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.
But only one of the 16 Bloomberg users contacted for this story echoed Downey’s complaint. A market analyst, who requested anonymity to avoid alienating Bloomberg, says that when he is looking for an old news story about a specific event, he can often find it more quickly with a Google search than by going through Bloomberg — hardly a fatal flaw in Bloomberg’s system.
“Bloomberg’s front end is antiquated,” Taylor says. “But regardless of how cumbersome it is, you still get the best result on the street.” From Bloomberg users, almost all the complaints focus on price.
Some say they are open to switching, or at least adding a competitor to Bloomberg. One is the co-head of portfolio management at one of the country’s largest money managers, which only communicates anonymously to the media and utilizes 85 Bloomberg terminals. He has great respect for the service.
“Bloomberg is a very fantastic product,” he says. In addition to the terminal’s capabilities, Bloomberg is “extremely customer-centric,” he says. “They are focused on improving their products in any way that users find meaningful. They have earned a spot in our ecosystem.”
But his firm would love to find an alternative to the colossus. First, there’s the $1.9 million it’s paying each year for its Bloomberg terminals. The per-terminal price has climbed 25 percent over the past ten years, the executive says. “People are concerned about price, but the more inextricably linked you are to Bloomberg, the more you realize you have to pay that price,” he says. There are competitors in narrow areas with products his firm views as superior to Bloomberg. The firm pays for those services in addition to Bloomberg.
Another reason the firm would like an additional full-service solution is to avoid complete vulnerability to a Bloomberg network outage. Such a breakdown occurred for a few hours in April 2015, effectively shuttering parts of financial markets around the world. “We are actively looking for an alternative to Bloomberg, because we feel like a competitor — even if it’s just for a piece of the business — is in our best interest,” the executive says.
A friend of his who is the head trader at a global macro hedge fund recently switched to Money.net from Bloomberg for all nine of the firm’s traders. The head trader declined to identify himself or his fund. “He told me that knowing the work I do, if I spent six weeks using Money.net, I would forget about Bloomberg,” the executive says.
Money.net and fellow new entrant Symphony have been all the rage as of late — to the financial media, at least.
Money.net, built by ex-Bloomberg commodities chief Downey, charges $150 per month, or less than 10 percent of Bloomberg’s fee. Downey, 44, grew up on a farm in Ireland. After graduating from the University of Limerick, he ventured to New York City, where he found a job as a junior fixed-income derivatives trader at Citibank. He later specialized in commodities, and after working overseas for Citi and Bank of America, he joined Bloomberg in 2010 to lead its commodities division.
He had used Bloomberg since the beginning of his career in 1993. “But even then I thought it was old,” Downey says. Seeing that after the financial crisis users were increasingly concerned about Bloomberg’s pricing and sensing they were disappointed with the terminal’s technology, “I figured I could build a better system at one-tenth to one-fifteenth of Bloomberg’s cost,” Downey says. And so he went to Money.net in 2014.
He and other top managers own a majority stake in the company. Outside investors include former Citigroup CEO Vikram Pandit and Michael Litt, a money manager featured in Michael Lewis’ book The Big Short.
Downey claims his service provides all the data Bloomberg and Thomson Reuters do (Thomson Reuters occupies the No. 2 position in the financial information market, with a 23 percent share, compared to 33 percent for Bloomberg, according to Burton-Taylor).
When it comes to analytics, “ours is more intuitively delivered than Bloomberg and Thomson Reuters,” he says. “They are spread thin with low-usage analytics, while we take the main 30 to 40 functions, like options analytics, and make them exceptional.”
Rather than start its own news division, which would represent a major expense, Money.net pays for the news of The Associated Press, MT Newswires, Fly on the Wall, and others. Last year the company hired Norman Pearlstine, vice chair of Time Inc. and a former top news executive at Bloomberg and Dow Jones, as its chief information architect.
Money.net isn’t just marketing itself based on price. Ease of use is key, Downey says. “We don’t think you should need a university course to learn how to use the service like at Bloomberg.” Bloomberg’s system was designed in the 1980s and hasn’t really changed, he says. “It’s a garbage heap of functionality that has been piled up.”
Downey harbors a certain dismissiveness toward his former company. Its founder Michael Bloomberg “should just IPO and go home,” he says.
Money.net should be particularly attractive to younger users who have no historical attraction to Bloomberg and are put off by the difficulty of using it, Downey says. However, Taylor notes that younger finance workers will want to use the same tools as their more senior brethren. “I haven’t seen any evidence of a new generation of financial players that will drive the market” away from Bloomberg, Taylor says. “If I’m paid for performance, I’ll want the tools that work best.”
