SEEKING Alpha CEO David Jackson, whose company ranks as the largest provider of free earnings call transcripts, says companies have no grounds to claim copyright over their calls.
He was reacting to the news that Swiss company Swatch Group is suing Bloomberg for transcribing and redistributing its Feb 8 invitation-only earnings call. The case is being watched closely by earnings call transcript providers and has focused attention on the disclosure practices of investor relations departments.
Jackson told IR Web Report that companies have approached Seeking Alpha “numerous times” claiming his company is violating their copyright by transcribing their calls, but his company disputes these claims.
“Our position has been that earnings calls are intrinsically public due to Reg. FD, and that the transcription therefore does not violate their rights,” Jackson said.
Seeking Alpha, which reaches a monthly audience approaching 5 million people, provides free call transcripts of 1,500 companies each quarter. These are also distributed to a variety of other websites, including Yahoo! Finance, Nasdaq.com and market data provider Xignite.
Prior to Seeking Alpha starting its free transcripts service in 2006, retail investors were forced to pay upwards of $49 per transcript to companies like Thomson Reuters’ (NYSE: TRI) Earnings.com. Meanwhile, industry professionals can access transcripts through FactSet’s (NYSE: FDS) CallStreet or StreetEvents, another Thomson Reuters service that also sells information about investors’ activity to company IR departments.
Last year, Morningstar Inc. (NASDAQ: MORN) started providing earnings call transcripts on its public website, giving investors a second source for free transcripts.
Microsoft, Deere & Co issue warnings
While they haven’t gone to court yet, many US IR departments appear less than pleased that their earnings call information is easily accessible on the web. Some now preface their earnings calls with warnings that their calls are copyrighted.
On Deere & Co’s (NYSE: DE) Q1 2011 earnings call Feb 16, investor relations director Tony Huegel read the following statement at the beginning of the call: “Just a reminder that this call is being broadcast live on the Internet and recorded for future transmission and use by Deere and Thomson Reuters. Any other use, recording or transmission of any portion of this copyrighted broadcast without the express written consent of Deere is strictly prohibited.”
Interestingly, Deere’s earnings call was not transcribed by either Seeking Alpha or Morningstar, even though the company is an S&P 500 constituent and its calls have been available for free in the past.
On its recent call, Microsoft’s (NASDAQ: MSFT) IR general manager Bill Koefoed read the following warning: “This conference call is protected by copyright law and international treaties. Unauthorized reproduction or distribution of this call or any portion of it without the expressed written permission of Microsoft may result in civil and criminal penalties.”
Under both companies’ warnings, it’s not clear that it’s permissible to quote the warnings as I’ve done here!
Jackson, who was a Morgan Stanley technology analyst and a hedge fund manager before founding Seeking Alpha, says “it astonishes me that companies would want to restrict access to the information in their analyst calls. Transcripts are faster to read than listening to the audio of calls, can be searched, and can more easily be quoted from and linked to in discussion and articles.”
He adds that while some companies have claimed they are concerned about inaccurate transcription, Seeking Alpha offers to correct errors immediately on notification, and also sends transcripts automatically to companies for proof reading.
Swatch case calls attention to foreign firms with US securities
Swatch’s move last week to sue Bloomberg in a New York court claiming statutory damages of $150,000 per violation for copyright infringement has put European IR practices in the spotlight.
In contrast to North American companies, which have almost universally provided public access to their earnings calls since the introduction of Regulation FD in 2000, recent research by academics in Germany has found that most European companies do not provide public access to their earnings calls and investor presentations.
The closed nature of European companies’ calls raises interesting issues when their securities also trade on US stock markets or in the over-the-counter market as Level 1 ADRs.
While exchange-listed foreign companies are registered with the US Securities and Exchange Commission (SEC) and mostly do webcast their earnings conferences, the same cannot be said of hundreds of Level 1 ADR companies like Swatch. They are exempt from registration under Rule 12g3-2(b), approved by the SEC in 2008 to address foreign companies’ flight from US markets to escape the Sarbanes-Oxley (SOX) requirements.
Under the 2008 rule, foreign companies are not required to register with the SEC or comply with the SOX provisions as long as they give US investors access to English versions of their disclosure information on their websites or via a home-market regulatory database.
The rule does not expressly list access to earnings calls as one of the minimum disclosure items that foreign companies must provide, but the language is sufficiently flexible that they could be included.
At the time of approving the rule in 2008, it was argued that allowing companies to follow their home market disclosure requirements provided adequate protection for US investors since global disclosure practices were broadly equivalent with those in the US. However, as the Swatch action last week demonstrates, that’s not true in all cases.
Jackson says that he and Seeking Alpha’s management “support Bloomberg wholeheartedly, and are watching the case with great interest.”