Research firm CB Insights have published a screen-shot laden report on the inevitable passing of the Bloomberg terminal. It's death has been reported many times. And yet it remains the 900-pound gorilla in the trading and analytics space.
The report is long on conjecture and thin on actual data bolstering many of the claims, and relies on tenuous assumptions about the ease with which:
- Users are willing to migrate to a hodge-podge of start-ups and open-source apps, all while maintaining the same level of reliability and support that Bloomberg offers;
- Insurgent content and application providers can profitably offer alternatives to Bloomberg. It's easy to point to a company like Bluegold Research and their natural gas shipments service. Are they reliable? Will they be gobbled up by a larger firm like Drilling Info, who will subsequently roll their service into a larger, more expensive service?
Among the claims CB Insights makes.
Long Tail. The long tail of data has doomed Bloomberg's moat. The argument is that a typical subscriber uses only a tiny fraction of the data and functions available via Bloomberg. Niche providers are popping up every day that are peeling subscribers away, offering just what a user needs and no more. Slowly but surely, the Bloomberg installed base will whither away as users migrate to cheaper alternatives. On the margin, this may be an issue, but for the bulk of Bloomberg's users, I can't see their use cases being so limited that Bloomberg could be "simply" replaced by upstart niche providers.
Chat. This has long been one of the stickier features of Bloomberg, which CB Insights rightly considers the world's first social network. It's hard to overstate the productivity that traders realize by using the same communication network.
News. News is a lousy busy with terrible margins that's selling a commodity product. This is true. Few firms have been able to paywall news and profit from it (FT, WSJ and NYT). But Bloomberg must subsidize this business to fulfill its mission of providing a one-stop shop via its terminal.
Research. CB Insights rightfully calls out Bloomberg's foray into the Clean Tech and Legal research space. These have been disasters. Bloomberg should consider selling these businesses which have been operated at massive losses for years.
SaaS (Cloud). The argument here is that a trader can cobble together an a la carte financial portal with just what he needs and a fraction of the cost of a Terminal. But this requires a lot of planning and administrative overhead - and reliability is always a question when you're aggregating data from a dozen or more providers. As with niche content providers, who needs that headache?
It's hard to overstate the piece of mind traders get from having a simple, highly reliable product with a standardized user experience. $24K a year sounds like a lot, but how much of that is just piece of mind? How much would people be willing to spend cobbling together alternatives to Bloomberg based on each user's specific use cases - and then managing all those vendors and services? And when user needs inevitably evolve and require additional services, reducing the amount you're saving versus Bloomberg? And managing all of that? Who the hell needs that headache -- especially for front office employees?
The time may well come when Bloomberg, like Microsoft, will have to pivot its business model and suffer significant reductions in its ROIC as it invests in a new way of delivering value to its customers. Like Microsoft, Bloomberg has immense resources at its disposal, and the power of market incumbency should not be underestimated. Culturally, however, one must wonder if Bloomberg has the agility to turn the battleship as successfully as Microsoft has.
My prediction: competition from Refinitiv and S&P will eventually lead Bloomberg to tier their terminal pricing. The one price take-it-or-leave-it model is terminal. The Terminal itself, however, is here to stay. For now.
- Kevan Huston