Bloomberg L.P

views updated

BLOOMBERG L.P.

Bloomberg L.P. is among the world's leading financial information, news, and media companies. Along with selling real-time financial data to banks, investment firms, government agencies, and other institutions, the firm operates 79 news bureaus throughout the world, publishes magazines, produces radio and television shows, and manages one of the Inter-net's most frequently visited financial information sites, which averaged roughly 200 million page views per month in 2000. Customers included the 250,000 financial professionals who leased Bloomberg terminals, 8 million radio listeners, 200 million television viewers, and 350 million newspaper and magazine readers.

EARLY HISTORY

When Harvard Business School graduate Michael Bloomberg was fired from Salomon Brothers Inc. in October of 1981, he began to explore the idea of establishing his own business. Bloomberg had worked in equity trading and sales for Salomon Brothers, where he eventually was named general partner. Bloomberg also spearheaded efforts to create an in-house computerized financial system there. It was while working for the securities trader that Bloomberg first saw the need among Wall Street firms for a more sophisticated method of gathering and analyzing information.

In March of 1982, Bloomberg sold off his Salomon Brothers stock and used the fresh capital to create Innovative Market Systems (IMS). He hired a team of computer programmers to begin developing an electronic information system that would grant users access to real-time securities market data via a desktop terminal. In December of that year, Merrill Lynch became IMS's first customer by ordering twenty terminals on the condition that IMS not market the machines to any Merrill Lynch competitors for five years. Impressed by the technology's potential, Merrill Lynch also bought a thirty-percent stake in IMS for $30 million.

IMS launched the Portable Bloomberg machine in 1984. By pointing out that increased sales would up the value of Merrill Lynch's stock in IMS, Bloom-berg convinced Merrill Lynch to lift the five-year sales restriction, freeing IMS to begin widespread marketing of its terminals at a price of $1,500 per month for a single terminal, and $1,000 per month for additional machines. IMS focused on marketing its technology to pension funds, central banks, mutual funds, insurers, and other "buy side" firms. Bloom-berg changed his company's name to Bloomberg L.P. in 1986 and increased its user base by selling terminals to securities underwriters, trading firms, and other "sell side" firms for the first time.

International expansion efforts heated up in 1987 when the firm opened offices in both London and Tokyo. Global growth continued in 1989 with the launch of an office in Sydney, Australia. An office in Singapore opened in 1990. Bloomberg moved into Germany in 1992 by establishing a unit in Frankfurt and established a Hong Kong office in 1993. Eventually, the company established units in Brazil and India, and by the end of the 1990s, its customers spanned more than 100 countries.

Technological developments throughout these years also fueled the firm's growth. For example, a new securities trading feature allowed the firm to launch the Bloomberg Trading System in 1988—an electronic bond trading system that made the company a player in the electronic commerce arena before the term e-commerce had even been coined. The firm also launched the Bloomberg Traveler, which allowed subscribers to access Bloomberg information from remote locations. The 10,000th Bloomberg terminal was installed in 1990. Enhancements such as color monitors and video training materials, as well as e-mail and multimedia capabilities, came in the early 1990s.

GROWTH VIA NEW MEDIA OUTLETS

In 1991, the firm diversified into a new industry when Bloomberg hired former Wall Street Journal writer Matthew Winkler as the editor-in-chief of Bloomberg's Business News, a Washington, D.C.-based upstart news service that would cover the financial aspects of politics, business, general news, and sports. The news service eventually allowed Bloom-berg to complete with the likes of Bridge Information, Dow Jones, Knight-Ridder, Reuters, and other news wires that served the world's largest newspapers and magazines.

That year, in what many would later call one of his most astute maneuvers, Bloomberg convinced the New York Times to publish Bloomberg Business News articles with the Bloomberg byline in exchange for providing the newspaper with a free terminal. It wasn't until January 1, 1999 that Bloomberg began charging a monthly fee for the terminals it had been giving away for free to newspapers and magazines. By 1992, Bloomberg had secured a similar deal with every major newspaper in the United States, essentially guaranteeing name recognition among financial news readers for his company.

