September 29, 2010: Help CBIS Fight the Distribution of Pornography

November 1, 2010 Update: The sign-on window for the letter has now closed.  We extend our sincere thanks to everyone who supported this initiative.  We received more than 200 signatures for this letter.  Please watch our website for updates on corporate responses.

Background
The prevalence of pornography in our society is a grave concern to CBIS, our participants, and many other religious and non-religious investors. Pornography addiction, under-age access, and the increasingly hard-core nature of pornography are some of the reasons why action needs to be taken to curtail the availability of pornography.

There are only a small number of publicly traded companies involved in producing pornography, and their focus tends to be almost exclusively on pornography. CBIS and many other faith-based and socially responsible investors have investment screens that prohibit investing in publicly traded pornography producers. However, most pornography producers are small privately owned businesses, which precludes any form of shareholder action.

Other publicly traded companies involved in pornography are content distributors such as cable and satellite TV providers and hotel chains that provide “adult” channels and on-demand programs. These companies tend to be fairly large, and the revenues they earn from distributing pornography tend to be a small percentage of the companies’ overall revenues (although, on an absolute dollar basis, they could be significant). CBIS believes there is an opportunity to use our roles as shareholders to influence these companies’ behaviors and get them to stop distributing pornography.

CBIS has initiated a sign-on letter that will be sent to five major media companies: Comcast, Time Warner Cable, DIRECTV, Dish Network, and Cablevision. The letter asks the companies to: 1) Stop distributing pornographic programs, and 2) Improve public disclosure of potential business risks and revenues earned from distributing pornography.

Below is a copy of the company letter. The deadline to sign the letter was Friday, October 29, 2010.

Letter
Dear COMPANY:

Christian Brothers Investment Services, Inc. (CBIS) is an investment management firm with approximately $3.6 billion in assets under management for more than 1,000 Catholic institutions worldwide. We have initiated this petition as part of our initiative to reduce the availability of pornography in our society.

The more than NUMBER signatories to this letter, representing socially responsible shareholders, members of the religious community, and members of the Interfaith Center on Corporate Responsibility, believe that pornography negatively impacts our society in profound and far-reaching ways, and that curbing its availability is in the best interests of society as well as the companies that distribute pornography and their shareholders.

The pornography industry is estimated to be worth more than $13 billion in the U.S. alone. Over the past several years, we have witnessed a significant increase in the amount and availability of pornography in our society, spurred in part by technological innovations that have resulted in easier and more anonymous access to pornographic films and images.

Many formerly family-friendly media companies are now engaged in the distribution of pornography, viewing this line of business as a revenue stream with little associated risk.

However, if a company is distributing pornography that could likely meet the definition of obscenity in a court of law, then there are potentially significant legal and business risks that should be discussed in the company’s public disclosures.

In addition, pornography and the sex industry have been linked to criminal activities including human trafficking, child pornography, and child prostitution. Providing products or services that could be seen as supporting, even if indirectly, such problematic activities may create public relations problems and affect a company’s reputation among its existing and potential customers.

We recognize that distributing pornography is a conscious business decision that can have both positive results (incremental revenues and profits) and negative consequences (increased business and reputational risks, societal harm).

In the case of COMPANY, we feel that the risks and the societal harm that result from your participation in distributing pornography are not outweighed by the benefits that accrue to your bottom line.

We therefore ask COMPANY to discontinue distributing pornography.

If COMPANY declines to cease distributing pornography, we would like additional information to help us understand the decision to continue offering pornographic programming and the scale of this line of business. Particular questions we would like answered are:

• What is the business rationale for offering pornographic programming? What is the relative importance of this line of business to COMPANY’S overall business operations?
• Who are your strategic partners, including key content suppliers, and what percentage of your “adult entertainment” content is procured from each?
• What policies are in place to ensure that programming is not considered obscene and possibly illegal? How are these policies implemented?
• How much revenue do you earn from pornographic programming? How much is from subscription channels and how much from video-on-demand?
• What is your assessment of the potential risks to COMPANY and its shareholders, including business, legal, and reputational risks, resulting from COMPANY’S involvement in distributing pornography?

Currently, investors have no means of objectively assessing the degree of involvement companies have in distributing pornography or how they are managing the related business risks. Due to the controversial nature of pornography, investors need to have more information than is currently disclosed in order to effectively evaluate companies’ related business activities and make informed investment decisions.

We feel that as more people become concerned about pornography and the effects, both direct and indirect, it has on our society, greater scrutiny will be placed on those companies involved in its production and distribution. The costs for remaining involved in pornography will increase. 

We request a response to this petition by November 30, 2010 indicating COMPANY’S strategic rationale for either continuing or discontinuing distributing pornography and, in the former case, providing additional responses to the questions above.

We would also appreciate the opportunity to convene a small group of shareholders to discuss with COMPANY this issue and our requests.

Please direct your response to Dan Nielsen, Director at Christian Brothers Investment Services: dnielsen@cbisonline.com; 877-550-2247; 20 N. Wacker Dr., Ste. 2000, Chicago IL 60606.

Thank you for your attention to this important issue.

Dan Nielsen