The recent merger of Thomson Financial with Reuters has set the new combination on a bid for better bragging rights against Bloomberg in providing financial information to the banking industry. Of course, these two firms also provide news fodder for countless finance and economics bloggers like yours truly, making the competition particularly interesting. Simply put, it's a test of two approaches to marketing financial information. Whereas the more prestigious Bloomberg provides a single package with all the trimmings for a monthly fee of between $1,500-$1,800, Thomson Reuters is offering a more a la carte menu where basic subscriptions can start at as little as $25-$50 a month up to $1,200 for a Bloomberg-near equivalent package. Although having a Bloomberg terminal does have its own kind of cachet--I used to regard colleagues who couldn't find their way around the traditional Bloomberg terminal as terminally gauche back in the day--the incremental approach of Reuters may be more suitable in wooing developing markets where such outlays are at a premium. Who do they think they are? Subprime peddlers? From the International Herald Tribune:For years, Thomson was the information giant that rarely talked about its own business. But since its acquisition of Reuters, which closed this year, that reticence has softened. Thomas Glocer, the head of the combined company, is very candid about where he is aiming next. "For a long time, Bloomberg had it too easy," he said during a recent interview.Thomson Reuters is going hard after Bloomberg, which has for some time been the marquee name on Wall Street for financial information. The companies are in a dead heat: Thomson Reuters has 34 percent of the market for financial data and Bloomberg 33 percent.
But Thomson Reuters is a far larger, more diverse company: Its strength is delivering electronic data and services to professionals, including lawyers, doctors and scientists. It was Bloomberg, however, that defined the market by providing information unmatched in scope by any other company, married to a disciplined and customer-driven culture.
Glocer concedes that there is some symmetry in the challenge by Thomson Reuters to Bloomberg. After all, it was Bloomberg in the early 1980s that revolutionized financial information, stealing the market away from established companies like Reuters and Dow Jones. "Reuters used to be BOAC," Glocer said, referring to one of the airlines that later formed British Airways. "Along came Richard Branson and Virgin and suddenly British Airways became a much better airline. Bloomberg is that Virgin that forced Reuters to sharpen up."
The point is not lost on Peter Grauer, who was appointed chairman of Bloomberg when the company's founder, Michael Bloomberg, became the mayor of New York in 2001, that the takeover of Reuters by Thomson might be a first step reclaiming a business that Bloomberg redefined and now dominates. "My job is to worry, to take nothing for granted and make sure that we think about things in terms of humility," said Grauer, a close friend of Michael Bloomberg and a former investment management executive. "Great companies have begun to believe their own press and hubris has killed them. My mission in life is to never let that happen."
It was in the early 1980s that Bloomberg, a former trader at Salomon Brothers, took the high pressure atmosphere of the trading floor, imported it to the newsroom and delivered the result through proprietary, advanced technology backed with exceptional customer service.
"This company has, in many ways, the most powerful business model I've ever encountered," said Daniel Doctoroff, who stepped down in December as Bloomberg's deputy mayor for economic development to become the company's president.
The roots of Thomson Reuters go deeper. Thomson, which is controlled by the Toronto-based family of the same name, began with a newspaper empire that the company abandoned to concentrate on electronic data.
Reuters, which has a business news partnership with the International Herald Tribune, is best known for its news service. The company turned to financial information in the 1980s and is now the leading provider of some types of trading data.
While Glocer may have to deal with all the usual problems that mergers bring, he has the advantage of running a significantly bigger company.
The combined revenue of Thomson and Reuters last year was $12.5 billion, more than double that of Bloomberg, and Thomson Reuters has about five times more employees.
Glocer thinks he can go after Bloomberg on price but, more importantly, flexibility. While privately held Bloomberg generated about $5.4 billion in revenue last year and has about 10,000 employees, it still offers, for the most part, a single product: the Bloomberg terminal coupled with its vast array of data.
For clients, Bloomberg is a take-it-or-leave-it proposition that supplies everything the company generates for a monthly fee of $1,500 a user ($1,800 a month for the small number of firms that use only one terminal). Traders who have no interest in, say, debt markets cannot reduce their Bloomberg costs by subscribing to a service that drops that data.
Bloomberg's price and packaging may not have mattered as much during a bull market, but with Wall Street firms looking to cut costs, the fourth Bloomberg terminal on a trading desk could start to be seen as a luxury.
The combined Thomson Reuters has its own terminal products (some of which are delivered through proprietary computers). Glocer said that the "blended price point" of Thomson Reuters' terminals was about $1,000 a month, well below Bloomberg's.
Indeed, some Thomson Reuters terminals offering minimal information cost just $25 to $50 a month, depending on volume, according to Douglas Taylor, managing partner at Burton-Taylor Consulting and a former executive at both Thomson Financial and Reuters.
"Bloomberg has a real problem finding new business. They priced themselves at the top of the market," Taylor said. "There are different points on a pricing curve that Bloomberg can't hit but that Thomson Reuters can deliver. It's going to be hard to figure out where Bloomberg's new growth opportunities will be that don't cannibalize its current pricing."
Grauer and Doctoroff both dismissed suggestions that the Bloomberg terminal was too costly, arguing that the price was offset by the returns subscribers generated by using it. "Price is really not the issue for the vast majority of customers," Doctoroff said. "It's not how cheap you are."
Price, however, may be a factor in emerging markets, particularly Asia, which both companies agree is the next battleground in their war for financial information supremacy. Thomson Reuters has been traditionally stronger outside of North America than Bloomberg, especially in India, and has been aggressive in China.
While the market downturn has yet to significantly affect either of the two competitors, Thomson Reuters serves its data and services to a broader range of customers - like physicians and scientists - giving it some protection from financial industry cycles.
Even Reuters' founding business - the news agency that supplies stories and photos to newspapers and Web sites as well as news video to broadcasters and publishers - is growing. But some journalists in the Reuters newsroom in London have been protesting against planned job cuts stemming from the merger.
Meanwhile, the growth of the Internet can cut both ways. Both Thomson Reuters and Bloomberg face common enemies in sites like Yahoo Finance and Google Finance, which offer less sophistication, but are free.
