Reading the numbers – Columbia Journalism Review

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When the stock markets were completed on January 19, 2021, Netflix achieved a press release with the financial areas at the end of the year. The business is booming, the news went. About a year after the Coronavirus pandemic, the company had provided more than two hundred million subscribers “flight, connection and joy”. A New York Times The journalist had an hour to check Netflix’s winning report: eleven pages, half corporate, half dense tables that are filled with accounting metrics-some of them invented. The Netflix share increased while trading after trading.

The pressure was switched on to explain the numbers while standing against the sale. In his publication, Netflix had highlighted the operational income. This was high interest for its debts (the company had lent sixteen billion dollars for the financing of an exhibition room) and the costs of taxes (Netflix had quadrupled her profit a year earlier by emptied by emptied a tax reserve that it had recently met). But Netflix ‘Finance Whizz had turned into gold. The Just Story properly noticed the increasing operating result of the company, not the fact that the profit decreased by 8 percent in the quarter – and the decline looked even steeper compared to the emerging sales. (Netflix refused to comment on this article.) The profit was not discussed in the publication. The number appeared as the conclusion of a required financial report.

But in Silicon Valley, where Netflix is ​​based, the growth is king. The pandemic had delivered subscriptions and held new productions. Without paying crews, Netflix had stacked additional cash. The company announced on bold types: “We believe that we no longer have to accept external financing for our daily business.” The Just found that Netflix would still have ten billion to fifteen billion dollars, but said that the company “achieved enough income to repay these loans and at the same time maintain its immense content budget”. Netflix is ​​now doing enough to repay his debts, the story went; “The gambit seems to have worked.”

The article was written, edited and published in seventy -eight minutes. Unfortunately it was wrong. In fact, Netflix had said that it would only pay off the part of its due debts – one billion dollars – and the use of the rest of his cash “explore” to buy back its shares. (A Just Spokesman said that the newspaper was behind its reporting.)

The markets move the mere proposal of return purchases, since the shares in circulation are less worth. The next day, January 20, the Netflix shares reached 17 percent and set an all-time high. The company’s executives were more of millions from their shares than from their salaries and bonuses.

Nobody is stupid in this story. The situation is also not unique either: that Wall Street JournalThe Associated Press and the Finance times All LED with Netflix ‘subscription boom; Nobody mentioned the drop in profits before the eleventh paragraph. By consistently and in the entire press, the rush is prepared for the failure of the company.

The profit cover did not always work that way. In the nineties, when I started as a business reporter, journalists, as they were known, were able to rely on Sell-Side analysts who worked for banks, the shares and bonds for companies. It was your job to help us understand the corporate strategy and to warn of red flags. They toured factories and took meetings with managers. They combined the numbers in a winning report with the actions of CEOs, the Snafus supply chain, demography and the emerging technologies. (They also had a legion with well -trained, sleepless subordinates who supported their work.)

These analysts focused exactly on about a dozen companies and created reports with scope, depth and insight of the book chapter. “I would read her cover for the cover,” Micheline Maynard, an experienced business author for the Just and former columnist at the Washington PostReminded. Experienced reporters found ways to avoid obvious conflicts of interest because they knew that analysts would recommend buying shares that sold their banks. In fact, the Wall Street itself was monitored.

Of course, there were pitfalls in this arrangement, as the DOT Com-Crash from 2000 showed. Henry Blodget -Merrill Lynch’s chief -internet -Analyst, who was found further Business Insider—AMISCH Recommended stocks of companies that he had mocked as a garbage to colleagues in e -mails. (Blodget was finally sold Business Insider To Axel Springer for $ 450 million.) In 2002, Eliot Spitzer, who was then a new York general prosecutor, achieved a global agreement of $ 1.4 billion that exerted banks from the compensation of analysts on the basis of sales or even with representatives of sales members. Full of the hearing size regulations had to tell the companies to all investors what they told you.

