Cracks start to show in Mike Bloomberg’s empire

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For Mike Bloomberg, the Democrats' path to the White House has not come cheap.

The founder and chief executive of Bloomberg – his eponymous financial data titan – sunk $US1 billion ($1.4 billion) into an ill-fated bid for the US presidency.

Mike Bloomberg sunk more than $US1 billion into an ill-fated run for the White House.Credit:AP

That failed bet was followed by a $US115 million advertising splurge weeks before election day meant to turn Texas, Ohio and Florida away from Donald Trump.

It failed: all three states stayed Republican red.

Luckily for the 78-year-old it did not prevent Joe Biden from winning the White House. But what comes next for the former mayor of New York with a net worth of $US54 billion? A tide of technological disruption is creeping towards the business on which his wealth is built.

Tech giants Microsoft, Amazon and Google are tightening their grip over data infrastructure and the software to exploit it, reaching into the City of London and Wall Street and threatening to undermine Bloomberg. They pose perhaps the biggest threat yet to Bloomberg's terminals business, a system that has built a near-impregnable position supplying financial data to bankers and traders around the world via distinctive black screens.

Meanwhile, rumours persist that "Mini Mike" (as Trump insultingly nicknamed his 5 foot 8 inch opponent) could sell up and retire from corporate life – the future of Bloomberg the company has never looked less certain. Mike Bloomberg founded it as Innovative Market Systems in 1981 using $US10 million of redundancy pay. Over a 40-year run, he put his own name above the door of what became one of the world's largest private companies as it dethroned Thomson Reuters as the world's top financial data provider.

Bloomberg remains the industry leader, according to analysts Burton-Taylor, with market share reaching 33 per cent this year compared with 21 per cent for Refinitiv, its nearest rival. Revenues also rose 6 per cent to $US10.5 billion in 2019, as its terminals business added 2000 more users, the analysts found. That came despite the percentage of revenues from terminals dropping from 85.2 per cent to 72.4 per cent over the period.

The average price of a financial terminal rose by 2.4 per cent to $US1968, according to Burton-Taylor, with its share of terminals climbing from 265,000 to 332,550 over the past decade.

Some bankers and market traders privately bemoan the cost of a Bloomberg terminal. The London office of the investment bank Rothschild removed all but two of its terminals as it sought to cut costs. But others have found it hard to cut ties with Bloomberg, admitting that its services are better than the competition.

The financial data market has been sleepy; there has not been a lot of innovation. But the environment of big data and analytics that we are in now changes the game in how we buy and use data.

The London Stock Exchange Group (LSEG) is the latest to attempt to knock Bloomberg off its perch, through its £22 billion ($40 billion) takeover of Refinitiv, Thomson Reuters's financial data arm, carved out in a debt-fuelled buyout by the private equity giant Blackstone. LSEG has significant ground to make up.

Refinitiv's terminals, which charge depending on the service but tend to be cheaper than Bloomberg's, dropped from 445,000 to 390,000 in the 10 years to 2019, Burton-Taylor found.

Revenues eked out just 2 per cent growth for the three months to September at $US1.6 billion.

LSEG's takeover of Refinitiv will create one of the largest financial and trading data companies globally, but a bigger challenge to Bloomberg comes from Silicon Valley. Cloud technology – vast data centres, connectivity and the heavy duty software to run them – owned by Amazon, Microsoft and Google is underpinning new "data supermarkets" for financial services. They allow for pick and mix data from a range of providers. Rather than being locked into terminal contracts, companies can pick and choose data sets as and when it suits them.

Robert Iati, a director of Burton-Taylor, says in the long term these marketplaces will challenge the overall business model of how data is packaged, sold and bought.

Bloomberg’s data business is under a lot of pressure.Credit:Michael Nagle

"The financial data market has been sleepy; there has not been a lot of innovation. But the environment of big data and analytics that we are in now changes the game in how we buy and use data.

"Ten years ago you could get all your data from Thomson Reuters and Bloomberg, but now you have several hundred alternative data providers."

Bloomberg is trying to adapt, helping customers take on third-party data via its terminals. The company said it remained successful in a highly competitive market by offering "reliability, efficiency and innovation" during a time of "global disruption".

With Microsoft, Amazon and Google competing for supremacy in big data and analytics, staking a claim on the flow of financial information could become a priority. Bloomberg's dominance could make it an attractive takeover target.

Douglas B Taylor, an independent consultant who founded Burton-Taylor, says: "Would Amazon or Microsoft want to be a terminal provider? Once Microsoft is able to deliver data through their cloud services to financial institutions would they then consider supplying the financial tools that manipulate that data? It hasn't happened yet, but it is a fair question to ask."

The question has lingered since Mike Bloomberg's aborted White House run, which risked awkward conflicts of interest for his newsroom and prompted a commitment to sell up if he became president.

The company insisted as recently as last month "it is not for sale", after hedge fund billionaire Bill Ackman reportedly held talks with Mike Bloomberg over buying a minority stake via a listed cash shell.

Going public could offer Mike Bloomberg an exit to concentrate on his philanthropic foundation, which distributed $US3.3 billion last year. His political appetite may not yet be sated however. It has been speculated his swift endorsement and lavish support of Joe Biden could land him leadership of the World Bank, for instance.

President Bloomberg was not to be. Sooner or later his business may have to make do without him regardless.

Telegraph, London

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