Battle lines shift as David aims to bring down Goliath in the financial data war
The boss of the new company carved out of Thomson Reuters is happy that data is now at the heart of the landscape, he tells Tom Rees
The wall backing on to David Craig’s office is like a battlemap covered with his skirmishes. The boss of Refinitiv, an 18-day-old financial data company carved out of Thomson Reuters, has scribbled on nearly every inch of the whiteboard wall with ideas to grab a greater slice of the global financial data market, worth nearly $30bn.
Craig says the “competitive landscape is changing completely” towards one of multiple players: “The new battleground is around data.”
The “B” word barely touches Craig’s lips but Refinitiv’s rivalry with Bloomberg looms large. The financial data giant, co-founded by former New York mayor Michael Bloomberg, has a stranglehold on global markets. Bloomberg took a third of the financial market data and analysis last year, while Thomson Reuters’s slice was 22.5pc, according to data from Burton-taylor International Consulting.
Craig is redrawing over outlines of faded doodles explaining the company’s two main products: Eikon and Elektron. The former is the terminal, or desktop product, that provides users with a programme to view and analyse data. The terminal allows investors to consume data through a mind-boggling array of functions from tracking shipping cargoes to watching the pound’s fluctuations, and has historically been Bloomberg’s stronger territory. Meanwhile, Refinitiv has been the market leader for the latter, which provides financial companies with up-to-the-second financial data to power their own applications from a single data source.
But Craig believes that the battleground is shifting to Refinitiv’s home turf and now he has the autonomy and Wall Street clout to turbocharge his attack on Bloomberg’s leading position. A consortium led by private-equity goliath Blackstone engineered a $17bn (£13bn) leveraged buy-out for 55pc of Thomson Reuters’s Financial and Risk division, the largest deal using junk-rated debt since the financial crisis.
Bloomberg’s grip on financial markets is irrefutable. The hunt for a so-called “Bloomberg killer” is one riddled with failure. Many have been touted as a rising challenger to break its dominance but few have laid a scratch on the data behemoth.
Bloomberg’s omnipresence on trading floors came from having a highly innovative product at the right time. Deregulation in the Eighties was creating a boom in financial hubs and, crucially, stock exchanges were turning to electronic trading. The first terminal in 1982, which even predates the first Apple Mac, consisted of a small unsophisticated box that opened up a sea of information to investors.
Rather than waiting for the daily newspaper to land on the doorstep to look up a stock price, an investor could get it instantly at their fingertips. Being the pioneer to tap the electronic revolution sweeping global financial markets has ensured its prominence ever since. A fully fledged rival from Reuters would not be launched until 1999. About 325,000 terminals are used today and they have made its boss, Michael Bloomberg, the 11th richest man in the world with a net worth of $52bn.
But now Bloomberg’s reputation as the infallible data giant is beginning to come under threat. Mounting discontent over pricing has stoked demand for challengers to its terminal. It is expensive but has become deeply ingrained in global financial markets.
Although list prices are not provided by the firms, Refinitiv is considered the mid-range product, while fast-growing competitor Factset is the low-cost option. Doug Arthur, an analyst at Huber Research Partners, explains Refinitiv has been “lost in the middle there somewhere”.
“To get market share, they have had to compete on price,” he says.
Bloomberg has shown it is not immune to competitive pressures. The company’s Instant Bloomberg (IB) function is a simple messaging service that has become vital in markets because of its enormous scale.
“Sales people seem to be very reliant on it [Bloomberg terminal] because of its ability to connect them with clients,” says Arthur. “An awful lot of clients just communicate all day long on Bloomberg. I don’t think they can function without it.”
Symphony, a chat system developed by Goldman Sachs that attracted investment from a glitzy list of Wall Street heavyweights, was launched in 2015 as a rival to wean banks off the expensive terminals. Bloomberg responded by unbundling the chat service from the terminal at a cut price.
Alastair Reid, an analyst at Berenberg, believes pressures could also spread into Elektron, Refinitiv’s data-feeds business. “Banks want to save money and a lot of data feeds can now be delivered, rather than through physical computer hardware, through things like the cloud.
“That is providing an opportunity for Factset and Bloomberg on a product that Thomson Reuters has been very much the market leader.”
Refinitiv has had a rocky start to life on its own two feet, losing a major contract from Merrill Lynch in August to Factset. Craig says being carved out of Reuters and becoming a stand-alone company gives it a new “focus”, one not shared with the demands of a newsroom. The orange of the Thomson Reuters brand is splashed across the carpets of Refinitiv’s Canary Wharf office. But it is attempting to distance itself from the former owner, which has the remaining 45pc stake.
Refinitiv has also shaken off the quarterly grind. Moving from a publicly traded firm to a private one has alleviated the immediate pressures shareholders place on management.
Craig says: “You get to do investment cases that take two or three years to pay off.”
That’s not to say that Refinitiv will be a vanity project for Blackstone without the long-term goal of creating value. The private-equity giant plans to deliver $650m in cost savings while kick-starting stagnant revenue growth.
Reid worries that after years of being squeezed during restructuring under Thomson Reuters, it has
‘An awful lot of clients just communicate all day long on Bloomberg. I don’t think they can function without it’
‘Can they get revenues growing? To use a US football term, it’s three yards and a cloud of dust. I don’t think there’s any magic solution’
‘Forget about challenging Bloomberg. Can Blackstone open doors that Thomson Reuters couldn’t do on its own?’
Former New York mayor Michael Bloomberg’s company has been at the top of the financial data industry since tapping the electronic revolution in the Eighties, but rivals could be gaining ground on the previously unassailable titan