Terminal warfare or how the upstart Bloomberg overtook Reuters in 20 years

Terminal warfare or how the upstart Bloomberg overtook Reuters in 20 years - For most of its 150-year history, Reuters has been the king of news and financial data. But now a brash young business from across the pond wants to snatch its British rival's crown. Chris Blackhurst reports.

by Chris Blackhurst
Last Updated: 31 Aug 2010

For most of its 150-year history, Reuters has been the king of news and financial data. But now a brash young business from across the pond wants to snatch its British rival's crown. Chris Blackhurst reports.

At Bloomberg in London, a journalist is hauled over the coals for allowing Reuters to beat them to a story by 13 seconds. Over at Reuters, they're cock-a-hoop as well, because they've hired Sean Farrell, Bloomberg's UK banking reporter. The fact that the poaching was timed just before the banks' reporting season, leaving Bloomberg without a seasoned expert, adds to Reuters' glee.

Welcome to one of the fiercest battles in business: for domination of the global financial information and electronic terminal markets. It has all the ingredients of a classic conflict. New versus old, America pitted against Britain, brash against restrained, lean-and-mean attacking flabby and complacent. At stake, a total prize purse running into billions of pounds a year.

It's an enmity that shows no sign of waning. If anything, the hitting and counter-hitting is getting heavier. Alleging patent infringement, Reuters has launched a multi-million dollar lawsuit against Bloomberg in New York - the city that the company's founder Michael Bloomberg now controls as mayor (he still owns 80%, with the rest held by Merrill Lynch, but renounced any day-to-day role when he started pitching for City Hall).

Reuters, the once sleepy old company, pillar of the British chattering-class Establishment, renowned for the speed and accuracy of its wire service, more concerned with breaking a story in a far-flung region of the world than duffing up an opponent, is taking the fight to Mikey on his own turf.

'Should I sit on my hands and say: 'Leave it to the New Yorkers like Bloomberg to trample on us', or should I do something about it?' says Tom Glocer, chief executive of Reuters and himself an American.

It's not just talk - Glocer has reversed the downward profit spiral that has dogged Reuters, putting it back in the black to the tune of pounds 87 million for the first six months of 2003.

In Bloomberg's new, Norman Foster-designed offices in London - full of people whizzing round looking busy, the place positively buzzes with energy and noise - they'll talk about most things business. But not Reuters.

Says a Bloomberg spokeswoman: 'Our PR policy is such that we have never wanted to get involved in the comparison between the two companies and would not want to be construed in any way to be critical of the competition.'

Truth is, the two are obsessed with each other. Talk to anyone in Bloomberg when the cameras and microphones aren't there, and they will confirm that Reuters is never far away from anyone's minds. The company's premises in the City are bristling with security systems quite at odds with a media organisation, unless it's one in the middle of a duel with a competitor.

Every visitor is automatically photographed and guards are in attendance.

As well as the dressing down for being beaten to a story, Bloomberg insiders speak of a culture of aggression, with the target firmly Reuters. 'When Farrell announced he was quitting,' says one, 'we got sent a message: 'Sean Farrell has decided to move to Reuters, please delete him from your message groups'. Within 10 seconds, Farrell was out of the door.'

Bloomberg is a company founded on combat. It is, after all, an organisation that had as its mantra: 'Ready, aim, fire'. Michael Bloomberg wears attitude on his forehead. In his book, Bloomberg by Bloomberg, he recounts how as a child outside Boston he read 'a hundred times' Johnny Tremain, a novel about a teenage messenger and spy for the Yankee rebels in Boston in 1776 and 'often took the subway downtown to visit the Revolutionary War sites the story mentioned. I thought of myself as the hero patriot, sticking it to old George III - a maverick role I still try to emulate.'

Reuters is no sad monarch, though. As well as the writ, the British firm, belatedly, is defending its territory in other ways. More transparent than its unlisted opponent, Reuters is also more upfront about the challenge it faces. Under Glocer, it has Sean Bauld, a senior executive dedicated to 'Competitor Intelligence' (there are other companies, notably Thomson Financial, but it's Bloomberg that takes most of Bauld's time). Bloomberg almost certainly has a person in a similar role, too - it just doesn't want to say so.

