Merrill Lynch is worried that too many people are reading its research.
Yes, too many. Reports DealBook:
Merrill Lynch said it plans to eliminate all access to its research from nonclients and to put new restrictions on the media’s access to the research. It will also replace some licensing agreements that “erode the value of our written product” with new arrangements that put a fairer price on its reports.
[Update: The statement is here.]
In other words, Merrill is trying to put the toothpaste back in the tube. Rather than embracing the digital era, Merrill is trying with all its might to pretend that nothing has changed, and that it can distribute digital copies of its research to tens of thousands of clients while still somehow ensuring that no one else gets to read it.
As for the “fairer price”, does anybody, anywhere, actually pay for Merrill Lynch research? As in a simple cash-for-research transaction? I doubt it, somehow. This is a classic example of something being free to those who can afford it, and utterly inaccessible — at any price — to those who can’t.
What Merrill should be doing is to follow the example of, say, Morgan Stanley’s Global Economic Forum, which has been freely available online for over a decade now. The problem is that sell-side shops like Merrill like to think of their stock research as being actionable: if Merrill puts a “buy” rating on the stock, then the idea is that a large number of Merrill’s clients, impressed with Merrill’s analytical expertise, will rush out and buy the stock. If that’s true, then they would rightly want the research to go to as few people as possible, so that the inevitable uptick in the wake of the rerating wouldn’t move the stock too far. Or something.
The problem, of course, is that sell-side analysts aren’t used as outsourced stock-pickers by buy-side clients. They’re used as sources of information — analysts often have better access to corporate executives than the buy-side has — and as sources of interesting ideas. But the headline “buy” and “sell” ratings are largely ignored. Besides, the few sell-side analysts who do prove particularly adept at picking stocks usually find themselves lured to the buy-side sooner rather than later in any event.
I look forward to the day when the first large investment bank is bold enough to put all its research online for free. That would be the really smart move. Merrill, on the other hand, is simply wrong when it says that the value of its research goes down the more people who read it. That’s not true of the Wall Street Journal, and it’s not true of sell-side research either. Good information is often actually more valuable if it’s widely read.