Can European analysts cut it on the small screen?
By Ian Rowley
December 2000
Institutional Investor Magazine
Seated in the back row of Lehman Brothers’ new TV studio in London, producer Nick Guthrie scribbles on a notepad while assessing the on-air delivery of one of his show’s featured guests. Relating the previous day’s stock market movements in Scandinavia, a young trader trips over some of his words before suddenly offering an unscripted “oops” to the camera. Guthrie stops writing and his pencil looks like it’s about to snap as the speaker gamely tries to get back on message. Not to worry, a colleague tells Guthrie, the gaffe can still be edited out before the presentation reaches Lehman’s clients.
Welcome to the world of streaming video and on-air research, Euro-style. Though U.S. analysts are masters of the sound bite, their European counterparts are still babes in the wood, using video sporadically - and with mixed success. As a director for media consulting company TV Talk, Guthrie, a former BBC producer, is helping to transform a band of not-ready-for-prime-time analysts into media-savvy presenters; their work and visages can then be Webcast to hundreds of institutional investors around the globe. In turn, the on-air training is also expected to produce a crop of polished commentators who can appear on Europe’s fledgling broadcast and cable financial news programs. “Some are natural performers, but there are others who will simply never make it,” Guthrie says. Even so, the investment banks are wise not to leave anything to chance. “You can make bad content look good with presentation and spoil very good content with bad presentation,” he notes. “Banks are realizing this is no longer something that can be left without help.”
If Guthrie and his counterparts are successful, leading European analysts may someday find themselves vying with U.S. media stars like Merrill Lynch & Co.'s Internet analyst Henry Blodget and Lehman’s semiconductor specialist Daniel Niles. Already, the daily routines of Lehman banking analysts Alan Broughton and Colin Hector are changing as they carve out time to prep and deliver video segments on their sectors.
Investment banks in the U.S. have been Webcasting research for nearly two years. The explosion there of television and Web coverage of the stock market has made some analysts into household names. Some, like Niles, have even received death threats after making unpopular calls. That’s a rarity, but certainly the constant demand for sound bites can distract top analysts from conducting fundamental research. Consider Morgan Stanley Dean Witter’s renowned Internet analyst, Mary Meeker, who receives on average more than 100 interview requests per week. Though she turns down almost all of them, it is enormously time-consuming to do even that.
Because the cult of the stock market hasn’t taken off in Europe as it has in the U.S., TV financial coverage hasn’t taken off either. CNBC, CNN, Reuters and Bloomberg all broadcast financial news - complete with analyst interviews - daily in Europe, but usually on an abbreviated schedule. No network has achieved the ubiquity that CNBC has in the U.S. And despite economic and monetary union, the Continent must deal with the lack of a common language for reaching the masses.
Still, European investment banks are forging ahead with studio facilities, both in anticipation of the retail investing sector’s maturing and to better serve institutional investors. Analysts and portfolio managers at large money management houses want to watch research presentations and interviews with company executives, ask questions in real time or store it all for later viewing.
Lehman opened its in-house television studio, complete with editing room and seating for 50, in October. Its debut came just a month after Morgan Stanley Dean Witter unveiled a $500,000 facility designed specifically for broadcasting news and analysis based on its equity research. Deutsche Bank and UBS Warburg also have TV studios at their London offices.
In a virtual world London-based operations aren’t the only contestants. From its TV studio in New York, Merrill Lynch plans to launch an international complement to its daily U.S. Webcast early next year, according to Fred Yager, head of broadcast communications. Like the U.S. Webcast, the international edition will be available on other financial Web sites, such as Yahoo! Finance Vision.
Why the sudden rush to streaming video? Part of the reason is technical. Asymmetric digital subscriber lines, which have been available for several years in the U.S. and provide higher-quality pictures than standard phone lines, are only now appearing in Europe, making Webcasting feasible there for the first time. Indeed, despite improvements, picture quality is likely to remain a limiting factor for some time to come. As consumers acquire more-powerful home computers and broadband communications, Webcasting will be distributed to retail investors.
Sell-side firms see video distribution as a way to distinguish themselves from their rivals. With the help of experts like Guthrie, these firms can give their research a more attractive gloss. Lehman has even hired so-called studio presenters like Christina Biltchik, a nonanalyst whose job it is to act as a kind of informal emcee. Says Robert Vaudry, associate director of research at MSDW in London, “It’s partly about the quality of the content and partly about production quality.” Combining a comprehensive research report with a sophisticated video presentation not only helps generate business, but also allows a firm to reinforce or alter its image in the marketplace.
