The Traditional "Press Release" is on the Endangered Species List
The role of investor relations has changed dramatically in recent years, and many in financial services wonder what the hybrid role IR now plays will look like in the future. We think it will look dramatically different - a lean technology-laden role that logically will report to the CMO and the brand manager, who also controls the social media thread. The days of the IRO as some sort of advance man in a rumpled suit are over. In fact, some of these stodgy old firms will be easily identified because the IRO has an AOL email address and doesn't use social media.
In the early 2000s, the IRO role morphed into a capital raising, roadshow-driven scramble to try and determine how to add value. No public company needs to overpay to write the press releases, which are edited by lawyers. In the first of many drafts prior to hitting the newswire, the IRO will push the edge of promotion going in, while legal will remove any promotional language and pare it down. So, really the voice of the company previously came through this channel, but now social media is dominating every brand message, and the role of IR as a voice has vanished. This is OK. In fact, it's natural. You don't need to overpay someone to write PR that no one reads. A simple Twitter post will suffice.
Currently, a company will put out press releases, and they are required by regulators to do this for shareholders as part of Sarbanes-Oxley. This rule was music to the ears of traditional wire services because the wire services have a monopoly, and they are owned and operated by very smart people. Warren Buffett owns Business Wire. He bought the company in 2006, recognizing that he would be one of the few players in the monopoly, and they would have control over pricing. The only part they did not factor in was the emergence of social media as a tool for companies to communicate their message. Berkshire Hathaway undoubtedly sees the writing on the wall, knowing that the prices to put out information will fall 90 percent when regulators fully allow companies to post the 8K and 10Q on Facebook.
It is wrong for shareholders to accept the inflated rates and companies should not be required to pay $650 and up a minimum of four times per year. In fact, the PR budget at companies is wildly inflated. Costs for this function will fall precipitously in the next few years. Think about it: no more unnecessary PR, required quarterly calls that only analysts benefit from, and all this for half of what you pay now.
The problem is that Berkshire will likely fight any changes in Sarbanes-Oxley for the good of the business. But in reality, the horses are out of the barn, price always controls how quickly things change. Experts likely already know that the days of wire services are numbered. All PR will be posted via social media before the end of the decade and traditional exchanges and fees associated with transactions will also come under pressure because of blockchain. Pricing as we know it is under siege and it is welcome!This article was written in partnership with our friends at equities.com – check out their website for original news and analysis on emerging growth companies.