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2003 Track Record
2002 TrendReport Q3-Q4
2002 Track Record 2002 Q1-Q2
2002 TrendReport Q1-Q2
What will 2002 look like? According to Stanley Bing, pseudonymous Fortune columnist
and real-life PR executive for CBS, "Short term, the first part of 2002
will feel a lot like the end of 2001
a year that was distinguished, more
than anything else, by the fact that we survived it."
As always, we've focused on the national business press: what we predict
the media will cover in 2002 and the context and background that will
help shape business news coverage. What do we mean by context? Those
of you familiar with the national business press know that they are not
driven by product announcements. The national media focus on trends and
issues, and more often than not, how those trends and issues will affect
the average American consumer. Therefore, it is important to be aware
of the context in which stories are being reported. For this reason,
we look at larger trends and issues we expect to surface in the coming
year not just the gizmos and gadgets that might make the headlines.
The two big business stories for the year have probably already hit:
Enron and the state of the economy specifically when the recession
By now, much has been written about the implications of the Enron-Andersen
debacle. From a media relations perspective, the most important implications
||Media Relations Implications
|Increased SEC scrutiny of corporate financial statements,
disclosures and investment risks, particularly earning statements
citing pro forma and EBITDA (earnings before interest, taxes, depreciation
and amortization) or if insiders sell-off shortly before bad news
is announced. The SEC has already announced proposals including
the creation of new categories of information to be disclosed - that
will be the first step in a process to improve financial reporting
and disclosure. The SEC has also requested that the New York Stock
Exchange and NASDAQ evaluate their corporate governance and conduct
codes applicable to all listed companies.
The lessons of Global Crossing Ltd., Tyco International Ltd.,
and Krispy Kreme Doughnuts Inc. (which halted an off-balance sheet
transaction to fund a processing plant) is proof that financial
transactions and income and balance sheet footnotes, previously
uninteresting to journalists, are now fair game as reporters search
for the next Enron.
More reporters will be assigned to a "financial statement" beat,
following the lead of Forbes senior
reporter Elizabeth MacDonald, who has dissected balance sheets
for more than a year, and New York Times Kurt
Eichenwald, who has investigated corporate financial misbehavior.
Two phrases we can expect to hear this year:·
- "Show me the money" prove that the company's
numbers are real;·
- "Follow the money" because that is where you'll
find modern-day Charles Ponzis.
We have already seen that rumors of accounting improprieties can
cause stocks to drop, and reporters to write.
As Congressional investigations continue and civil cases against
Enron begin, the media will start to mention forensic accountants,
who can delve through records to uncover what actually happened.
Companies should evaluate the way they communicate financial information
in a post-Enron world, including how to communicate disappointing
financial performance (including layoffs and restructurings), and
how to use media relations to support shareholder value.
Companies should be prepared to discuss and possibly revamp their
accounting practices, auditing policies and 401(k) plans. If they
don't, their shares could drop, just as Tyco's did because management
has not clearly explained its accounting practices involving its
Management, which last year was determining how much "visibility" regarding
the company's business in upcoming quarters, now must determine
how "transparent" they want their transactions to appear i.e.,
how much information they want to disclose to calm investor concerns
and stop rumors (that have impacted IBM, Tyco and others). However,
once companies increase the amount of disclosure, they must continue
at that level or else deal with SEC inquiries or the sort of rumors
they had hoped to dispel.
CFOs, who heretofore have kept a low profile, need to be media
trained, and Investor Relations and Public Relations departments
need to work closely together to coordinate messages and to respond
to questions from analysts and media.
|Closer SEC scrutiny of insider selling, particularly
prior to bad news.
||The media will become increasingly skeptical of senior
management, which could be reflected in the stories they file.
Companies must be prepared to discuss the reason behind any significant
stock sale by senior managers particularly if the sale diverges
from a regular pattern of diversifying their portfolio.
Investor Relations and Public Relations departments must work
together to respond to questions from analysts and media. The goal:
to restore and enhance management and corporate reputations.
|Continued Congressional inquiries into Enron, Global
Crossing and others.
||The media will devote significant time, space and resources
to monitor Congressional committee investigations, especially as
Congress widens its investigations to focus on Wall St. and the role
it played in Enron's rise and collapse.
Companies should avoid making key announcements or TV appearances
on days when key testimony is scheduled.
