March 2, 2012

Forbes

Despite Setback, Bloomberg Still on Track for Giant 2014

Tough times for the financial services industry translate into tough times for the news and data providers that supply traders and dealmakers with the information they need to do their jobs.  Exactly how tough times continue to be over the next two years is a matter of particular importance to employees of Bloomberg, with gigantic bonuses for all hanging in the balance.

At the end of 2010, workers there were notified that they would receive bonuses equivalent to 70% of a year’s salary if the company hits its target of generating $10 billion in annual revenues in the 12 months ending June 30, 2014. Like its founder and namesake, Bloomberg is not accustomed to failure.

Yet success here is far from guaranteed. In 2011, despite taking in $7.59 billion, the company fell short of its pre-determined sales goals, diminishing the regular annual bonuses it handed out in consequence. The gap was particularly wide for Bloomberg’s media operations, including its TV channel and Bloomberg Businessweek magazine, which collectively missed their target of $335 million by 35%.

Terminal subscriptions, Bloomberg’s foundational business, also disappointed, with 13,672 new installations, not the 15,000 hoped for. To juice its terminal sales, the company is rolling out an upgrade to the service, dubbed Bloomberg Next, which it unveiled at a press briefing this week.  Unified design and streamlined workflow are among the improvements.  The new features come at no additional immediate cost, with Bloomberg sticking to its regular program of price hikes pegged to inflation every two years.

Will Next be enough to get Bloomberg across the finish line?  It will have to be, since terminal subscriptions still account for an estimated 87% of the company’s revenues despite heavy investment in its media operations.  (Of course, since the target metric is revenues rather than earnings, for the purposes of triggering those bonuses it doesn’t matter how much the TV, web and print publishing operations lose.)

According to Douglas B Taylor, managing partner of Burton-Taylor International Consulting LLC, which tracks the financial data industry, Bloomberg’s top line has a compound annual growth rate of 10.8% over the past five years — a period that includes both the 2008 crash of the financial markets and the subsequent recovery. Projecting that out gives Bloomberg revenues of $10.3 billion exiting 2013.

“If they can keep up their current pace, their expectations are quite realistic,” says Taylor.

But what about last year’s slower-than-budgeted terminal sales?  In fact, while they might have fallen short of Bloomberg’s own expectations, the 4.5% increase was ahead of the five-year compound growth rate in subscriptions of 2.99%.  Here are the year-end totals over that span:
2011: 314,000
2010: 300,000
2009: 279,000
2008: 285,000
2007: 271,000
by Jeff Bercovici, Forbes Staff