Bloomberg began capitalizing on that name recognition almost immediately by venturing into other types of media. It acquired radio station WNEW, based in New York City, for $13.5 million, and changed its call letters to WBBR, which stood for Bloomberg Business Radio. The company also began publishing the Bloomberg Magazine, and in 1994, launched a new Sunday insert magazine called Bloomberg Personal. That publication's initial circulation of roughly 6 million marked it as the magazine industry's largest launch to date.

The company moved into television when it aired its first episode of the Bloomberg Forum, a television show that consisted of interviews with corporate executives. In January of 1994, Bloomberg Information Television, a 24-hour financial news service produced by Maryland Public Television and distributed by DirecTV, made its debut. In 1995, to allow subscribers to access the television service from their terminals, Bloomberg began wiring each terminal for compatibility with DirecTV satellite dishes. Bloomberg Information Television was launched in Europe that year. By then, Bloomberg Business News had expanded to include more than 330 reporters in 56 bureaus, and the firm had installed its 50,000th terminal.

Bloomberg Press began publishing works from its two imprints, Bloomberg Personal Bookshelf, aimed at consumers, and Bloomberg Professional Library, targeting financial professionals, in 1996. Bloomberg Business News was renamed Bloomberg News in 1997, when it began including more general coverage. That year, Bloomberg and WEFA reached a licensing agreement that granted Bloomberg permission to post WEFA's Country Profile and Country Monitor reports—including detailed economic and political news from more than 100 countries—on its terminals. The firm launched two new print magazines, Wealth Manager and On Investing, in 1999.

BECOMING AN "OPEN" SYSTEM

In the mid-1990s, Bloomberg stood apart from its competitors by being the only market data provider that required customers to lease one of its terminals to gain access to its information. Rivals like Bridge Information, Dow Jones, and Reuters all allowed subscribers to use their own PCs to link into a digital data feed, from which they could dump selected information into applications like spreadsheets, databases, and word processors for customization. Even more importantly, users could integrate data from a variety of sources for any purpose short of publishing it themselves. Despite the obvious benefits of such a system to clients, Bloomberg gave in to market pressures to offer a more "open" system rather slowly. In 1995, the firm began allowing subscribers to access its data from any PC, but restricted the actual download of raw data so that users could do little more than dump numbers into spreadsheet software. The price of the data was the same as the terminal itself—roughly $1,140 per month. This package, known as the Open Bloomberg, required that data be transferred via a Bloomberg server to desktops using either Unix or Windows NT. It also required subscribers to use a Bloomberg keyboard, which had built-in audio capabilities and color-coded keys.

In 1996, the firm's Bloomberg Data License opened things up a bit further. The license gave subscribers access to a raw data feed and allowed them to select the data they wanted, which varied in price depending on the amount and type chosen. However, Bloomberg's analytic features, which many analysts believe are its most valuable commodity, could not be downloaded. Eventually, the firm also introduced technology, called ActiveX, that allowed subscribers to customize the information displayed on their Bloomberg boxes.

Despite being criticized for maintaining a more "closed" system than its competitors, Bloomberg received praise for its proprietary machines, which were considered among the most comprehensive in the industry. Rodger Shaw, a writer for America's Community Banker claimed Bloomberg's technology was "like the Internet, with none of the 'signing on' and 'looking up' complications." Bloomberg terminals use high-speed telephone lines that allow users to access real-time market price information about securities. They also offer comprehensive information about the securities themselves; detailed historical information about prices, including comparisons of prices spreads over several months or several years; and extensive financial information on corporations, including documents filed with the Securities and Exchange Commission. Thanks to Bloomberg's extensive news wires, the terminals display financial news as it breaks. Analytic features allow the machines to examine a bond's past performance and project its future potential, as well as to assess things like how a bond purchase will fit into a specific portfolio. Subscribers also can use their "Bloombergs" for video conferencing, e-mailing, trip planning, employee recruiting, and even personal tasks like reading horo-scopes and gift hunting.

