Will Sell-Side Research Share the Fate of the Music Industry?

Henry Blodget of Silicon Alley Insider, Barry Ritholtz of FusionIQ, Nouriel Roubini of RGE Monitor and Jonathan Glick of Gerson Lehrman Group were on a Money:Tech panel chaired by Paul Kedrosky called Blogs, Analysts and the Future of Equity Research.  Part of the discussion was about the value of research being largely related to how much trust a reader will place in a writer.  Years ago it was believed you could only trust the recommendations of an analyst employed by a well-known sell-side shop.  Now a blogger can established a track record as a knowledgeable analyst and can develop trust and an audience.  And Gerson Lehrman will connect a trusted blogger, who has a specific area of expertise, with a hedge fund or private equity investor for private consultation.
The last few minutes of the session focused on research monetization and it struck me that the sell-side research business is displaying a number of similarities to the music business.  Leaving aside the fact that both are/were "hits" businesses - Institutional Investor rankings and Grammys tend to drive revenue of the analyst, artist and their "label" - it seems as if sell-side firms and majors labels can no longer monetize their investment in equity research and artist promotion as they have in the past - through commissions, deal flow or CD sales. Bloggers (independent research producers) and increasingly independent musicians monetize their product/talent through page views, subscriptions to special services and through public or private appearances.  Gerson Lehrman seems to be the  the major booking agency for blogger "performances" just as Live Nation is for musicians.
And just as there are aggregation sites for music (think hypemachine) there are also aggregation sites for independent research like Seeking Alpha.  Although I don't know of any public filing sharing networks for sell-side research (there is some stuff on Scribd) there is themarkets.com, which is essentially a closed-file sharing community.  It seems as if both industries are broken; fortunately for the sell-side their research was never their entire business.

Comments

[robwebb]

great analogy. push it one step further though...subscription service expert networks are the next to go. no need to pay $60,000 to connect with and compensate a blogger for their time.