Not mentioning the war is Bloomberg's style. In Bloomberg By Bloomberg, the founder makes only passing reference to the enemy. Indeed, the reader could be forgiven for believing that Bloomberg invented a whole new industry and that there really is only Bloomberg. It's deliberate: by consigning Reuters to little more than a footnote, you get the impression that's where he thinks it belongs.

If Bloomberg continues to grow the way it has, such an outcome may be unavoidable. From a standing start in 1981, when Bloom-berg left the bond trading desk at Salomon Brothers in New York to go it alone, his company set out on a vertical path. Reuters still serves more than 490,000 terminals (see box), comfortably more than twice Bloomberg, which accounts for less than 200,000. But like a long-distance runner chasing down his opponent, Bloomberg is accelerating and piling on the pressure. It's also making more money out of its screens: Bloomberg makes pounds 10,000 a year per terminal, an average of three to four times more than Reuters.

In the same way as Virgin turned the long-haul airline business on its head, offering personal service and all manner of gizmos, so too has Bloomberg transformed financial information and trading. The comparison is apposite: British Airways was the impregnable market leader; Virgin, the brash upstart. And BA woke up too late.

Just as travellers adored the freshness of Virgin and its youthfulness, so too have traders flocked to Bloomberg. Unlike Reuters, which fell out of a news service into the far more lucrative area of financial data, Bloomberg was designed by a banker for bankers. Michael Bloomberg gave them what they wanted: the ability to call up charts and make comparisons of bond yields, as well as the latest prices; and the means to talk to each other.

His terminal spoke their language, looked brighter, with keyboard and screen in vivid primaries, and had touches that left the old Reuters machine gasping. Bloomberg realised that dealers adore gossip - not chit-chat that takes weeks to get round, but the hot, up-to-the-minute word on the street.

They also love poking fun at rivals in other firms. So, as well as an all-singing, all-dancing data service - 'analytics' in the jargon - catering for their number-crunching need, he installed instant messaging, too. It was probably his smartest move. That, or giving his terminal a generic name: a Bloomberg.

It was corny, but hard-nosed bankers and brokers grew to love their Bloomberg. The terminal became part of any would-be king of Wall Street's kit. It was sexy, smart and fun but also very capable.

Unlike Reuters, which catered its terminal and system to the needs of the individual customer, each Bloomberg was the same, packed full of information and tables and charts that the average trader would never need or use.

But too much power didn't matter: the Bloomberg was the one-stop shop without airs and graces (any page on a Bloomberg could be accessed straight away), compared to the stuffy specialist store that was slow and unwieldy (Reuters needed codes to roam around the system).

As well as giving the customers what they wanted, Bloomberg put them first, all the time. To be a Bloomberg subscriber was to join a community.

The company pays inordinate attention to backup and after-sales (the London office alone has 200 customer help-staff on call, to respond to queries on practically anything). The service is personal and friendly, and quick.

Faced with the threat, Reuters did ... nothing. Grown fat and pompous on its history and the strength of its news service, Reuters never for a moment took Bloomberg seriously. The organisation was mired in the past, living off former glories that had everything to do with supplying news fast and little to do with embracing the financial services industry.

The contrast between the speed with which Reuters could tell the world about a change in the ministerial line-up of an economically unessential former Soviet state and its response to the danger was incredible.

Traders heaped praise on the Bloomberg's messaging service. Reuters didn't heed the warning. Only last October - by which time Bloomberg was entrenched - did the British company launch its own message system.

Partly, Reuters was oblivious because Bloomberg was seen as an American newcomer with limited appeal on the global stage. The US had always been Reuters' weaker market. Its base was London, its management was British and consisted of former journalists, not traders, and although they dabbled in the US there were other competitors across the Atlantic like Telerate. Reuters didn't heed the warning even when Bloomberg overtook the US financial publishers.

