Hard cash, soft copy: can we still trust the quality of financial journalism as traditional news providers slash jobs and online resources rely increasingly on republishing second-hand content? Steve Schifferes reports on the state of the business press.
But not all rumours are true, of course, and misinformation can damage perfectly viable companies. This was the point made by Richard Lambert, director-general of the Confederation of British Industry and former editor of the Financial Times, when he criticised the media for publishing speculation based on unattributed sources at the height of the financial crisis. Lambert's lament--that newspapers should use the words "crisis" or "panic" only once every 30 years--must have been echoed in many boardrooms as the UK's financial system tottered on the brink of collapse in the autumn of 2008.
"What makes me sick is some of the sloppier journalism we have seen in recent months," he said. "At a time when careless headlines or injudicious reporting risk becoming self-fulfilling prophecies of a very serious nature, you might have thought that the industry's self-regulatory body, the Press Complaints Commission, would have had some guidance to offer on the special responsibilities of business journalists."
At the time there was widespread support for the view that, if the media hadn't spoken out, the crisis could have been contained and the damage limited. But many of the rumours circulating in the media turned out to be true and nearly a year later the Bank of England revealed the massive scale of its liquidity support operation for many of the UK's big high-street banks.
It's inevitable that the media will report negative rumours about big companies, the economy or (most important to public confidence) the state of the housing market. So how can financial managers distinguish fact from fiction? And how can the media and the business community forge a productive, rather than antagonistic, relationship?
In this age of information overload, one key factor that users of all forms of media should consider is the reliability of sources and how stones are verified. The proliferation of news providers on the web has made it even more important to be selective about which ones to trust. In the past a handful of traders were the only people certain of obtaining accurate and up-to-date information. Today, they may have a few minutes' advantage at best, as the same data is quickly spread around the world by online journalists and amateur bloggers.
This means that companies must constantly monitor information about their competitors and markets if they are to stay ahead of the game. They must then use it swiftly--it's no good waiting to respond until the next day, by which time perceptions will already have been shaped.
Just as 24-hour news reporting has changed how politicians respond to the media, so the internet has changed the approach of corporate PR teams, which are finding it increasingly hard to control the market's reaction. The difficulty of managing (mis)information on the web was illustrated in 2000 when fraudsters posted a fake press release reporting unfavourable financial data concerning a Nasdaq-listed company called Emulex. Even though the scam was discovered and rectified relatively quickly, and the perpetrators were successfully prosecuted, the company's reputation and share price still suffered terrible damage.
While many big publications, especially newspapers, are cutting journalistic jobs, the availability of business information online is still growing. This has resulted partly from the expansion of wire services such as Reuters and Bloomberg, which are making much of their material publicly available, and partly from the increasing investment by both existing and new media providers in their web offerings. As a result, the quality press has had to differentiate itself from mere providers of information in order to compete with them and the growing number of independent bloggers. It has done this by looking at the bigger picture: sifting through the slew of information, identifying the most crucial facts and summarising developments. The commentariat, as it is sometimes called, played a significant role as the financial crisis intensified. Business managers, struggling to understand the nature of the downturn and its effects, sought the analysis of trends in a range of markets and industries.
The role of the economic commentariat is only likely to grow in the near future as governments make further key fiscal decisions to repair public finances. Many economic policy debates should take place on the opinion pages of the quality press. But in the world of business reporting there are still sharp divisions among the specialist reporting of specific sectors and markets, business-to-business magazines and more general business reporting. Some commentators fear that this fragmentation could limit the amount of useful analysis.
Specialist reporting, which is done mainly by the wire services and newspapers such as the Financial Times, tends to stick closely to its sources and, therefore, to be more sympathetic to its own industry. This can be a risk if it generates complacency rather than critical coverage. When only a few media outlets focus on a certain area, they often rely on a relatively small number of sources. But, when used well, these sources can explain the complexities of a financial story, which can be crucial for uncovering future problems. A case in point was Gillian Tett's coverage of the capital markets for the FT when she investigated sub-prime mortgages.
The economic and financial crisis is likely to lead to an expansion of specialist business press coverage. Businesses should see it both as a provider of information and as a (maybe less welcome) critical eye. Companies will ignore this at their peril, since journalists, policy-makers and academics will all be vying to be first to spot significant economic trends.
But such power brings with it increased responsibility. If we expect financial journalists to become more influential, then we should also encourage a wider debate about their knowledge, skills and duties. Otherwise, how can they expect to hold the financial system to account? But the landscape of business journalism is itself about to undergo its own transformation, as publications seek new ways to make money from their services.
Two of the biggest names in business news provision, the Wall Street Journal and the Financial Times, have long charged for using their websites (although they allow some search access). Now other major players--the New York Times and Rupert Murdoch's Times and Sunday Times-have indicated that they also plan to levy subscription fees. If these moves are successful (and much of the business-to-business press already charges for access to online content), will we see the end of free news on the web?
The answer is "probably not", given that many free providers such as the BBC are likely to continue as before. And those sites that compile news from other online sources-for example, Yahoo! and Google--are continuing to grow in influence. But it is likely that companies may have to pay more for timely market-sensitive data and for high-quality analysis and comment online. Even some of the better blogs, such as Professor Nouriel Roubini's EconoMonitor (www.roubini.com/roubini-monitor) now charge users to access certain material.
RELATED ARTICLE: Dos and don'ts for media-savvy managers
Do take into account the interests of the news providers you are dealing with--they may have a political agenda that could bias their coverage.
Don't rely on one source of business news alone.
Do use social networks to help your company understand its customers better.
Don't avoid the media when your company has bad news to report.
Popular business news websites
Financial Times (partly free): www.ft.com Wall Street Journal (partly free):
http://europe.wsj.com or asia.wsj.com
BBC business news:
Yahoo! Finance UK:
Google business news:
Richard Lambert, director-general of the Confederation of British Industry and former editor of the Financial Times
Steve Schifferes is director of City University London's new MA in financial journalism, which starts from September. For further information visit www.city.ac.uk/journalism.
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|Publication:||Financial Management (UK)|
|Date:||Mar 1, 2010|
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