Following the July 30 announcement from the US Securities and Exchange Commission (SEC) about new guidance concerning Regulation FD, there has been plenty of online commentary and opinion on what people think it means for business, investors and communicators.
The regulator has yet to publish the full details of its guidance, so much of the commentary and opinion at the moment is just speculation. [Update Aug 4: the details have now been published: see note at end of this post.]
But I think one thing is clear – among the huge implications the SEC’s announcement has for financial communication as a whole, the press release and how news and information is traditionally distributed will be affected.
Tom Foremski’s speculative view is a good one:
[…] If a company’s web site is RSS enabled and it releases financial information and any other material information through that web site, that should satisfy FD requirements. This is because financial analysts and investors can opt-in and subscribe to that information through RSS news readers, or choose to have that information emailed as soon as it is published.
The bold emphasis is mine as that gets to the heart of the new self-distribution model that I believe will emerge with more organizations as a result of the SEC’s move, one that will change traditional press release distribution and could dramatically affect the newswire services’ business models.
This form of distribution is much broader than through a wire service such as BusinessWire or PRNewswire. Distribution through RSS and email takes advantage of the full breadth of the Internet and does not require an intermediary such as a wire service. Yahoo Finance and Google News would provide additional free distribution services in those cases where investors are not subscribed to a company’s financial information. Companies will be able to save considerable amounts of money in bypassing those wire services, where a single release can cost at least $1200 and often more.
Again, the bold is my emphasis.
It seems like a no-brainer, doesn’t it? If you could use a communication channel that not only is within the scope of any regulations you must adhere to but also saves you quite a bit of money, surely you would. Wouldn’t you?
Aside from the SEC guidance itself – and remember, we’ve still not seen the details of that – a primary thing to think about in what I’ll call the emerging self-distribution news model is whether or not it has the breadth and depth of reach to be an effective communication channel.
Not yet, in my view, not in the sense of it entirely replacing those traditional channels: the press release and the newswires. So any calls for dispensing with the press release are a bit premature.
What I think will happen is more social media newsrooms going up, perhaps along the lines of what GM Europe has done. Or Electrolux, IABC and Ford. Or perhaps like Cisco Systems or Hewlett-Packard who issued a press release in a social media format (HP’s via a wire service).
You’ll notice that none of these examples has anything to do with communicating financial news and information.
That will come from some organizations, perhaps even from some of these ones, as a result of the SEC announcement.
Notice, too, that all these examples of using a social media approach to press releases are in parallel with traditional press releases – no one has replaced any traditional communication channels.
That’s an important point – you can experiment with new ideas like the social media news release without making any changes to the established order of things – you simply add a complementary channel.
I was talking to Dennis Howlett a few days ago about the SEC news. Dennis has an interesting point of view (and one I hadn’t considered) broadly surrounding governance, risk and compliance which he wrote about in ZDNet, saying:
[…] there is a case where the notion of social media as a prime delivery tool takes on genuine value. If, as has been argued elsewhere, one of the Big Four collapses and this guidance is fleshed out to be meaningful, then the whole question of corporate public disclosure becomes a major talking point.
Imagine this: the entire value of traditional audit comes under question. What replaces it? A carefully orchestrated stream of transparent information that can be parsed through links. There will, in other words, be no place to hide. Corporations will be forced into acting in a very different manner to the command and control structures I see every day of the week.
My emphasis in bold. What the SEC is proposing has far-reaching implications for corporate and financial communication, of which this post’s focus on news distribution is purely one aspect.
Also listen to Shel Holtz, Brian Solis, Chris Heuer and Tom Foremski discussing the implications for the social media news release in the SMRCast podcast episode #18.
As I said in my post on Thursday, I think this could be the tipping point for the social media news release where its value as an interactive communication channel becomes even more apparent.
I’m even more convinced of that. Note the word ‘could,’ though.
[Update August 4] The SEC has now published a 47-page document entitled “Commission Guidance on The Use of Company Websites” (PDF download) which explains the detail behind last week’s announcement.