In addition to the traditional market base of Wall Street players, Downey sees an opportunity to bring financial advisers, corporate treasurers, and people in investor relations to Money.net. “These are people who have never seen a Bloomberg or who share one,” he says. “There is a market that will never pay $20,000 to $25,000 a year for a terminal, but will pay $4,000 for one that helps them.”
David Bullock, founder and president of registered investment adviser Arque Advisors in Rye, New York, is one of those financial advisers. He began using Bloomberg more than 30 years ago in a career that has included stops at Lehman Brothers and Greenwich Associates.
Like others, he thinks Bloomberg is “brilliant,” but is put off by its price. “As a small firm, every nickel makes a difference for me, and I don’t do complex modeling.” While some Bloomberg programs are dated, “Money.net has it cold in equities, futures, and derivatives,” Bullock says. He sees Bloomberg as overkill: “I believe about 80 percent of Bloomberg users use less than 20 percent of the capability of the terminal.”
Yet of the more than 20 people interviewed for this story, only about half had heard of Money.net. “They haven’t done a real good job marketing,” Bullock says. Money.net says it has more than 50,000 users.
Taylor doesn’t regard Money.net as a true threat to Bloomberg. “It seems like a great service,” he says. “There’s an opportunity for a lower-cost data vendor. They have that exactly right.” But bankers and portfolio managers with millions of dollars on the line will want to stick with Bloomberg, he says.
That’s because it has more data and features than Money.net, which still has to prove itself. The biggest money managers aren’t interested in the $20,000 a year they could save by forgoing a Bloomberg for Money.net — they’re worried about putting millions of dollars in their portfolios at risk, Taylor says. “Making a change is not just about budget. You have to know the sources of information are as good and the function and support are the same.” (Taylor agrees with Downey that Money.net is perfect for small asset managers, financial advisers, and C-level executives who need some level of financial content at a low cost.)
Another ballyhooed competitor to Bloomberg is Symphony, a messaging service started three years ago by 15 financial institutions, including JPMorgan Chase, Goldman Sachs, and BlackRock. Google has also invested in the company, which has raised $233 million.
The financial institutions were concerned about Bloomberg’s virtual monopoly in messaging. Many traders and money managers use Bloomberg’s messaging service as the main form of communication with their counterparts in financial markets.
Goldman in particular was upset with an incident in 2013 when a Bloomberg reporter tracked the terminal usage of one of the bank’s employees. Symphony’s aim was to create a messaging service with better encryption and more transparency than Bloomberg.
The company charges $15 per month, and its CEO, David Gurle, scoffs at comparisons with the market leader. “I don’t view Bloomberg as a competitor, unless they change to be a communications network,” he says. “To the extent they do the same things, they are a competitor, but their focus remains on being an information services provider.” Messaging is just a part of that.
Symphony won’t build a full terminal service like Bloomberg, Gurle says, though users can add other services to their Symphony platform for an extra charge, including Dow Jones, FactSet, IHS Markit, and Money.net. Users of Money.net can also access Symphony. And in June, Symphony and Thomson Reuters signed an agreement to integrate each other’s services.
Anthony Kennedy, Miami-based chairman of Autumn ai, a Zurich currency-trading firm, uses Money.net and Symphony. As a self-proclaimed data nerd, he likes Symphony’s signal-based messaging. “It’s a light platform that a lot of financial technology will plug into nicely rather than needing a huge financial terminal,” he says.
He thinks the combination of Money.net and Symphony could turn into a Bloomberg killer. “My Bloomberg is mostly gathering dust now,” he says. He still uses it for research on real estate and civil proceedings, but thinks Money.net and Symphony will join forces to provide such data in the near future, making his Bloomberg terminal superfluous. Gurle says Symphony is in partnership discussions with Money.net that could end up with Symphony being embedded in Money.net.
Not everyone is convinced of Symphony’s potency. Many Bloomberg users say the new messaging service is superfluous. “I don’t want a screen and computing power taken away for something that I can already get on Bloomberg,” says Art Ayzerov, senior portfolio manager at Alpine Global Management, a global event trading firm in New York. “The problem with Symphony is that it’s mainly a form of communications with added flair,” he says.
Symphony, like Money.net, faces the problem of running up against Bloomberg’s network effect. For financial market participants, “the person at the end of every message is on a Bloomberg,” Taylor says. “Until enough people are using Symphony to be a tipping point, everyone says everybody else is on Bloomberg, so I have to be on it also. Until you get that critical mass, it’s hard to get people on your system.” Symphony says it has 200,000 users.
Symphony has an advantage in that its owners — financial institutions — are captive users, but Taylor says it’s not clear how much traction Symphony is getting even at those institutions. And the fact that they are competitors in so many different businesses could be a hindrance at some point to their Symphony venture.