To Vaudry, Webcasting provides a particular advantage to large, global firms like Morgan Stanley. Smaller rivals may not be able to afford the technology or manpower needed to put out a consistently high-quality product. “This will enhance the bulge-bracket firms, but smaller players will struggle,” he says.
The larger banks show the greatest interest in the new technology, says Glenn Whitney, a former reporter for The Wall Street Journal who now runs ECD Insight, which he calls a communications coaching firm. “There has been a huge realization among the bulge bracket that presentation actually counts,” he says, adding that this discovery has helped push his firm’s revenue up 300 percent this year. “While there are those banks that want just a handful of executives media-prepared, the top-tier firms will have 100 to 150 in training.”
Webcasting, says Vaudry, is a very logical next step for larger financial firms, which already operate as minipublishers. “We publish more than a lot of publishing houses,” he says, and the latest shifts are merely keeping pace with changes taking place at most media companies. “The TV stuff is just another distribution channel.”
Research directors are also quick to point out that this won’t become a question of style winning out over substance. “This isn’t about replacing written research, but enhancing it,” says Raul Biancardi, deputy head of research at Lehman Brothers, who spearheaded the opening of his firm’s Broadgate studio. “Video allows banks to deliver their message faster and with greater impact.”
In an age of personal branding, analysts stand to reap a substantial benefit. Says Susan Walton, global head of online equity business at ABN Amro in London: “The Internet potentially offers the analyst a platform for greatness. Compared with written research reports, Webcasting presents the analyst with a far greater degree of personalization.” Now research directors must decide how much of an analyst’s personality they want to reveal. “It depends how the heads of research wish to manage their research,” Walton says. “They have to decide how individual they want it to go.”
Targeting the retail audience, Lehman has signed agreements to provide online research, including video, for the Web sites of retail brokers Fineco SIM in Italy and ConSors Discount Brokers in Germany. Morgan Stanley plans to deliver more European video content to retail investors by means of its homepage. But for the moment, at least, most of the participants plan to keep the focus on institutions. They are bringing news analysis, research presentations and interviews with company executives to clients’ desks.
The research providers can also tap a private broadband Internet network run by Raw Communications that distributes video by means of satellite to a small institutional audience. London-based Raw, which has direct links to about 40 of the largest fund managers worldwide, enables the firms to deliver almost TV-like pictures - a substantial improvement over the uneven quality that is available on most Webcasts. These institutions also enjoy access to multiple sources of research, rather than having to surf a number of Webcasts, according to Ab Bannerjee, chief executive at Raw. UBS Warburg, Deutsche Bank and Salomon Smith Barney are among the larger firms distributing over the Raw network.
Peter Wilton, a fund manager at Scudder Threadneedle Investments in London, says he finds the presentations from corporations to be the most helpful feature of the new technology. “We mainly use the streaming video to watch company results presentations, particularly if two firms’ results are coming out at the same time,” he says. That way he can store one and come back to it later.
Wilton is less inclined to tune in to the edited highlights of brokers’ morning calls. He prefers to use the phone to learn which stocks are recommended by a salesperson. “That’s still the best way of getting that information,” he says.
Kevin Ryan, a senior equity analyst at Europlus Research & Management in Dublin, concurs. “The morning calls are a stream of blandness,” he says. “The company presentations are much better.” Part of the problem with banks’ daily meetings, Ryan notes, is that too many analysts don’t cut it on the small screen.
It may take a while until the researchers do. “These guys spend their whole lives hunched over spreadsheets looking at financial statements,” says ECD Insight’s Whitney. “There’s a reason they don’t go into acting.” But, he adds, “we try to bring out the inner performer.”
There are signs of progress. Taking the podium not long after the young trader’s misadventure, Lehman banking analyst Broughton offers a confident and persuasive discussion of the profitability of European financial institutions. Following his five-minute report, Broughton (who looks authoritative in a shirt and tie, unlike some of his casually clad colleagues) invites questions from a small crowd of interested Lehman employees. The segment proceeds without a hitch. Guthrie stops taking notes, leans back in his seat and breathes a sigh of relief.
