The case for conference call transcripts

IF THIS isn't an established saying yet, then let this be the makings of one: CCBN knows a market opportunity when it sees one.

The US giant of online services to investor relations departments and their audiences recently began selling its newest innovation in the gilded quarterly conference call market with something which investors can't get enough of: conference call summaries.

CCBN's move should come as no surprise. Clearly the demand exists. AIMR, the body which grants the CFA designation to investment professionals, reported in mid-2001 that 36% of respondents in a survey said transcripts of past presentations were the "most valuable" information companies could provide. Only SEC filings ranked higher with 41%.

You can also bet that retail investors are just as keen. Most are doing other things when conference calls are live and so have to rely on the call replay to stay up to date. For them, a text transcript is much more useful than audio or video, which can be slow and finicky to use over a dial-up connection.

CCBN is providing conference call summaries on 50 companies for sale to institutional investors.

Audio and video archives impede access
In fact, practicality is the main reason companies should provide transcripts of their conference calls. As I've written before on this site, streaming audio and video is great for real time information dissemination, but almost useless as an historical record.

No one who is sizing up your company for a possible investment, or catching up on recent developments, wants to sit through hour-long audio or video recordings to get the information they require.

Except for superficial qualitative insights, an audio or video archive of a conference call or investor presentation is a very poor substitute for plain old words on a screen.

Consider the following:

• You cannot print an audio or video file;
• You cannot copy and paste information from them;
• You cannot easily skim them for pertinent details; and,
• You cannot translate them using electronic translations tools.

Unless an investor hears the conference call live, they're at a double disadvantage. Not only have they missed a possible opportunity to gain a trading advantage, but their access to the same information after the fact is severely hampered by an unfriendly format.

Somehow, it just doesn't seem to be in the spirit of Regulation FD to disadvantage a group of investors just because they missed the live call. See How format choices undermine Reg. FD.

Of course, usability isn't the only motive for institutional investors and analysts to want transcripts. Fiduciary responsibility, coupled with the reality that it's next to impossible to listen to every conference call and still manage a portfolio, is another reason.

And this is where CCBN has seen a business opportunity. Its StreetBriefs call summaries, available as soon as 90 minutes after a call ends, provide a synopsis of the formal presentations and more detailed transcripts of the Q&A session. See a sample call summary here.

An opportunity to distinguish your company
Some companies have been providing transcripts of conference calls on their IR websites for a long time, such as The First American Corporation, which has been doing so since October 1999. First American Corp.'s Transcript Archive is an excellent model for how to handle transcripts on your IR website.

Another company that has long provided transcripts is Nationwide Financial which has been doing so since July 2000.

Given investors' keenness for them, though, providing transcripts of your conference calls, either in full or in summary, may well be a way for you to improve your company's relationships with the Street and also to attract a wider following. The opportunity is greater for small and under-followed companies.

Of course, there are some stumbling blocks for companies to overcome before conference call transcripts become the norm. Exposure to potential liability is one reason companies give for not providing transcripts. However, this is at best a weak excuse since the risk is the same regardless of whether the call proceedings are available in a multimedia file or in a text one.

If there is a valid excuse, then perhaps it is cost and resources. Fees for transcripts typically run to around $800 at the high end for a one-hour call. At $3,200 per year, however, this hardly seems like a large amount considering the enormous benefits investors will derive from it.

Of course, there is an added cost associated with transcripts by way of the additional work involved for IR staff. Someone has to validate the transcript against the recording to ensure it is accurate.

Coming right after the arduous process of preparing the quarterly, many departments likely cannot bear the thought of spending additional time on a transcript.

Consider your own call summary
One possibility is to take a leaf out of CCBN's book by providing your own call summary instead of a verbatim transcript. This will reduce both the cost and the work required to produce a useful format of your call. BP plc , the giant intergrated oil company, does this with its conference calls.

Time-to-publication could be shortened to a few hours at most because the summary of the formal presentations can be prepared ahead of time, leaving only the Q&A session to be transcribed and summarized.

Given the legal risk in providing an edited transcript rather than a verbatim one, legal counsel would need to be involved in the process. A disclaimer would also be required to the effect that the synopsis is provided as a convenience and that investors should consult the audio archive as the official record of the proceedings.

But if CCBN's initiative is anything to go by, call summaries are likely to become an important tool for investors and analysts. Not having one or being excluded from CCBN's coverage might well become a significant disadvantage for your company.

In the final analysis, however, your decision to provide a full or summary transcript will come down to your commitment to keeping investors informed about your company. In that sense, not providing a transcript may well be a bigger risk than actually doing so.