The SEC’s proposal, which takes effect on a voluntary basis this month, will ease that paper jam by making Internet delivery the de facto setting. Admittedly, the bulk of the savings will come from reducing printing and mailing costs, not from ditching the graphics-intense introductory material found in a typical annual report. Still, companies that have produced videos say the appeal goes beyond economics. Susan Collyns, CFO of California Pizza Kitchen, estimates that the $550 million company will save a mere $20,000 by eliminating hard copies of annual reports, but says the video is simply “a better method of communication.”
Certainly, these video reports — typically found on a company’s Investor Relations home page — offer a more intimate portrait of a business. J. Mitchell Collins, CFO at Equity Inns, believes the hotel real estate investment trust’s digitized annual report gives investors a much better sense of the folks who are actually running the company. “When you read an annual with a letter from the chairman, it doesn’t personify the whole management team,” explains Collins. “But with the video, you get to meet our entire group in six minutes.”
“People want to hear management talk about their business,” says Thomas Pennison Jr., CFO of Ruth’s Chris Steak House. “Frankly, the opportunity to do that in front of most investors is limited.” And unlike printed annuals, video annuals can be updated throughout the year and can be played for a range of audiences, including prospective employees. Collyns of California Pizza Kitchen even played that company’s video for the audit committee, and says it also serves as a useful piece of collateral marketing. By comparison, says Pennison, “a printed annual often goes on a shelf, never to be looked at again.”
Video annual reports are not without their drawbacks, however. Viewing a clip can be slow, depending on your connection speed and quality. And a would-be viewer may have to change the computer’s default video player, or download a new one. As for the videos themselves, while they do put a human face (many, in fact) on a company, they can also smack of late-night infomercials, with the company served up like a rotisserie chicken. You almost expect the CEO to say, “Supplies are limited!” as an 800-number flashes on the screen. In the four videos reviewed by CFO, not one mentioned real-world risks like market downturns or pension obligations.
Then again, companies don’t lead with that material in their printed annual reports either, and video annual reports are meant to augment, not replace, the charts, footnotes, and disclosures that can be found in Web-based documentation.
Some CFOs seem sold on the idea. Videos are “effective, clean, and cutting-edge,” Collins says. In fact, video seems poised to alter many forms of corporate communications; companies report that job candidates are now applying via DVD-based video résumés. With an entire generation now being weaned on Web-based video sites such as YouTube, future investors will undoubtedly embrace video over print. “In five years,” predicts Tom Ryan, CEO of corporate-relations firm ICR, “a printed annual report will be a collector’s item.”
John Goff is technology editor at CFO.