New services offer cost savings, but come under fire from newswires
Thomson Reuters and NASDAQ OMX have thrown down the gauntlet to the newswire industry by offering companies tools that enable them to self-publish press releases.
Both firms used NIRI’s annual conference this week to showcase web-based platforms that allow companies to prepare and distribute press releases in-house, eliminating the per-word editorial costs traditionally charged by the wires. The two IR service providers are also offering basic online distribution options, in another move to reduce costs for issuers.
In response, Business Wire, Marketwire and PR Newswire have defended the value of their existing services. They say allowing companies to follow a do-it-yourself approach to press releases could prove disastrous and argue that online distribution options will not lead to broad dissemination of information.
The new tools recognize the preference of some companies to take direct control of the process of publishing news and financial releases, as well as the potential of the web to distribute information cheaply.
NASDAQ OMX, which operates GlobeNewswire, says clients using its do-it-yourself service can choose for each release whether to employ basic online distribution or a fuller distribution model. Companies using the DIY service will pay a flat fee for each release depending on the distribution level.
‘There is a large market of individuals who feel very comfortable using online publishing tools; it’s generally a younger audience that likes to create its own content and distribute its own content,’ says Jeff Stacey, senior managing director for corporate services at NASDAQ OMX Group.
‘For the DIY service, as clients are doing it themselves and we’re not editing or proofreading, we charge them a flat fee, which is for a release of unlimited length.’
Thomson Reuters admits it does not have direct access to the thousands of distribution points built up by the wires, but it argues that mass distribution can be achieved more cost-efficiently by harnessing the power of the internet.
Steve Roycroft, global head of corporate services at Thomson Reuters, says a combination of distributing to the web’s most trafficked sites, like Google and Yahoo, enabling syndication through RSS feeds and optimizing releases for search engines will do the job. ‘When you can check the box on all those fronts, you’ll be hard pressed to say you’re not meeting mass distribution,’ he maintains.
Thomson Reuters is making its Web Disclosure self-publishing tool available free to users of its Thomson One IR and PR platforms for regulatory releases. It will then charge add-on fees for general press release publishing and use of analytical tools that measure the impact of the releases online.
The tools acknowledge the shift toward self-publishing that a number of companies have already embraced. Issuers like BGC Partners, Expedia and Marathon Oil now post earnings releases straight to their IR website, along with a short release over the wires pointing investors to the IR site.
These issuers say that self-publishing to the website makes the process more efficient, in their opinion, as all the editing and checking is done in-house. Costs are also reduced by around $20,000 a year, according to Jason McGruder of BGC Partners.
Issuers contacted by IR magazine are intrigued by the new offerings, but want to look into them further before making any judgments or decisions on future disclosure policy. ‘I have not looked closely enough to know whether it would change anything else we are doing,’ says Alan Pickerill, vice president of investor relations at Expedia.
He adds that the decision by Google in April to start publishing financial information exclusively to its website may encourage other companies to consider self-publishing as an option. ‘I would imagine you would see more companies at least evaluating it and perhaps going in this direction given that it seems to be a process improvement and also reduces expenses,’ he comments.
In defending their offerings, Business Wire, Marketwire and PR Newswire focus on two areas: service and distribution. On the question of service, they say companies will put themselves at risk if they take on full responsibility for creating and distributing their releases.
‘In our view, having a DIY system is basically a disaster waiting to happen in terms of security, release timing, error prevention, presentation on the web and visibility,’ states Greg Castano, president of Business Wire.
‘Companies rely incredibly on our operations and editorial departments,’ notes Darin Wolter, senior vice president of sales at Marketwire. ‘We catch errors in nearly every press release we disseminate, and a lot of those releases are, by their nature, material. Some of the mistakes are benign, like a missed comma or not capitalizing a brand or product name, but often the firm might put in the wrong quarter or omit pieces of its financial statements.’
When it comes to distribution, the wires state that basic online dissemination does not constitute best practice. ‘We think the web is extremely important as part of a company’s disclosure and as part of its engagement strategy,’ says Scott Mozarsky, executive vice president, commercial operations at PR Newswire. ‘But we don’t think limiting distribution and engagement to the web and to a limited group of websites on the web – which is basically what both Thomson and NASDAQ are doing – is prudent, as we think a company in order to succeed needs to have an integrated engagement strategy.
‘If all a company wants to do is comply with Reg FD and do limited web disclosure, that’s something they can do. Most IROs we talk to want to find ways to engage with their shareholders, portfolio managers and analysts in an optimum way.’
‘By limiting the distribution, you’re making a decision in your corporate transparency and disclosure policy,’ adds Wolter. ‘It’s not that you’re not meeting disclosure requirements but you’re making a decision about how broadly to disseminate your information.’
Certainly there are several companies that prefer the self-publishing route. Some, like Google and Expedia, have already begun to take control of their releases and the new offerings from Thomson Reuters and NASDAQ OMX may encourage more companies to follow this route. On the other hand, many firms, especially resource-constrained ones, need the editorial services provided by the wires and will continue to use them.
The issue of online distribution is more complex. Companies must decide what kind of distribution model they are comfortable with. Kevin Sellers, head of IR at Intel, says he recognizes the potential of the web to disseminate information widely but right now is happy to take a wait-and-see approach to the new disclosure options and technologies being made available.
‘From our perspective there is the greatest comfort in using a wire distribution service as it essentially goes to everyone,’ Sellers explains. ‘We feel most comfortable knowing the information is most broadly disseminated. That’s probably the reason why Intel is not going to be one of those earlier companies dropping the wire distribution and going straight to the web. We have concerns not just from a communication strategy perspective but also from the legal and fair disclosure perspectives.
‘I think the web will become the predominant means of disclosure in the future. Eventually it will get there; it’s probably reasonably close. But we still feel a little risk-averse toward it at the moment.’