It is the virtual equivalent of the old stock exchange, a gathering place for everyone in the business
Over the years, many “Bloomberg killers” have launched and failed. They have come for the king of the financial data and analytics business and missed.
Now comes Symphony, a start-up messaging service and technology platform, nurtured by Goldman Sachs in its tussle with Bloomberg. This is a problem: if there is one organisation that other banks and investment managers resent more than Bloomberg, it is Goldman. On past form, Symphony’s launch this week could be written off.
That would be an error, not because Symphony itself is bound to succeed but because it need not kill Bloomberg to do so. It is not attacking the target head-on, like Bloomberg rivals such as Thomson Reuters. It is using another approach to technology to compete in a different way, just as Android, the open source mobile platform supported by Google, took on Apple’s closed world.
It may flourish — and even if it does not, its model could work for someone else. Technology has evolved, making it easier for rivals both to compete with each other and to attack a bigger foe. The fact that 14 others, including BlackRock, the world’s largest fund manager, joined Goldman to back Symphony shows that something has changed.
Bloomberg has always appeared to be vulnerable: its orange and black screens; its weird array of keyboard commands; its reliance for 80 per cent of its $8.5bn annual revenues on selling terminals at a fixed price of $21,000 per year each, with no discount even if they are used only to send messages; its cult-like internal culture created by Michael Bloomberg, its founder.
Yet it prospers because, despite the requirement for its 325,000 terminal users to learn an entirely new language, it focuses relentlessly on serving them. The terminal seamlessly integrates data, analytics, messages, and even the ability to trade derivatives and bonds. If something is wrong, or feels wrong, the user calls and it gets fixed.
Bloomberg is more than a network; it is a community. A portfolio manager can chat online about a trade with a salesperson at an investment bank, review a spreadsheet and other data, and execute it, all within their Bloomberg terminals. It is the virtual equivalent of the old-style stock exchange, a gathering place for everyone in the finance business. This makes it, as a rival says enviously, “very sticky”.
How do you attack it? With difficulty, many have found. Thomson Reuters, its main rival, steadily lost ground despite launching fightbacks and “Bloomberg killers” — its market share in 2014 was 26 per cent compared with Bloomberg’s 32 per cent, according to Burton-Taylor, a research group. Upstarts such as FactSet, Markit and Capital IQ are growing but are relatively small.
One crack appeared in 2013 when Bloomberg journalists were found to have observed subscriber activity for stories. Goldman, which pays for 2,500 Bloomberg terminals, and was developing its own messaging and communication system, protested loudly. It later folded this software into Symphony to encourage others to join.
Banks used not to worry about paying Bloomberg’s bill. But times are tougher — tighter regulation has hurt their bond and currency trading divisions. Bloomberg is also competing more directly with them by letting users execute trades directly, rather than using bank-backed electronic trading platforms such as TradeWeb.
No matter how angry Wall Street got about such trends, it could not have done much about them were it not for the evolution in technology. Open source software, cloud computing and the internet have made it simpler to compete with networks such as Bloomberg. Symphony need not do everything — it can build a platform and let others write software and applications.
This will be less like Bloomberg than a Wall Street app store, on which a data provider such as Markit, a bank such as Goldman, or an asset manager such as BlackRock offers pricing and data widgets, or integrates theirs with others. Some services will be private, with only a few users; others open to all.
It will also be far cheaper — from only about $15 per month for the basic message service. Goldman wanted to build its own messaging network so all of its 35,000 employees — from operations and back-office staff to analysts — could communicate even if they did not have a Bloomberg terminal. Symphony similarly aims to spread widely rather than seizing the high ground.
The biggest obstacle is the buyside — the asset managers and hedge funds at which Bloomberg is entrenched, where a new service is another screen to cram on to a desk. Symphony will appeal to investment banks with thousands of back office employees, but what about hedge funds with only a few?
It may yet rise up the ranks, spread across the buyside, and knock the king off the throne but that is unlikely. Although Wall Street has fallen on comparatively hard times, it still has deep enough pockets to buy Bloomberg terminals for the elite traders and salespeople who want them.
Symphony will not kill Bloomberg. But it, or something like it, could make a big impact by being different. That counts as success.