Morgan Stanley wants to know: “Would you give up your Bloomberg Terminal?”
For many in the investment industry, this question is a terrifying non-starter that could potentially leads folks to counter with questions about the meaning of life.
But financial information is expensive. Very expensive.
Morgan Stanley estimates that Bloomberg Terminals cost firms about $24,000 per year per seat while the fully-loaded Eikon system from Thomson Reuters costs around $22,000 annually.
Then there’s FactSet’s data, which costs around $12,000 a year and S&P’s Capital IQ offerings total $7,500.
This adds up!
Here’s Morgan Stanley (emphasis mine):
We see increasing customer cost consciousness and heightened industry concentration facilitating a fragmentation of the terminal industry. Low interest rates and depressed capital markets activity are requiring banks to tightly manage expenses, and have forced some firms out of the industry. As a result, we anticipate that firms may increasingly try to minimise their market data costs by turning to lite versions of existing terminals or piece together newly available alternatives — a trend we view as deflationary for the industry.
This is an alternative way that headlines around the idea that “it’s getting bad on Wall Street” can be played out. Sure, it’s a tough time to be a bank or a banker. But it’s also a hard time to provide services to that bank and their bankers.
All-in, Morgan Stanley thinks $3 billion of the ~$24 billion spent on financial information is at risk if new players — headlined by chat product Symphony — make major inroads into the market.
A new world could look like this:
Now, as Morgan Stanley outlines, there quite a few hurdles to overcome for the industry to see a real dissolution of the overwhelming dominance enjoyed by incumbents like Bloomberg (which, as this Financial Times article from last summer details, has a cult-like following among its faithful users).
On the one hand this new world imagined by Morgan Stanley is decentralized. You’re chatting on Symphony, following news at The Fly on The Wall (disclosure: I used to work there), and getting analyst estimates on Estimize. Morgan Stanley’s analysts also wonder if this new world of cheaper financial services doesn’t also spell doom for their own research. This is a bleak world.
But the main hurdle to overcome is the network effect achieved by Bloomberg’s Instant Bloomberg, or IB chat, service.
If you’re a trader or a big investor on Wall Street, you’re probably on IB. And asking folks to use other services potentially chokes off a line of an important line of business communication.
But Symphony seems to be a major threat in this arena, and its success could put the broader terminal ecosystem at risk. The really important thing: Symphony costs $95 a month.
Back in 2013, reports surfaced that Bloomberg employees could access information about how any customer used their terminal. Bloomberg, we’d note, has a massive news operation (which Business Insider competes with directly). And so this access was, well, pretty great, though it has been years since it was available.
So Symphony — which has the backing of some of Wall Street’s biggest firms including Goldman Sachs, JPMorgan, Bank of America, Citigroup, Credit Suisse, Deutsche Bank, Wells Fargo, and Nomura — launched back in September 2015 and is at the center of this services un-bundling: if Symphony works, the whole process works.
Symphony, for its part, has pushed back against press characterizations of the product as a “Bloomberg killer,” instead arguing that it is an “email killer.” Look, everyone hates email, but here at Business Insider we use chat app Slack — another product dubbed an “email killer” — and I can assure you it has done almost nothing to reduce the amount of email sent but it has killed Campfire and AIM.
Additionally, Symphony CEO David Gurle said in an interview with Business Insider last year that there are something like 6 million investment professionals in the US; Morgan Stanley estimates 327,000 people have Bloomberg Terminals.
And so this makes the Terminal another example, perhaps, of a niche New York product New Yorkers actually think is ubiquitous. Which is not a slight to the Terminal! Just an anthropological aside. (Sort of like this whole post.)
But this is really about contemplating a future in which most all of the rules that governed what it meant to be in or around financial services start changing. And almost no matter what, things get cheaper.