I’ve glanced through it but clearly it requires careful reading and study before making any further commentary.
The SEC is asking for feedback on the content:
[…] We are soliciting comment on issues relating to company use of technology generally in providing information to investors.
Dominic Jones has some initial analysis of the report.
Very very interesting. I hope for this somewhat utopian view, and hope that Dennis’ interesting and optimistic view plays out. Thanks Neville.
Do you really think it’s a utopian view, Will? I think it’s a suggestion for practicality where you can experiment with something that is a low-risk activity.
If it doesn’t work according to the measurement criteria you set, then you’ve lost nothing. But imagine if it works.
Time will tell what happens as a result of the SEC’s guidance. I would expect quite a bit of communication experimentation to happen. And some of it will be successful.
Some interesting comments on the emerging self-distribution news model http://is.gd/1eLB
Some interesting comments on the emerging self-distribution news model http://is.gd/1eLB
[…] The emerging self-distribution news model : NevilleHobson.com […]
[…] The emerging self-distribution news model […]
Before I start, a disclosure. As Chief Exec of a news release distribution service I have some degree of vested interest in this discussion (although minimal as publicly owned company financial disclosure announcements are not an area where we have any real direct market share).
Having read the SECâ€™s guidance document there were a number of passages that jumped out at me in connection with the use of SMNRs/blogs/websites v wire services to make announcements that I thought were worth highlighting.
On the use of electronic means in general (p11)
â€œwhere access is freely available to all, use of electronic media is at least equal to other methods of delivering information or making it available to investors and the market.â€
â€œavailability of information in electronic form â€“ whether on EDGAR or a company web site â€“ is the superior method of providing company information to most investors, as compared to other methods.â€
So big tick there in principle for using such means to disseminate as the Internet has become so accessible.
However on use of a companyâ€™s website in particular it goes on to define two key criteria for whether this method will be adequate (p19)
â€œfocus on (1) the manner in which information is posted on a company web site and (2) the timely and ready accessibility of such information to investors and the markets.â€
And in particular with reference to (2) whether (p20/21)
â€œcompanies that are well-followed by the market and the media may know that the market and the media will pick up and further distribute the disclosures they make on their web sites. On the other hand, companies with less of a market following, which may include many companies with smaller market capitalizations, may need to take more affirmative steps so that investors and others know that information is or has been posted on the companyâ€™s web site and that they should look at the company web site for current information about the company”
The implication seemingly being that you still need to ensure that your Company website is being seen as and used as a timely source of investor news. It is not simply enough to provide the information. A similar issue would therefore apply to SMNRâ€™s or Social Media Newsrooms. You will still need to market and promote the use of your site for this purpose. This may be relatively easy for the very large companies who people in the media will be making a particular effort to follow, but may be a much greater challenge for small/medium sized companies with less â€œnaturalâ€ exposure.
Interestingly the SEC then goes on to give a degree of conflicting advice in that it doesnâ€™t stipulate that anything of a â€œpushâ€ nature needs to be used (p21)
â€œWe do not believe, however, that it is necessary that push technology be used in order for the information to be disseminated, although that may be one factor to consider in evaluating the accessibility to the information;”
On the other hand it makes specific reference to the use of newswires as a way of ensuring that investors and interested parties are aware of announcements being made on their website (p20)
â€œSome factors, though certainly non-exclusive ones, for companies to consider in evaluating whether their company web site is a recognized channel of distribution and whether the company information on such site is â€œposted and accessibleâ€ and therefore â€œdisseminated,â€ include:
â€¦â€¦â€¦â€¦..the extent to which the company has advised newswires or the media about such information and the size and market following of the company involved.â€
On the topic of using blogs rather than the main Company website they also go onto acknowledge the potential for such medium as blogs and forums to provide a potential valuable source of information and dialogue (p42)
â€œWe acknowledge the utility these interactive web site features afford companies and shareholders alike, and want to promote their growth as important means for companies to maintain a dialogue with their various constituencies.â€
and also point out that Companyâ€™s need to remember that statements made on them have the same standing as announcements made anywhere else (p43)
â€œA company is not responsible for the statements that third parties post on a web site the company sponsors, nor is a company obligated to respond to or correct misstatements made by third parties. The company remains responsible for its own statements made (including statements made on its behalf) in a blog or a forum.â€
This would apparently allow for the possibility of using a blog as the relevant dissemination tool given it is seen as having the same standing.
