February 29, 2008
Gerson Lehrman Group Councils - Analysis View
New Thomson-Reuters Combination Will Command 32% Share of US$23 Billion Market
Implications
The Thomson-Reuters merger approval reduces “the Big 3” financial information players to “the Big 2”. Not only does it dramatically change the market share of the dominant players but it also limits competition and vendor choice for the users of information…at least until a new vendor steps-up to create “the new Big 3".
Analysis
My data
shows that the global spend for financial information and analysis
topped US$23 billion in 2007, with roughly half coming from the
Americas and almost 30% occurring in the Fixed Income/Foreign
Exchange (FX) Sales & Trading segment.
I estimate that worldwide information and analysis spend by the
corporate and financial services sectors grew 4.9% in 2007. Asia led
all regions with nearly 8% growth, year on year. Not surprisingly,
China was the fastest growing country at 12.9%, followed by India at
11.5%. Fixed Income/FX Sales & Trading, totaling US$6.47 billion
globally, is the largest single segment within each major region.
While Investment Management is the second largest segment in the
Americas and Asia, Equity Sales & Trading holds the number two spot
in the Europe, Middle East and Africa region.
Although 2008 will be challenging for the industry, I expect
financial information/analysis spend to grow at a rate of just over
6% for the year, to US$24.4 billion. Regulatory changes cascading
through countries around the world, coupled with the continued
evolution and maturity of the markets in China and India, will drive
growth.
Uncertain economic times, particularly in the US, will make 2008 a
year of caution for many clients of the information/analysis
vendors. Fortunately for data suppliers, uncertain times often
increase the importance of high-quality, differentiating content.
With a smaller margin for error, and US economic uncertainty
generally seen as short rather than long-term, many financial
services clients will be less focused on internal contraction and
more focused on finding Alpha. Consequently, they’ll continue to
invest in premium information and tools.
Even with the credit crunch and pending elections in North America,
2008 looks to be an interesting and exciting year for the industry.
Generally, stricter reporting standards and the growing trend for
corporations to take a more proactive and direct approach to their
investor relations and communications globally, set this up to be a
banner year for spend in the Corporate segment.
Moreover, the merger of
Thomson
and
Reuters
(which by my calculation gives the new combination a 32% share of
this US$23 billion market) will force answers to several interesting
questions. Will the new combination seek to maintain a dominant
position in the low margin Wealth Management segment? How will the
Investext, FirstCall, Multex, Datastream and EcoWin franchises be
impacted by the mandated database sale? Which company will step-up
alongside Thomson-Reuters and
Bloomberg
to form “the new Big 3”?
My guess is that
IDC will
take the first run at joining “the new Big 3”, if they can 1) fill
their current strategy void and 2) acquire experienced talent to
integrate real-time data with historical/reference data and news.
FactSet
could also make a run, if they were to 1) find the motivation and 2)
find a way to continue to meet their high customer service standards
while pursuing new markets.
GLG members may download my 2008 Global Financial
Information/Analysis Competitor Market Share Maps and Segment
Sizings free of charge by visiting the
Research Request
page and inputting research sample code FINMARKET2007GLG.
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