The decision was first announced by Sun's pony-tailed CEO, Jonathan Schwartz, on his famous blog, on July 24. In the announcement called "Truly Fair Disclosure," Schwartz says:
We will announce our results to the general public via Sun's IR web site before making that same information available through the third party news services that traditionally distribute such information to paying subscribers.
Specifically, we will publish our results to this web site on July 30th at 1:00 PM (Pacific Time), which will in turn be disseminated via open syndication protocols (namely, RSS) to those who have subscribed to Sun's news feeds. 10 minutes after publication to the internet, we will distribute this information via traditional news wires for dissemination to private news agencies and distribution vehicles.
The essence of this decision has been brewing for a long time. The Internet makes us all publishers and disseminators of information on a global basis. So at what point does it become unnecessary to use traditional (and expensive) wire service distribution to insure that investor information is widely disseminated?
Sun, with its forward-thinking social media strategy and its central role in powering the Internet itself, was the perfect test case for this policy change. It hosts hundreds of employee blogs and surely has thousands of investors and others signed up to receive its news feeds. For nearly a year, Schwartz has had a running dialogue with SEC Chairman Christopher Cox about this, who spoke briefly about it last month in the WSJ:
"On his blog, Mr. Schwartz, chief executive of Sun Microsystems, challenged the commission to clarify that the use of blogs like his could be consistent with our regulations requiring public companies to share news with the public at the same time they give it to market professionals. As a result of that exchange, the SEC is moving forward on that initiative, aided by thoughtful commentary from outside our own cathedral, some of it found on blogs."
So this past Monday, Sun did indeed do what it said it would do.
Since I wasn't there to watch the whole thing unfold, here's what BusinessWire CEO Cathy Baron Tamraz wrote about it:
I eagerly tried to access Sun’s earnings at precisely 4 pm/Eastern. Unfortunately, I kept getting a “Page Not Found” message. It wasn’t until 4:06 pm that I was finally able to view Sun’s results.
Reuters didn’t move its first take until 4:16; Yahoo! Finance posted Sun’s press release at 4:11 (after it moved on a commercial newswire). As for those accessing via RSS feeds, those times were all over the map and that’s because RSS feeds are not push technology, nor are they simultaneous. This means that the material information was not received simultaneously by all market participants. So what’s “full and fair” about that?
It goes without saying that the CEO of BusinessWire has a vested interest in maintaining the status quo. But the facts she reports are damning in their own right.
Furthermore, as she points out later in her post, Sun's main argument for initiating the shift away from wire services -- that they are paid subscription services, not open communication platforms -- is hopelessly out-of-date. The PR wire services have been issuing releases on the Internet simultaneously with publication on their wire for about 10 years.
I'm unclear on the strategic reason for Sun's move, unless it was simply to draw attention to itself in a new and novel way. And I like the concept of the idea: it's inevitable, and its time will surely come.
But basically, it was a half-baked idea. The way to do this would be to release it on your web site and newsfeeds simultaneously with the wire service release, then argue with the SEC about whether the wire release is necessary at all -- that's where this is all going. There may have been some entertainment value in Sun's move, but it didn't really move the ball forward in any meaningful way.
What you've missed, and what Cathy Baron Tamraz failed to tell anyone was that Sun filed the news release on the SEC's EDGAR site at 4:00:58pm EST. That's actually all they are required to do.
ReplyDeleteBut because EDGAR has a live feed facility which a variety of intermediaries subscribe to, the news release popped up at 4:01pm EST on Sun's Yahoo! Finance page. The news was out on the Web, in newsrooms and trading rooms BEFORE the PR Newswire release was even sent out. Reporters were writing their stories before the wire release went out.
I think that proves the point that PR wires are not required for rapid dissemination of market-moving information on the Web, especially not scheduled news like earnings announcements that are filed on EDGAR.
Of course, that's not something wire services want their clients to know because it calls into question the value of PR wires for disclosure information. And we must distinguish here between scheduled disclosure releases and general PR releases. There's a huge difference from the audience's perspective.
Sun's 8-K first method (it's incorrect to characterize it as a Web-first method) is entirely compliant with Reg. FD, and actually goes beyond what the rule requires. In addition, one year after Reg. FD was approved, Commissioner Unger recommended to the commission that news releases not be required. That was six years ago.
PR wire companies are good at spin, but the facts speak for themselves.
Excellent point -- thanks Dominic.
ReplyDeleteOnly just found this post - and it is a good one. There's no doubt that newswires are going to be pressured in the next few years, but the issue of whether you need them or not will still depend on who you are. You could send news about Sun with a carrier pigeon and still be guaranteed good coverage. Similarly, a good general news story has a greater chance of being picked up with a web-only release. Newswires should come into their own with niche releases in specific industries - although they still have gaps here, according to my experience.
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