Why the Net Could Be Bad News for Bloomberg
For almost two decades, media moguls have fought a war over who would supply news and data to the desktops of Wall Street. So far, Michael Bloomberg has prevailed. The sharky former general partner of Salomon Brothers triumphed over industry leaders Reuters, Quotetron, and Dow Jones' Telerate by building the splashiest terminal out there. He included real-time stock, bond, and commodity quotes as well as every scrap of historical data. To cater to traders--who measure the shelf life of news in seconds--he built one of the most bloodthirsty newsrooms around. Bloomberg's terminals even looked sharper, as if they were designed using Crayola markers. His über-terminal lured a new breed of customers, including buy-side analysts and portfolio managers.
But now Bloomberg faces what could be his biggest challenger: the Internet. While consolidation of financial institutions means demand on Wall Street is shrinking, individual investors have never been hungrier for financial data. Free websites like Yahoo!Finance have turned regular investors into virtual traders by running delayed quotes and recycled news from professional terminals. The sites also splice in chat rooms so market junkies can gossip, and links to trading sites so they can act on tips.
What does this mean to Bloomberg and his competitors? For starters, the Internet lowers the barriers of entry into his business. Rather than raising capital to install pricey equipment, startups like MoneyLine simply send out content over the Net. "For us the Internet is the ultimate distribution tool," says Jon Robson, CEO of MoneyLine. But what's more worrisome for the incumbents is the prospect of the Internet diluting the value of their data. While few professionals would chuck their Bloombergs for a website with stale data, eventually the Net sites will start to catch up. (Already sites like CBS MarketWatch provide real-time news of their own.) When that happens, Bloomberg is in trouble. No one will pay a stiff monthly fee--currently $1,225 for two or more terminals--for data they can get free.
Reuters, Bloomberg's biggest opponent, has taken full advantage of the Internet. In North America, it's building brand recognition by peddling 20-minute-old news to consumer Websites, and it's wooing smaller customers, like retail brokers, by delivering service via closed intranets. Reuters has its hands in everything from Yahoo to brokerage websites for Paine Webber and Quick & Reilly. (Reuters also provides news to fortuneinvestor.com, a service affiliated with this magazine.) "[Reuters has] become a very good second-tier internet player," says Patrick Wellington, a media analyst at Schroder Securities.
Bridge has an equally ambitious but less compelling Internet plan. For the past three years, Bridge has melded Bloomberg casualties like Dow Jones' Telerate, Knight-Ridder Financial news, and, soon, the market-data business of ADP into one giant service. Nonetheless, it has limited brand recognition, even on the Street. The company plans to launch a Net version called Bridge Channel to attract retail customers who may have previously relied on the free services. For $62.50 per month, users can access a website with real-time data, news, and analysis. Bridge looks beautiful, but it's all flash--with nothing like the substance its competitors offer.
And how's Bloomberg handling the Net? Pretty much ignoring it, aside from a couple of Websites and a few news deals. He's sticking to his longtime strategy: charging a large, unwavering fee for arguably the best service. He will deliver via the Internet, but don't bother haggling over price. For now, he's safe. "Bloomberg's a huge part of my business," says Andy Kaiser, an institutional broker and associate director for SBC Warburg Dillon Read. "Without it, I'd be hard pressed to get pertinent information out to my clients as quickly."
But looking further out, it's not hard to envision a day when Bloomberg's terminals could become dispensable. "It's abundantly clear that the internet will change the model of proprietary-data businesses," says Kevin Werbach, managing editor of Release 1.0 newsletter. Though their new ventures may seem unfocused, Bloomberg's competitors are at least experimenting with Internet technology. Bloomberg seems unfazed. "Reuters has three businesses: its financial data, its news arm, and trading. The rest [the internet business] is bullshit," he says. Strident words, but when it comes time for Bloomberg to expand his online business and defend his niche, it just might be too late to catch the front-runners.
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