After that, the banks began to enlarge their research departments, just like publishers shrank. The financial crisis of 2008 and 2009 led to more bloodshed and consolidation, with fewer companies listening to the public stock markets and fewer people bought individual shares than a market layer through index funds. According to Vali Analytics, which examines the financial services industry, the fifteen largest banks in the world have replaced a third of their analysts. In 2017, when a regulation of the European Union banned banks to bundle research costs in trade fees, according to material research, a market research company based in London was reduced to half the research budget. Star analysts with committed employees were replaced by teams who cover twenty companies or cover more.

It is a assembly line: a person listens to quarterly profit calls with managers. Another news that could affect customers, suppliers or competitors of the company. An entry number is inserted into a table. Only the head of the team makes calls and calls are tight and forecast short-term income. These judgments are made within minutes. The income often exceeds expectations – mainly in agreement with the instructions of the companies – that can be recommended to recommend analysts that customers buy shares. This in turn sends stock prices. For journalists, these recommendations are mostly useless.

And yet only a few economic reporters, even with elite news organizations, understand the effects of all of these changes. Market news pages will still create stories about individual shares based on Sell-Side research results. If the numbers of a company defeat the Wall Street estimates (in an area that the company has provided), this usually becomes a history of a story. Michael Pinsel, a columnist for Marketwatchobserves a persistent conflict of interest: “There is an enormous incentive for a research analyst, to be optimistic on shares that sell your banks,” he said. Nevertheless, he pays attention – he ignores stocks of stocks, but depends on the Intel on emerging technology and drug attempts.

Journalists must be both numerical and educated. Since companies are accumulating and postponing their business around the globe, the public cannot count on the federal supervisory authorities, which are accountable for private companies, Wall Street analysts. The fact that American companies are legally obliged to report their finances every three months in a press release sends a clear message: The government expects reporters to help people understand the importance of the numbers.

Too often, however, business reporters lack the capacity -time of time pressure, the resources or both -to deal with the numbers. Ultimately, this gives the private sector a pass. This can even apply to the investigative work – for example “capital assets”, a pilitzer price of 2023 Wall Street Journal Series about federal employees who trade in the shares they regulate. The project was based on tens of thousands of public records about business of the federal employees, but not of the disclosures published by the Securities and Exchange Commission to determine whether managers or board members had disclosed the purchase and sale of shares in their companies before state contracts. The tendency of journalists to draw attention to civil servants, in contrast to powerful corporate management, can drive the myth that the business world is more effective and efficient, and that the markets can rely on to check bad corporate behavior.

Reporters also have to slow down. Even the Wall Street analysts that are expected to fall judgments within a few minutes is difficult to work so quickly. Most ignore one -off fees such as severance pay for layoffs or the sale of unprofitable companies. In reality, CEOs hide their skeletons here, and journalists should pay additional attention.

After January 19, 2021, Netflix’s yield publications increased nineteen banks and investment houses for the company and recommended that their customers buy shares. Things were not doing well for the increase in buyers the next day who paid a record amount. Netflix shares immersed in – until January 21 – and only recovered in September. The price fell again and only exceeded this record price in March 2024. In fact, everyone who bought Netflix would have bought much better into the Benchmark S&P 500 index after reading the company’s income. Netflix’s returns remained in the index for four years by the end of last year – a route when other technology and media companies defeated the market.

Last January, Netflix reported a subscription blowout with three hundred million. The company’s share reached a record high. The cover raved. Only a few stories found that the last time this would report subscribers – a sign that these numbers go south. The company, which can be assessed long after growth, now wants to be assessed after profit. Ultimately, it should be journalists who choose, based on what all metrics show.

Sara Silver is an investigative reporter who trained journalists and students to pursue the money through workshops for the Columbia Journalism School, the Dow Jones News Fund, the Quinnipiac University and many news editorial offices. Before that, she was a reporter for the Associated Press, the Finance timesand the Wall Street JournalWorking in Mexico City, New York and London.