Tuesday, July 18, 2017

"Can Anyone Bury Bloomberg?"

From Institutional Investor, July 17:

Inside the decades-long quest to bring down a financial information giant.
In 1989, Reuters — the legendary international news agency based in London — launched an ambitious and secretive project.

Bloomberg, a relatively young New York–based company, had been eating into Reuters’ market, providing analytics and data to Wall Street’s Masters of the Universe via proprietary terminals. Dubbed Decision 2000, the project’s goal was no less than the destruction of Reuters’ competitor and its terminals.

But to beat Michael Bloomberg’s brainchild, the legacy brand first needed to rival it. Reuters tasked Capital Market Decisions, a firm led by ex-Smith Barney executive J. Stephen Levkoff, with developing an investment analytics system on par with the one luring away clients. Reuters played hardball — but it also played dirty, evidence suggests: In the late 1990s, federal prosecutors obtained more than 100 communications between Reuters officials and a consulting company that investigators believed was hired to steal information from Bloomberg, according to The New York Times. But the alleged Watergate tactics failed, as would Decision 2000.

“It was the first product to be dubbed a Bloomberg killer, and that was unfortunate,” says Douglas Taylor, a former Reuters executive who worked on the project. “It wasn'’t a bad product, but it wasn’'t a Bloomberg killer.”

In 1993 relations between Reuters and Capital Market Decisions soured. The project collapsed; lawsuits ensued; accusations of intellectual property theft were lodged.
And Bloomberg remained.

Since then a handful of other products have taken on the mantle of Bloomberg killer. So far none has succeeded. “Up to this point, any so-called Bloomberg killer has ended up as roadkill itself,” says Taylor, who now runs his own firm, Burton-Taylor International Consulting.

Yet large-scale shifts in banking and money management — including compressed margins and, correspondingly, shrinking information-service budgets — are causing a mature Bloomberg more pain than copycats ever did. Its terminal count has barely risen over the last five years, according to Burton-Taylor. And last year, for only the second time in the company’s 35-year history, the terminal total shrank. (Bloomberg doesn’t have physical terminals anymore, but rather a software package officially named Bloomberg Terminal.) At the same time, another generation of upstart competitors, including Money.net and Symphony, has emerged.

Can anyone finally bury Bloomberg?

The basic complaint about Bloomberg is its price — always, forever, infuriatingly, the price.
Whether Ray Dalio or Ray Daytrader, everyone pays the same price: $25,000 a year for one terminal and $22,600 a year per terminal for more than one. No discounts are available.

“I'’ve been a Bloomberg user for close to 25 years,” says Seth Shalov, a partner and portfolio manager at $4 billion MAI Capital Management in Cleveland. “And for 24 years, I have been frustrated with their pricing.” Bloomberg declined to comment for this story.

Banks, of course, have faced economic struggles since the financial crisis, making Bloomberg terminals an onerous expense. And many money managers are seeing less revenue amid the shift to passive investing and general pressure for lower fees, putting their budgets for information services under pressure too.

JPMorgan Chase & Co. CEO Jamie Dimon complained in a recent letter to shareholders that his bank paid $9 billion for its technology services in 2016 — a sum about twice the gross domestic product of Fiji. For many financial services firms, information technology is the biggest expense after personnel costs.

It’s no wonder, then, that Bloomberg’s terminal volume climbed only 0.7 percent annualized over the last five years, and that it shrank 0.96 percent last year, to 324,485, according to Burton-Taylor.
But a large number of financial market participants see Bloomberg as an absolute necessity, regardless of the cost. “It’s basically a way of life for many people,” says Bloomberg user David Gilmore, a partner and currency analyst at Foreign Exchange Analytics in Connecticut.
Bloomberg provides one-stop shopping for data, analytics, news, and trading. Bruce Falbaum, who invests in high-yield bonds and leveraged loans as a senior portfolio manager and principal at $1.6 billion Cohanzick Management in Pleasantville, New York, has used Bloomberg for 20 years. He’s not looking to make a change now.

“For the things it does, I don’t find anything that really compares — though, honestly, I haven’t looked,” Falbaum says. Market makers post high-yield bond prices and send traditional communications to customers like him over Bloomberg’s messaging system. “I see the entire market going on in front of me on Bloomberg. I’m not aware of any other place where I can do that.” Cohanzick has six Bloomberg terminals and would love to trim the expense. “That’s real money for a firm like ours,” Falbaum says. But a replacement would have to include the same capabilities he and his colleagues enjoy on Bloomberg.

And just as important, the other players in his market would have to adopt the new service as well, so he could continue to communicate with them. “We have relationships with about 100 broker-dealers,” Falbaum says. “I can use a scraping function to see their quotes that are contained in messages, and then I can contact them to potentially do a trade. That’s all on Bloomberg.” It would be very difficult for a competitor to gain a critical mass of users, he says.

One complaint lodged against Bloomberg by competitors such as Money.net CEO Morgan Downey is that the terminal is difficult to use — “clunky,” as Downey puts it, citing outdated software and the lack of touchscreen capability....

Possibly also of interest:
August 2014 
A Deep Dive Into Goldman's Chat Platform (GS)
August 2014 
"Can the Bloomberg Terminal be “Toppled”?"
...And now Mr. Turck (*"Partner at FirstMark Capital. Previously, Managing Director at Bloomberg Ventures and before that, co-founder of TripleHop Technologies, acquired by Oracle....")
October 2016 
Money.net Hires Former Bloomberg Honcho to Take On Bloomberg Terminals With Machine-Generated News Bulletins and Stories