A video camera is as much a part of any home as an Instamatic was for our parents’ generation. So why not have one in the office? Some executives still run for cover whenever a video camera is produced, but many others are turning to video as a primary communications tool. This is a tried and true technology whose time in the IR limelight has come.
Virtual roadshows, satellite video tours, videoconference one-on-ones, video webcasts and video on CD-Rom – all are based on the same precept: maintain the personal, emotional contact of face-to-face communication while saving time and money.
If there was any remaining doubt about using video, September 11 erased it. US airlines reported passenger traffic down 30 percent as many companies curtailed air travel by employees, but videoconferencing jumped by 40 percent with some service providers seeing a 100 percent increase, according to California-based TeleSpan Publishing Corporation, which tracks the teleconferencing business. BT Conferencing handled triple its usual number of teleconferences and videoconferences after the attacks and it predicts conferencing traffic will settle back to about double its former volume.
‘It’s similar to the sudden growth of videoconferencing during the Gulf War,’ says Elliot Gold, TeleSpan’s president. ‘Then usage spiked about 25-33 percent, and when the crisis was perceived to have ended, usage fell to about 15 percent above the former level. New people had found new uses for videoconferencing.’
Gold predicts videoconferencing will bounce back down to around 25 percent more use than before September 11, both because of fear of flying and delays at airports and because ‘videoconferencing is much more user-friendly and less expensive than it was ten years ago.’ The average price of a videoconferencing system has fallen from $42,000 to under $10,000 in the past five years, and TeleSpan says there has already been some increased demand with a lot of new orders expected in the fourth quarter.
IR effect
The IR world has seen its activities attenuated even outside the numbed US. Salomon Smith Barney ditched its technology, media and internet conference in Cannes – just one of many such conferences to fall by the wayside. Three European clients of Financial Dynamics canceled US roadshows, according to Scott Fulton, director of investor relations at the London financial PR firm. Raw Communications had several investor events fall out of its schedule, though the reason was as much market turbulence as fear of flying. Immobilized fund managers asked Raw to line up video presentations by specific companies they couldn’t get out to visit.
At TDC, formerly Tele Danmark, IR chief Ole Soeberg says a number of one-on-ones in both Copenhagen and the UK were canceled in the weeks after September 11.
In one case, half of a US investor group refused to travel so the host brokerage canned the trip and replaced it with a series of conference calls and videoconferences. Now TDC executives are having webcams installed on top of their PCs so they can videoconference from their desks.
Soon after September 11, Los Angeles-based Infonet Services Corp canceled its next quarterly roadshow to New York, Boston, London and San Francisco. Instead, the usual results teleconference and webcast will be followed by a day of videoconferences. ‘It will be just like having one-on-ones, but we don’t have to go city to city. We’ll be able to do London, New York and Chicago all in one morning,’ says Morgan Molthrop, vice president of IR. Infonet’s top executives are still traveling to sell-side conferences they had already committed to, but Molthrop says their ‘videoconference roadshow’ will let them ‘stay at home and stay focused.’
As a global company, Infonet can’t ban travel, but there’s an inevitable decline in plane-hopping. ‘It used to be I could just drive to the airport and jump on a plane. Now you can’t even park at LAX and it takes half a day just to get on a plane,’ Molthrop says. ‘Then you land at JFK and face three hours in a car trying to get to Manhattan through roadblocks. We believe in face-to-face meetings and we’re a big travel-all-the-time company, but the time factor is a huge impediment.’
Infonet has already done some videoconference one-on-ones with analysts and investors in Manhattan and San Francisco and Molthrop reports that the response has been good.
Spreading the word
Videoconferencing is not simply a reaction to September 11. Since the adoption of common standards in 1990, the number of videoconferencing systems sold has gone from a few thousand to between 64,000 and 89,000 a year, according to TeleSpan. WorldCom Conferencing saw 30-40 percent growth in conferencing traffic in 2001 before September 11, and Neal Lulofs, senior manager for marketing communications, says a typical company now has at least one room-based videoconferencing system in a conference room: ‘The early adopters have broadened their use. Five years ago it might have been for senior executives only, whereas today a company might have hundreds of systems around the world. Also, those that didn’t use video before are finding the entry costs much lower today.’
Indeed videoconferencing costs a lot less than face-to-face meetings involving air travel. According to WorldCom’s Meetings in America study, a five-person videoconference is three times less expensive than flying to a meeting, while audioconferencing is one seventh the cost. ‘The ROI on videoconferencing is pretty solid,’ Lulofs states.
Scott Fulton at Financial Dynamics points out that a private jet around Europe costs £38,000 a week, and taking account of all the other costs for transport, hotels and so on, a week-long roadshow could cost £150,000. In contrast, a solid week of videoconferencing would cost £40-50,000. ‘We’re probably going to use it a lot more now because no-one will get on an aircraft,’ he says phlegmatically.
But is video worth the cost compared to a teleconference? Tim Linacre, MD of technology investment banking at West LB Panmure in London, pooh-poohs the comparatively high cost of video. ‘The cost of communicating with shareholders is something everyone has to bear in mind, but there is a real cost in not communicating well,’ he says. ‘I am a great advocate of using whatever means you can, and video works a darn site better than telephone conferences.’
Linacre says 90 percent of communications is non-verbal. ‘Body language says an awful lot. Does management look confident? Or are they looking a bit shifty? For spreading a message widely, I don’t think anything can be better than video.’