“You have the odd situation of a consortium of rival institutions creating something not because the market needed a new service, but because they thought they were paying too much to one vendor,” Taylor says. “I’m not sure it’s a sustainable business.”
Beside Money.net and Symphony, Bloomberg’s competitors include Thomson Reuters, S&P Global Market Intelligence, and FactSet.
But Bloomberg isn’t taking challenges lying down.
“Bloomberg may face more pressure now than they ever have in the past — but I have watched them fend off threats for years,” Taylor says. “Their attitude is always to work on improving their product and not to spend time addressing specific competitors.”
In fact, he has never heard Bloomberg employees mention a specific competitor. “They don’t look right and left a lot. If a customer says there’s an unmet need, they’ll try to meet it,” he says.
Like others, Taylor cites Bloomberg’s customer-centric culture. “They have such deep roots within the companies they serve that they have developed real loyalty.”
Credit investor Falbaum is one customer whose loyalty Bloomberg has earned. “I get calls about once a month from our Bloomberg sales rep asking if I’ve seen their new functions, and about half the time it’s something useful,” he says.
Falbaum’s salesperson also asks him if he’s having any problems using his terminal. He lets the rep know when there is something he’d like to do on his Bloomberg but can’t. Sometimes his suggestion is heeded. Falbaum is also impressed with Bloomberg’s forays into trading and clearing stocks and bonds.
“When Bloomberg moves into a new area, they do it carefully and successfully, such as collateral and risk management services,” says Hugh Stewart, New York–based research director at London firm Chartis Research, which focuses on risk management technology.
He and others cite Bloomberg’s 2016 purchase of Barclays bond indexes — benchmarks widely used by fixed-income professionals — as a smart move. Those indexes provide Bloomberg great opportunities for licensing income, they say.
“It’s an important, sustainable advantage, because investors have to use the indexes as their benchmarks,” Taylor says. And Bloomberg showed flexibility in its willingness to buy an established product rather than building its own bond indexes. “It’s a clear example of where they continue to deliver value for the terminal to fend off risk,” Taylor says.
Bloomberg is also leading the pack in developing data feeds for securities. Data feeds represent the fastest-expanding part of the financial information market, with 7.8 percent annualized growth over the past five years, according to Burton-Taylor. Bloomberg’s growth in this area was 14.7 percent annualized over the past five years, lifting its annual revenue for the segment to $1.1 billion last year.
Bloomberg wasn’t even in the data feed business 15 years ago, but now it has a captive audience due to regulatory requirements, Taylor says.
Thanks primarily to the growth in data feed revenue, Bloomberg’s financial-market revenue increased 3.4 percent in 2016, to $9.2 billion, despite the drop in terminal subscriptions, according to Burton-Taylor. Terminals account for $7.2 billion, or 74 percent of total revenue.
Some customers see their Bloomberg terminals as an equalizer. William Slaughter, a partner and senior portfolio manager at Northwest Passage Capital Advisors in Milwaukee, says Bloomberg puts his small, emerging-markets money-management firm (a bit less than $1 billion in assets) on a level playing field with much bigger ones. “PIMCO and BlackRock don’t have better functions for technology than we do, because they are using the same platform,” he says.
Bloomberg could ultimately replace almost all front- and back-end office systems for money managers, Slaughter says. “They’re becoming an end-to-end solution, whether you’re running $1 trillion, $1 billion, or less.”
For many users, the one-stop shopping represents Bloomberg’s biggest appeal. “I use it as a quote machine, a research tool for options pricing and metrics, and for updating my portfolio through Excel spreadsheets,” says money manager Shalov.
It’s no wonder, then, that users are reluctant to abandon Bloomberg, despite its hefty price tag. “People are buying it because they have money at risk,” Taylor says. “There is risk to companies and asset managers personally. That makes them resistant to change.”
Put bluntly, Bloomberg is a bigger threat to others than others are to Bloomberg, Chartis’ Stewart says. “The amount of work Bloomberg is doing to add value multiplies their moats,” he says. “People can chip away at the edges,” but that’s mainly through lower prices, which isn’t very profitable, he says. “They don’t break the increasingly large golden egg.”
Eventually, of course, someone will dethrone Bloomberg: No one stays at the top forever in any endeavor. Yet it’s not clear where that blow will come from. Some mention Silicon Valley.
“You could argue that Google and Microsoft are a bigger threat than Symphony, Money.net, or other current competitors,” Taylor says. “But they would have to prove their chops. The challenge for Google or Microsoft is that they have a huge learning curve before they are in a position to compete at a financial institution that has $1 billion at risk.” Given the size of the market for financial technology, it’s only a matter of time before such Silicon Valley royalty make forays into Bloomberg’s territory.
Yet if history is any guide, they are more likely to be roadkill than killers themselves.