February 16, 2009

Dow Jones Financial News Online

Credit crisis takes $500m bite out of Bloomberg and Reuters

The world’s largest financial information providers, Bloomberg, founded by New York Mayor Michael Bloomberg and Thomson Reuters, could take a hit of more than $500m (€388m) on their revenues this year as the financial crisis punishes their clients.

Global spending by the securities industry on data, largely through leasing desktop terminals, is forecast to shrink by about 3%, or $700m this year, according to a report to be published this week by data specialist Burton-Taylor International Consulting. Thomson Reuters and Bloomberg, which between them share half of the US market and two thirds of the business in Europe, will bear the brunt of the cuts.

The slump comes after a period of steady growth over recent years. Last year, data vendors’ revenues were flat on the previous term but turnover was growing at 5% for the three years before that.

This year’s drop will be most pronounced in the Americas, where budgets could be cut by as much as 5% from data spending of $10.6bn last year. In Europe, spending is forecast to fall by up to 2%, but to rise in Asia by between 3% and 5%.

Douglas B Taylor, the managing director of Burton-Taylor, said: “Thomson Reuters and Bloomberg account for over half the financial information spend in the Americas, but can be expected to absorb more than their share of the revenue hit because lower priced and specialist data players may find it easier to defend their desktop space. The result for the ‘Big Two’ could be as much as an 8% to 10% drop in their revenue from the region.”

Last year Thomson Reuters, which has 32% market share in the Americas, compared with Bloomberg’s 22%, generated $3.4bn in revenue from the region, according to the Burton-Taylor analysis, meaning a 10% drop in spending could reduce Thomson Reuters’ data revenue by $340m in those markets alone. Bloomberg stands to lose about $234m, which has been running for three years.

Thomson Reuters, which derives 40% of its revenues from securities firms, and Bloomberg, which is focused on financials, face smaller loses in the $9bn market in Europe and the Middle East, and these cuts will only be partially offset by revenue growth in Asia.

Taylor said this year’s slowdown would have been more dramatic, but many data clients are on three-year contracts so their cutbacks can take longer to affect their suppliers.

Taylor argued that smaller providers that are less expensive may benefit at the expense of Thomson Reuters and Bloomberg.

Interactive Data Corporation (5.1%), FactSet Research Systems (3.8%), Moody's Analytics (3.1%) and Dow Jones (3%) compete with Thomson Reuters and Bloomberg in the US.

Bloomberg did not return calls seeking comment and Thomson Reuters said it was unable to comment because it is in a closed period in the run-up to its results on February 24. Financial News is owned by Dow Jones, a supplier of financial information and competitor to Thomson Reuters and Bloomberg.