President Donald Trump and SEC Chair Paul Atkins (Christopher Smith for TheWrap)
With his public push for companies to shift earnings disclosures from quarterly to biannual, President Donald Trump is re-igniting a decades-long debate around the long-held practice — a move that could have significant ramifications for public companies, including those in Hollywood.
Since 1970, the U.S. Securities and Exchange Commission has required public companies to report their financial statements every 90 days in what’s known as a 10-Q filing. But Trump is looking to shift from a quarterly to a semi-annual disclosure schedule in the hopes of saving money, allowing managers to “focus on properly running their companies” and bringing the U.S. in alignment with the practices of the U.K. and some countries in the European Union.
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A rule change would just require a majority vote by the SEC, where Republicans currently hold a 3-1 majority with one open seat.
While the change seems radical, there have been some notable names who have been in favor of moving away from providing quarterly earnings guidance. In 2018, financial giants Warren Buffett and Jamie Dimon argued quarterly earnings guidance puts an “unhealthy focus on short-term profits at the expense of long-term strategy, growth and sustainability,” with companies holding back spend in areas such as hiring, technology and research and development to meet Wall Street targets and their own internal forecasts. (Buffett later clarified: “I like getting the figures quarterly, and I hope that stays.”)
“You have to realize that right now, semi-annual reporting is no stranger to our markets. Foreign private issuers do it right now,” SEC chairman Paul Atkins told CNBC on Friday. “There’s been a lot of discussion over the past few years about how this quarterly reporting emphasizes a short-term type of thinking.”
But critics say quarterly disclosures level the playing field for both insiders and shareholders, allowing wider access to timely financial information, resulting in greater confidence and improved allocation of capital. For media companies (some of whom have already pared back on certain financial metrics or have signaled they would), this could become a catalyst for even fewer disclosures.
“The SEC ‘can’ change the rules, but it’s unlikely they would do so. The burden of reporting is more than offset by the benefit to investors of regular periodic reports and greater transparency,” Wedbush Securities analyst Michael Pachter told TheWrap. “Trump has no real reason to insist on it other than whim, and that is a bad reason to limit visibility and transparency for investors.”
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Representatives for Comcast and Paramount declined to comment on Trump’s proposal, while Disney, Warner Bros. Discovery and Netflix did not immediately return TheWrap’s request for comment.
Experts told TheWrap a rule change would lower media companies’ administrative costs around compliance and reporting and offer less short-term pressure from Wall Street.
But it could also encourage companies and executives across the entertainment industry to offer less transparency around their performance in areas like streaming, theatrical and advertising, which would drive investors towards third-party providers for accurate information.
Netflix notably already stopped reporting streaming subscribers and average revenue per user (ARPU) on a quarterly basis at the end of 2024 as part of a shift in focus to engagement, while Disney+, Hulu and ESPN+ are set to stop reporting the metrics in the coming months amid a similar shift in focus.
Warner Bros. Discovery also doesn’t break HBO Max and Discovery+ subscribers out individually, instead reporting an aggregate figure for its direct-to-consumer division, and Paramount+ and Peacock do not release updated ARPU figures every quarter, though the latter has previously disclosed it’s around $10.
Netflix co-CEOs Ted Sarandos and Greg Peters no longer talk about key metrics like subscriber numbers. (Getty Images)
“While this change could provide relief to media companies, the reduction in transparency between media companies and investors could strain investor confidence in an industry that is already struggling to deliver consistent returns,” Novika Ishari, Romano Law partner and chair of the firm’s Entertainment Law Group, told TheWrap.
Stefano Bonini, an associate professor of corporate finance at Stevens Institute of Technology, emphasized that the entertainment industry is heavily impacted by seasonality and that if you delay the release of material information, the investor reaction could become more pronounced and individual stocks could face more volatility.
“If you skip that quarterly meeting where you inform investors on the performance of a particular show, movie or product and you wait until the end of the season to say, ‘Hey, we launched this thing and it didn’t really work. Nobody watched it and it really bombed,’ the reaction is going to be a lot more violent,” Bonini told TheWrap. “The moment the information comes and it’s negative, the extent of the damage that we do to shareholders becomes more significant.”
An SEC spokesperson told TheWrap that the agency would “prioritize” the proposal at Trump’s request to “further eliminate unnecessary regulatory burdens on companies.”
While TD Cowen analyst Jaret Seiberg said it would be an “easy policy win” for Atkins to deliver to Trump, the firm pegs the probability of a switch happening at 60%, noting the likelihood has “moved from improbable to probable though not guaranteed.”
Seiberg believes it would take the agency’s staff at least six months to craft a proposal and collect the economic data needed for the rule change to survive judicial review.
Atkins told CNBC that if the rule change is approved, it would be left up to companies and the market to decide the proper cadence of disclosures.
He also pointed out that much of the information available in 10-Qs are still publicly available to investors during company earnings calls and that companies can file an 8-K whenever they want to provide material information to investors and the public.
“We have to remember who the boss is, and that’s investors,” he added. “So we want to look at all of this …We’ve had the cues, there have been lots of complaints over the years about short-termism, so let’s see what we can do to address it.”
The post Trump Wants to Kill Quarterly Earnings. Here’s What It Would Mean for Hollywood appeared first on TheWrap.
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