revenues have increased, circulation volumes during May for the Daily Mirror have been disappointing," the company said in a trading update covering the past six months.

The City was told that June had been a poor month, too, although audited circulation figures will not be available for another few weeks.

The Daily Mirror's average daily circulation was 1,846,734 in May, down by 40,000 readers compared with the previous month, according to the Audit Bureau of Circulations. The figure was the lowest since World War II.

Analysts said the company, whose chief executive is Sly Bailey, had conceded that the readers were lost for good.

Simon Baker, of SG Securities, said: "The ABC data illustrates how the fake Iraq abuse photos have affected the credibility of the title, taking perhaps 2-3 per cent off the circulation base, permanently."

Sales of the Daily Mirror slid through the psychologically important 2 million barrier a year ago, and the company has resigned itself to not seeing that figure again. Instead, the new editor, Richard Wallace, has been informed that his main task is to stabilise the paper's share of a declining market.

Piers Morgan was sacked as editor after it was proved that photographs purporting to show members of the Queen's Lancashire Regiment abusing Iraqi prisoners had been faked - after two weeks in which the paper had first defended their authenticity and later rehearsed a defence that they illustrated real events.

Investors were concerned the circulation decline in June will turn out to be worse than in the previous month, because readers discovered the deception only midway through May.

The newspaper produced a front page on 15 May with the headline: "Sorry we were hoaxed". The apology to readers was accompanied by a promise to donate to charity all the money it made from selling on the photos.

Trinity Mirror shares fell 4p to 642p yesterday. The company said that circulation revenues from the national titles - which also include the Sunday Mirror and ThePeople - were up 6.6 per cent in the 26 weeks ended 27 June.

Across the Trinity Mirror group, which takes in 240 regional papers as well as the national titles, circulation revenues were up 6.2 per cent, and advertising sales up 5.1 per cent.