13 December 2010

Will XBRL consolidate the filings market?

Ironically, an unintended consequence of the introduction of XBRL may be a consolidation in the filing agent market. Already the market is dominated by a few key players, with a number of smaller filing agents supporting varying numbers of filers. The "Big-4" players of course are RR Donnelly (now including Bowne), PR Newswire (and their subsidiary Vintage) , Merrill and EDGARFiling.  [Okay, I'm human, and I bet I've missed someone very important... you, gentle reader, will no doubt correct me].  Yet there are also much smaller filing agents - almost the proverbial "mom and pop shops" that cater for the needs of small groups of non-accelerated filers, frequently 'local' to the filing agent.

Yet the introduction of XBRL is impacting those relationships. For a couple of years I have had occasional communication with a few smaller filing agents, each time they have come to me asking where they can access affordable XBRL software for their clients.

Recently I've been hearing that some of the large filers are adding additional conditions to the use of their software, in effect further reducing the options for the smaller filers and filing agents. As one small filing agent told me - "it is almost as if XBRL will help them take my clients from me".

The good news of course is that there are options, and exploration will uncover these, for both filing agents and for individual non-accelerated filers creating their own and filing their own XBRL.

Now, this discussion does not relate to those companies that self-file. These companies continue to have access to a wide (ish) range of software tools and processes to create their XBRL. And there are some very good tools out there.

There is a strange irony here.

XBRL threatens to disintermediate the data aggregators. Free, detailed tagged, accurate and timely information is a threat. This will force them, in order to remain relevant, to improve the range of data provided, and the range of value-added services that come with the data subscriptions. The IRA (Institutional Risk Analytics) is a great example. They are taking Call Report data from the FDIC and adding value through bank analysis (and multi-bank analysis), and selling subscriptions to that value-added data.

Unfortunately the filing agents might be using the mandatory provision of XBRL as a mechanism to actually contract the market for filers. The complexity and cost of XBRL creation actually serves to herd the filers into the arms of a smaller set of very large filing agents - the ones that can afford to provide XBRL services, either through self-developed XBRL software or through strategic alliances. The smaller filing agents find themselves with fewer options.

So disintermediation at one end, yet greater aggregation and fewer options at the other. And following the almost "natural order" of things, would it surprise me to see further aggregation?


  1. Well, the "consolidation" has already happened.

    In December 2010, R.R. Donnelley & Sons Company (RRD) has completed the acquisition of Bowne & Co. Inc. (BNE) as announced on February 23, 2010.

    R.R. Donnelley acquired Bowne & Co. for approximately $487.0 million in cash, or $11.50 per share.

  2. Dear Anonymous,

    Somehow I knew that I would get that wrong. I'll amend the posting. Thank you for the reminder.


  3. Excellent assessment.

    I'm an owner of a medium-sized filing agency and your comments have been on our minds for the past year. For the reasons you mention we decided to build our own XBRL software and retain control of the process.

    We believe that filing agents without their own software and/or the required technical know-how will eventually see their client bases eroded to the point where they will have no choice but to exit the business. XBRL is far more complex and technical than HTML and requires skillsets not typically found within smaller "mom and pop" filing agencies.

    Most of the XBRL software solutions made available to filing agents (that we've seen anyways) are far too manual and cumbersome - while workable for companies that self-file, filing agents will not find them practical during high volume periods (i.e. deadline days). And to use them the agent will still need to have a solid XBRL understanding, and some accounting knowledge too.

    Big changes are coming to the market and if the summer of 2011 doesn't cause concern for smaller agents, 2012 - detailed tagging of notes - surely will.

  4. Dear Anonymous(2),

    Building your own XBRL software is quite an accomplishment - congratulations. It is a pity that you had to resort to that, as a medium-sized filing agent. There should have been solutions out there that met your needs (I now there are now).

    I certainly agree that many of the solutions are too manual and cumbersome - and complex for non-XBRL experts. That, I expect, will be the problem that many face as they buy software solutions that have consulting services available - they may find the fixed price of the software attractive, yet discover that the open-ended consulting support is what kills there.

    I expect there are / will be fixed priced solutions - providing a fully formed XBRL 'package' to the filers for them to provide to their filing agent or to file directly. I expect that there will be fixed price solutions for filing agents like you.

    Still, congratulations on doing what the XBRL industry should never have forced you to do.

  5. As a co-owner of the medium sized filing agent referenced above, we quickly rejected a business plan which would see the majority of XBRL revenue going to third parties. There is also the substantial risk of the XBRL provider realizing that the next logical step would be to become a full service filing agent and simply take your clients. The consolidation in the industry also may result in your outsourced XBRL provider being owned by your direct competition.

  6. Dear Anon(2),

    Excellent conversation - I'd love to know more. E-mail me directly (daniel.roberts01@gmail.com).