So on the one hand they seem to be saying that use of Company websites, blogs, forums are valid tools as a way to disseminate investor information and that push technology or services are not necessary to fulfil the relevant dissemination obligations. On the other they are saying that it is the Companyâ€™s responsibility to ensure that whatever method they use is sufficiently well marketed/promoted that it achieves these obligations. So the onus is on you the Company to achieve this.
Therefore I think this debate will come down to a cost/benefit analysis of the classic outsourcing kind. As you quote from Tomâ€™s post â€œCompanies will be able to save considerable amounts of money in bypassing those wire services,â€. But is this always going to be the case?
This means companies comparing these savings with the costs; cash investment in technologies and maintenance; management capacity to oversee these mechanisms; and the risks of not being successful in fulfilling the obligations.
This comparison may not be a one way bet for all.
Adam, thanks for these thoughtful comments. A lot to digest here. I’ll be back with some further thoughts.
Adam, Thanks for the thoughtful analysis. My view is that now that there is no “requirement” that companies use paid news release distribution services, IR departments can now look at these services in a different light.
Not pointing fingers at anyone in particular, but having a captive market has made some PR wire services lazy and smug, and their IR clients a little sore. But with this change, IR departments can now decide to use wire services because they offer a service they want or need, rather than because they believe they have no choice.
I don’t see IR departments giving up on wire services quickly, or ever in some cases. But I do think the relationship has changed. We may see IR departments being able to drive harder bargains and using the wire services’ distribution networks differently than they have often been forced to do in the past.
Ultimately, though I tend to agree with Neville that we are seeing an emerging self-publishing model. There is no reason, for instance, that Yahoo! Finance or any other information aggregator could not pick up feeds for every public company in the US, or anywhere else in the world. If they can carry blog content, why not content directly from companies? They could do so now, without companies themselves having to do anything. The SEC’s Edgar database has feeds for every issuer and registrant. Each feed is updated in real-time immediately when a company’s filing (press release, quarterly report, annual report, insider filing) is accepted by the system. That information can then be syndicated freely across the web.
There will continue to be a role for wire services. As Dave Armon at PR Newswire told me last year. “Someone is going to have aggregate all these feeds.”
Dominic, I agree completely that the self publishing option this guidance opens up effectively represents a significant new “market entrant”. Like other such situations this will mean that the market will change and existing providers will need to adapt their service, message and/or price in order to maintain their stake in that market – and even if they do the profitability of the market for existing providers may well reduce. I wouldn’t want to comment on the attitude of our larger and more famous competitors :) but your point about Yahoo Finance is an interesting one as at the moment the service is a closed shop where press release distribution is concerned with the big 4 being the gatekeepers.
Your comment regarding the EDGAR system already having all the content is a very interesting one that I hadn’t thought of. Combined with the self publishing option this may well create other service and distribution models that could help IR departments address some of the dissemination challenges without relying on the current providers. The potential for pricing/value pressure this would then create could be very significant.
Coming from an accountancy/corporate finance background I find this situation fascinating and it will be very interesting to see how this develops.
[…] The emerging self-distribution news model : NevilleHobson.com – interesting collection of views on the SEC changes […]
[…] it’s more to do with an evolution in how news and other information is communicated. The distribution, especially, will […]
[…] is both in the sense that social media tools can increase the PR distribution network but also that it improves consumer psychological brand impressing and improves […]
[…] The emerging self-distribution news model (Neville Hobson) […]