IMPACT OF THE INTERNET

Although Bloomberg believed that the financial information increasingly made available for free on the Internet was too unreliable and served too broad an audience to pose any real threat to his service, the firm launched its own Web site at the end of 1995. Due in large part to the Bloomberg name recognition, it quickly became one of the world's most heavily trafficked Internet sites. As with its traditional service, Bloomberg offers a wide-ranging combination of both financial data and news and general news on its site. However, the highly condensed data targets a mass market and does not compete with Bloom-berg's fee-based service. According to Bloomberg himself in a AsiaPulse News article dated June 29, 2000, "The Internet is not fast and reliable enough for professionals. It is for the man on the street.&rquo;

Unlike most of its competitors, Bloomberg is not racing to use the Internet as a commerce vehicle. In fact, the company's electronic trading developments in the late twentieth century—which included the Bloomberg Trade Book, an electronic commerce network for equity securities launched in December of 1996, and an electronic trading network for fixed-income securities established in February of 2000—are not made available on the Internet at all. Rather, their access is limited solely to Bloomberg subscribers.

However, Bloomberg hasn't completely divorced itself from Internet-based deals. In December of 1997, it conducted its first Webcast (a live broadcast via the Web) of the Bloomberg Forum. Early in 1998, the firm moved into interactive television products and also inked a content agreement with America Online, which began hosting live Bloomberg news feeds. LendingTree Inc. and Bloomberg launched an online consumer loan center in 1999. That year, Bloomberg Television and RespondTV formed a joint venture to develop an interactive television feature allowing viewers to obtain stock quotes on demand. Bloomberg also added to its Web site a new section called the Entrepreneur Network, featuring programs, services, and information for small business owners. In 2000, small business site Inc.com began adding articles to various sections of the Entrepreneur Network, covering such small business topics as financing options, management issues, marketing efforts, tax strategies, and e-business solutions. Bloom-berg also agreed to link its site to MoneyZone.com, which agreed to provide various interactive features to Bloomberg's Loan Center and Entrepreneur Network. That year, an agreement with the Real Estate Exchange Network (REXnetwork) resulted in the addition of a real estate section to Bloomberg.com that allowed users to post real estate listings on Bloom-berg's site, as well as on all REXnetwork sites. The firm also added a searchable news archive to Bloom-berg.com.

Analysts remain uncertain about whether or not Bloomberg's insistence on charging high prices for what he believes is exceptional information and unmatched analytics will continue to pay off for the firm. By placing real-time financial data at the fingertips of securities investors for the first time, Bloom-berg did more than just launch a highly successful business. He also played an instrumental role in the industry's increasing use of online platforms. One online platform in particular—the Internet—is poised to cause a major shift in Bloomberg's strategy, according to some analysts, as increasingly sophisticated financial information continues to make its way to the Web for free. Bloomberg also is facing competition from rivals Reuters and Bridge Information Systems, which offer similar information at much cheaper prices.

FUTURE PLANS

In December of 2000, the firm decided to focus its efforts on increasing its end-to-end securities processing capabilities from order placement to transaction completion. According to InformationWeek writer Anthony Guerra, Bloomberg is looking to "position itself as the company that can guide its clients onto the smooth path of straight-through processing by doing nothing more than turning on a terminal that might already be on their desks." To do so, Bloom-berg will need to open its platform to such an extent that it can process orders from all types of systems. This focus represents a substantial shift for Bloom-berg in that it targets a broader base of trading clients than ever before. If the shift is successful, it should improve Bloomberg's bottom line. After all, if the firm can convince clients to use its terminals for securities processing, they likely will need more of Bloomberg's machines.