He recalls being at a meeting with a large institutional investor watching a company presentation on video. Then they watched it a second time with the sound off to observe the CEO’s body language. ‘They joked that the guy was obviously lying, and as it turned out, the company had a profit warning shortly after.’
West LB Panmure has invested in Raw Communications, a London firm that has fast become the darling of the City and is now making inroads on Wall Street. Raw broadcasts company presentations and brokerage briefings on the computers of
institutional investors with video quality that is significantly better than the jerky, thumbnail-sized picture seen in normal video webcasts. That’s because Raw puts its own high bandwidth servers inside investment institutions – bypassing the firewalls that tend to slow down or block webcasts.
Many webcasts have run up against the firewall problem, with institutions and analysts complaining bitterly about the difficulty of accessing live or archived results presentations over their networks. A Danish IRO reports paying several thousand dollars for a webcast listened to by only five investors. In Italy, one analyst got so frustrated trying to listen to a webcast conference call at the office that she went home to listen to it on her home computer.
Donald Nordberg, Raw’s head of strategy, explains that to play any type of streaming media smoothly, a lot of the firewall functions that protect networks from hackers and computer viruses have to be disabled. That’s something network administrators at security-conscious financial institutions are reluctant to do. The problem is likely to get worse before it gets better with e-mail-borne viruses still proliferating. When internet traffic almost ground to a halt as a result of the powerful Nimda virus recently, two Raw subscribers who were going to start allowing streaming media changed their minds and decided not to relax their firewall controls.
Communication breakdown
Denmark’s TDC turned to Raw after getting frustrated with webcast breakdowns. In September 2000 the IR team made videotapes and CD-Roms of their capital markets day and put an indexed archive on Raw. TDC also started taking a novel approach to its conference call: the CEO and CFO were videotaped as they conducted the call, then the indexed video was put on Raw’s system. Though Raw’s Nordberg says the peculiar video made for compelling viewing, TDC’s IRO, Ole Soeberg, admits it was boring to watch except for the Q&A. The purpose was simply to create something for Raw subscribers to watch: ‘That way we could get feedback afterward about who reviewed the conference call, which is useful in targeting investors. We can even check who accessed particular clips, so we can tell who’s interested in our mobile operations, for example. With Raw we get full access to 90 percent of the investors we target, giving us very good exposure.’
After trying different approaches, TDC now makes a slide presentation available several hours before the results conference call – on the web and by e-mail – then does an open teleconference without video. Soeberg hasn’t decided whether to put TDC’s November 9 capital markets day on the Raw system.
Buy-siders who subscribe to Raw get a mix of sell-side briefings and company presentations, but apparently they typically prefer the latter. With Raw installed in 18 US institutions and 44 in Europe, accounting for 80 percent of actively managed European equity investments, specific companies are sometimes pressured to make video presentations available to Raw subscribers. That’s great – if you don’t mind the £5,000 ($7,000) price tag, which includes the institutional webcast and one for the public on RAWfinancial.com.
Take Zurich Financial Services, for example. Pierre Wauthier, head of IR, extols webcasting but seems an almost reluctant Raw client. ‘Putting our half-yearly results presentation on Raw is driven by demand. We have many investors who value it,’ he explains.
‘I must admit the quality is much better, so I can’t blame them for wanting it, but it’s a bit expensive. It’s difficult to say whether it’s worth it or not, but some of our investors wrote to say they really appreciate it because it’s much better than video over the web.’
Wauthier first adopted video for Zurich’s June 2000 analyst day, but for internal purposes only. ‘It allowed the speakers to see themselves after the event,’ he says. ‘Also, it’s good to have a record because sometimes we want to refer to something someone said.’
Infonet has also used video in a range of different ways. As Investor Relations magazine reported, the company did one of the world’s first analyst day webcasts in June 2000 and followed up this year with a video one-on-one on DVD and on the web – transforming two previously closed investor events into Reg FD-friendly ones. More recently, Molthrop produced a video summing up Infonet’s IR activities over its first 18 months as a public company. The entertaining 22-minute film was shown at a meeting of Infonet’s top 200 managers from around the world and not only helped explain the company’s market performance and the function of the IR department, but stirred up some company spirit to boot.
Molthrop’s latest move is ‘the first web-based magazine for investors,’ with short, documentary-style streaming videos about aspects of Infonet’s operations. ‘This is a precursor for what will one day be daily disclosure,’ he says. ‘Our job in IR is fact-finding then finding a way to deliver the facts so people understand them. It makes sense to have a TV-oriented format for investors.’
Others have a similar vision. The UK’s Cantos, for example, has recently launched a consumer-oriented ad campaign for its web site which features CEO interviews: ‘Heads, talking,’ posters blare to commuters on London’s tube. However, the joint venture between financial PR firm Brunswick and corporate broker Cazenove faces an uphill battle: PR firms and brokers alike are reluctant to refer clients to Cantos because of who its owners are.
Another adventure in video is sponsored by MediaWave, a European firm specializing in pop star webcasts which also has experience handling the technical guts of big corporate webcasts like AOL Time Warner’s merger announcement. It recently launched its own channel on Sky TV and other commercial satellite services so companies can get their investor presentations out to living rooms as well trading desks.
MediaWave CEO Chris Frampton concludes that corporate video, especially webcasting, ‘will become less of a black art and more of a standard communications tool.’ Surprised at the hitherto slow spread of video in the corporate world, he says he feels like ‘the guy running around with big blocks of wood trying to get people to switch from the quill pen.’
