February 16, 2009

The Wall Street Journal

Financial News: Financial-data providers face a 2009 revenue dip

Providers of financial information are facing a significant drop in revenue 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 $700 million 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 U.S. market and two thirds of the business in Europe, will bear the brunt of the cuts. Terminals are mostly leased by banks and fund managers, who have been cutting back on costs and laying off staff who use the terminals.

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 $10.6 billion last year. In Europe, spending is forecast to fall by up to 2%, but it will rise in Asia by between 3% and 5%.

"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," said Douglas B Taylor, the managing director of Burton-Taylor. "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 $3.4 billion in revenue from the region, according to the Burton-Taylor analysis, meaning a 10% drop in spending could reduce Thomson Reuters' data revenue by $340 million in those markets alone. Bloomberg stands to lose about $234 million.

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

Mr. 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 Corporation (3.1%) and Dow Jones & Company (3%) compete with Thomson Reuters and Bloomberg in the U.S.

Bloomberg didn't 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 Feb. 24. The Wall Street Journal Europe is published by Dow Jones, a supplier of financial information and competitor to Thomson Reuters and Bloomberg.