For management and investors to understand the true value of an organisation they need to know how it is performing against a wide range of criteria, which increasingly include intangible as well as tangible assets.  Media coverage plays a key role in brand and reputation value, both of which are now widely accepted as major intangible assets.  The challenge has been how to provide a reliable method of valuation.  Fortunately, this is about to change with the introduction of PRSV, a robust and credible method for determining the asset value of media coverage.

We welcome comments below

Accounting has moved a long way from its original purpose, which was to provide a record of monetary transactions and financial results.  In today’s increasingly knowledge-based economies, organisations are spending more and more on intangible assets to the extent that investment in them can be equal to or even greater than investment in tangibles such as machinery and equipment.  In its 2017 report, Reputation Dividend stated that the combined value of corporate reputations of the 350 largest listed companies in the UK stood at £986bn in January 2017; 39% of all shareholder value.

No in-depth studies are required to see and understand that media coverage plays a key role in the value of organisations.  The real-life laboratory of stock exchanges across the world reveals, on an almost daily basis, the impact that media coverage can have on share price and market value.

Recent history is littered with examples of how news can wreck the value of a company, from the reporting of Gerald Ratner’s infamous 1991 after-dinner speech, which wiped £500m from the value of his jewellery business, to Robert Peston revealing an agreement to bail out Northern Rock on the BBC News, which triggered a run on the bank in 2007.  Even good news can lead to a drop in share price, for instance if earnings are not as strong as market expectations.  However, this tends to be short-lived and consistently good news will invariably increase market value over the medium and long-term.  Either way, the clear fact remains that media coverage has a significant impact on an organisation’s reputation and market value.

The challenge is to determine what that value is.  Historically, the financial value of media coverage has been measured using the advertising value equivalent (AVE).  The AVE has many flaws, details of which are widely reported and can be found at numerous sources simply by searching for the term itself.  As a result AVEs have been widely discredited and are now outlawed by professional industry bodies, although many in the PR profession continue to use them on the basis that they provide a monetary value of media coverage.

Crescendo’s view is simple.  While AVEs are not fit for purpose, they will only be consigned to history when a robust and credible alternative for valuing media coverage is available.  That alternative is the public relations search value (PRSV).  Like AVEs, the PRSV assigns a financial value to coverage but that is where the comparison ends.  Crucially, the PRSV is not an ‘equivalent’ of anything but assesses the value of coverage in its own right.

Whenever anyone carries out an online search, in any language and at any place and time in the world, the results page that is returned is assigned a value, which can be found using the search engine’s support tools.  This value is not set by any individual or organisation but by the open market based on auction bidding.  This forms the foundation for the PRSV, which takes account of the likelihood the coverage will engage audiences and deliver business benefit.  PRSV has been extensively tested over the past 18 months and is now used by some of the world’s leading organisations.  More information and a white paper are available here.

PRSV for media coverage is available under a Creative Commons Attribution International License, which effectively makes it open source.  Crescendo has developed PRSV so that it can now be applied to all forms of media coverage, including online, broadcast and ‘traditional’ paper-based media.

Having established a robust and credible alternative to AVEs for valuing media coverage, Crescendo is in the process of opening discussions with finance and accounting academics as well as professional and industry bodies in the UK.  Early feedback suggests significant interest in both the principle and application of valuing media coverage as part of financial reporting.

The Financial Reporting Standard 102 (FRS 102), which replaces all previous reporting rules, came into force for accounting periods beginning on or after 1 January 2015.  As part of the standard’s most recent review, entities will have the option to value intangible assets over and above those defined as ‘separables’*.  They will also be able to value such intangible assets, which could include media coverage, separately from goodwill should they wish to do so; and given the impact of media coverage on organisational value, this is an area where the valuation of media coverage would make a great deal of sense.

Over and above this, Crescendo believes that the value of media coverage should be independently audited on an annual basis.  As well as providing an important component of goodwill valuation, especially where mergers and acquisitions are concerned, this would provide a consistent and level playing field on which to measure, for instance, PR agency performance.  It would also send the strongest possible signal to senior management of just how vital the role played by communication professionals actually is and could very possibly lead to increases in communication budgets.

In conclusion, these developments do create a potential threat to PR in that accounting and management consultancy firms could easily seize the opportunity and encroach into the territory traditionally owned by the communication industries.

On the other hand, the business opportunities they create for the PR industry are huge; and just as, if not more important, is the potential for public relations to be seen as the vital driver of organisational value that it actually is.


*Separable assets can be sold, transferred, etc. Examples include computer software, licences, trademarks, patents, films, copyrights and import quotas.

Leave a Reply