Some financial services companies, including those directly involved
with Enron, should prepare for the possibility that its executives
will be called to testify before Congress.
|Renewed bipartisan support for campaign finance reform
that eliminates "soft money" and other regulatory changes.
||The media will continue to cover close relationships
between lawmakers and business, particularly connections between
campaign donations, access and regulatory relief. At the Enron Senate
hearings, as each Senator addressed Ken Lay, CNBC noted how much
money each had received from Enron and Andersen. The media will "follow
the (campaign) money" from Global Crossing and any future large
||Corporate lobbying and public affairs programs need
to be re-evaluated and re-calibrated, particularly in light of new
campaign finance legislation with "soft money" likely
shifting from national to local organizations and the potential
for increased government regulations and SEC enforcement.
|Focus on GAAP and accounting rules, and auditors' conflict-of-interest
||The media will spend more time looking at the Financial
Accounting Standards Board, any proposed rules that close loopholes,
its relationship with accounting firms, and accounting firm's conflict-of-interest
policies. The media will also continue to focus on SEC Chairman Harvey
L. Pitt, who has his own strong connections to the accounting industry,
to see how he enforces new policies and whether individual investors
are actually better protected.
Companies must be able to address their auditor's policies and
any consulting services they buy from their auditors.
Companies that buy consulting services from their auditors should
expect questions from financial analysts and the media. Companies
whose auditor is Andersen should also expect questions.
|Heightened awareness of corporate governance issues
and director scrutiny, with calls for new standards for board member
independence, worthiness and oversight.
||After the Powers Report rebuked the Enron Board for
its inadequate oversight and for rubber-stamping management decisions
(rather than serving as vigorous advocates for shareholders), the
media will focus more on board issues, responsibilities, training,
and conflicts of interest. The media will also cover annual meetings
where there are shareholder initiatives to vote off any board members
who served on Enron's board.
Companies may want to consider replacing any board member who
served on Enron's board. Currently at least six major companies
have shareholder initiatives to do just that.
Companies must be able to discuss how its Board takes its responsibilities
seriously, how aware they are of transactions, and how they look
out for employees and shareholders (not just management).
Company may want to media train its board members to address key
issues. Public relations departments, which rarely interact with
board members, should look for opportunities to enhance board credibility
via positive stories about its board members.
Look for the National Association of Corporate Directors and Calpers
to get widely quoted on the issue.
In terms of the economy, the media relations implications include:
|Media Relations Implications
|Reporters will continue to look for signs that the
recession is finally over and to determine the characteristics of
||Companies that can demonstrate sustained resurgence
in their business may be able to score ink.
|Reporters will look for the cost of terrorism, particularly
the drag of new security procedures on the rest of the economy, travel
industry, and insurance.
Companies may be able to secure coverage by developing interesting,
positive stories relating to security, including advice for road
warriors or managing new transportation logistics, or new forms
Companies need to evaluate the changing role of Public Relations
during war time.
|Reporters will continue to look for the Next Big Thing,
but will also continue to be skeptical
with a few (i.e., Ginger)
exceptions, due to a competitive media environment.
||Companies must combine cool features that work and
solid evidence of a market either from a financial or industry analyst
or via a large customer sale.
The ad slump will continue through at least Q3, causing its own
implications, namely that the competition to get covered will increase
- Ad pages will remain flat, which translates to fewer pages
allocated to editorial (vs. advertising) in newspapers' business
sections and in magazines.
- Additional media properties will fold or merge. Look for problems
at Upside, which gets smaller each
month while the percentage of articles written by its editor,
Jerry Borrell increases; and Red Herring,
which has eliminated its free email newsletters.
Because competition to get ink will be tougher, companies need
to be more creative in evaluating and developing news and take
advantage of diminishing media resources and build stronger relationships
with the media. Companies will need to transform their marketing
messages into a compelling media story.
Companies need to re-evaluate their top media targets on a quarterly
basis, due to the shifting economic climate and ongoing media consolidation.
Be careful promising exclusives to any financially shaky outlet by
the time the outlet folds, it may be too late to go to another
Here are additional topics we think will interest the media throughout
- The War Against Terrorism and Security: There
may not be a direct business story - other than as a potential drag
on the economic recovery - but the media will continue to devote resources
(i.e. reporters and space) to covering this story. Business reporters
will cover the impact that increased security expenditures and new
policies will have on the U.S. and global economy, including personal
investments. The media will also report on domestic terrorism preparedness,
personal safety and workplace safety, and the cultural impact of terrorism
(psychological impact of crisis/Post-Traumatic Stress Syndrome and
how organizations are dealing with employees, reluctance to travel,
etc.). Balancing security and privacy will continue to be an issue.
The media will continue to be interested in advances in biometrics
devices. Impact of terrorism on the economy, business travel, insurance,
- Pharmaceutical Pricing: Are pharma
companies charging too much? Are insurance companies not reimbursing
at realistic levels - if not, what can senior citizens do to afford
the drugs they need? Why does the same pill cost more in some countries
than others? How much does marketing a new drug cost? This issue will
become a more important story as we get closer to the mid-term elections.
- Convergence and Home Networking: This
was a big trend at the Consumer Electronics Show (CES), probably the
most important consumer technology convention. As consumers continue
to "cocoon," they will continue to shop for and buy cool
technology for home use. The incredibly fast adoption of DVDs, along
with its dramatic price drop to under $300 (in some cases, under $100),
has already been one story widely covered. The next step, judging from
CES, could be easier-to-install, more reliable home networks that link
not just home PCs, but TVs, phones, everything to make it easier, say,
to download your favorite MP3 song and then listen to it from your
- Layoffs, Bankruptcies and Industry Consolidation: While
layoffs have slowed, compared to last year, they have not abated, and
will likely continue through much of 2002, despite some economists
seeing the light at the end of the recession tunnel. Bankruptcies also
are likely to continue, including some large well-known corporations
for whom other cost control options (including layoffs) have failed
to stem the red ink. This could lead to consolidation in many sectors.
According to a recent PricewaterhouseCoopers survey of senior executives,
60% of senior executives at large multinational corporations expect
an increase in M&As over the 12 months; 90% expect M&As to
increase over the next 24 months.
- Whither IPOs?: After a major drop
in the number of IPOs in 2001 from 2000 (when $97 billion was raised
in 406 deals), more companies will go public in 2002 (though not at
2000 levels), led by online payment provider PayPal (imparting deja
vu when its stock soared despite a lack of profits, among other risks)
and discount airline JetBlue.
- Airline Industry Slump, Travel/Transportation
Alternatives and Increased Security: After its worst year
ever, the airlines now must pay for huge new security-related expenditures,
resolve training issues and handle passenger resistance to slow lines
and frequent delays, including an increase in the number of suspicious-passenger
evacuations at terminals countrywide. We can expect continued coverage
of financial problems as airlines try recovering from losses last
year of $1 million per day; there could be some bankruptcies and
consolidations. The media will continue to cover new security technologies
that will make passenger screening faster and more accurate. The
media will also look at consumer travel alternatives - with a debate
about Amtrak's role and subsidies - and business transportation alternatives,
including rail and trucks, along with new freight security procedures.
- Mid-term Elections: The media will
gear up to cover the mid-term elections, re-allocating reporters, space
and other resources.
- Nanotechnology: Forbes,
Business Week, The New York Times, etc. have already written
about nanotechnology and buckyballs even though new products have
not reached the marketplace. Look for significant media attention
when the first product actually is ready.
- Rise of Biotech Sector: The one tech
sector generating positive news.
- Broadband glut: Telecom's meltdown
continues with Global Crossing's bankruptcy.
- Return on Investment (ROI): For VC,
reporters and investors, currently the most important three factors
in business: ROI, ROI, ROI
In terms of the media environment, 2002 will closely mirror last year.
- Media continues:
- to be interested in leadership
- to look for good stories amid doom & gloom
- to be very competitive
- to redefine websites, missions, staff
- Newspapers, Online sites:
- cover significant news that impacts stock
- different news cycles = broader business issues
- Consolidation continues as more outlets end up as roadkill
- Implication: changing landscape impacts strategy, focus
- Day of the 300+-page issue over
- Business 2.0, Fast Company, etc.
won't topple mailboxes for some time
- Ad slump continues through Q3
- Tech coverage in national dailies down sharply; number of pure tech
stories down about 30-40%; focus of tech coverage is on earnings, pre-announces,
- Fewer outlets increases competition
- Implication: who gets "exclusives" will be a key
- Implication: fewer reporters to target (Website and print staffs
may merge) may foster closer relationships