In a sense, it didn't need to. Times were good, financial markets were booming, banks had plenty of cash to pump into IT. Instead of scrapping Reuters in favour of Bloomberg, they simply ordered both. On dealing desks across the world, the two rival products sitting side-by-side became a familiar sight.

Reuters struggled with its identity, too. Its fame - although increasingly not its wealth - was founded on the news service. In terms of status and the way it was run, it was more akin to the BBC than the trading floor of Morgan Stanley or Goldman Sachs. While reporting past events, albeit quickly, was a strength, predicting the future was not. After all, what was the need? Life had always been kind to Reuters.

Somebody with foresight and nous might have seen how traders were lapping up the new rival; might have wondered what would occur if US banks came out of their homeland and started buying operations overseas (so cutting any loyalties to Reuters and calling for the introduction of one of their own); could have speculated about the rise of satellite technology and other electronic media able to compete as quickly and as efficiently as an established news agency; and just possibly, may have had sleepless nights thinking about the consequences of a recession and whether customers might drop one of Reuters or Bloomberg, and if so, which one?

Not a bit of it. If they did the analysis, it didn't show - and besides, under Sir Peter Job, Glocer's predecessor, such speed of reaction or appreciation of potential criticism was unlikely. 'The culture of the Oxford debating society' was Glocer's appraisal of the company he had inherited.

Reuters' financial might crumbled. In 2000, the group's shares were pounds 16.20. This year, they've been as low as 95p. Profits have gone down too, from pounds 626 million in 1997 to a loss last year of pounds 83 million. That most recent pounds 87 million interim profit looks much healthier, but Reuters also posted a 10% fall in subscriptions over the same period. So the surplus has been achieved by slashing costs rather than boosting revenues. Companies that paid for both terminals now take only one. JP Morgan, the most blue-chip of US banks, for instance, now uses just Bloomberg across its global equity business. To add insult to injury, the value of the Reuters name has dropped by pounds 800 million to pounds 2.05 billion in the past year according to brand consultants Interbrand, which put Reuters down 18 places to number 76 in its 2003 list of the 100 most valuable brands.

In the middle of this maelstrom sits Glocer. A lawyer, not a journalist, he is suave and softly spoken - but feisty too. He is not afraid to speak his mind, to attack the unimpeachable. 'Reuters got distracted; we took our eye off the ball in the second half of the '90s.' The business was all over the place - 'big and unwieldy to manage' is how he puts it. As a result of this, the core businesses were overlooked.

Glocer's job, outlined in an initiative called Fast Forward, has been to strip the company down and get it back to the basics of making money. Since he took over in 2001, more than 4,500 jobs have gone. Nothing is sacrosanct, not even the hallowed news-gathering operation. Customers have been spoken to and listened to, and put first. Products have been adapted to meet their wishes. Glocer's latest scheme - announced in July as a cost-cutting measure - is to relocate a large chunk of the firm's core financial content division to India, a move that is expected to involve further redundancies.

'There's nothing like a near-death experience to wake people up,' says Glocer. 'What I've done is scare the living daylights out of 16,000 people in Reuters and make them aware that just because we've been in business for 150 years doesn't give us a God-given right to be in business for the next 150, or even next year. The big mission I'm on is to change the culture.'

But Bloomberg is not standing still either. Its recently announced tie-up with EBS, a major player in dollar, yen and euro trading systems, is a significant strike against Reuters, which still enjoys the upper hand in forex dealing (although Bloomberg is bigger in bonds).

Neither is it hidebound by the past. It doesn't have one. Talk to Glocer about Bloomberg and he will rage about his rival's behaviour during the Iraq War. Reuters had 150 journalists in the Gulf region, including 70 in Iraq; Bloomberg had none. 'Bloomberg was datelining articles from Baghdad even though nobody had left the safety of New York,' fumes Glocer. 'Their explanation was that the dateline was where the action occurred, not where the journalist was located.'

But did the customers really notice or care? Did any of them end their subscription because Bloomberg pulled a fast one with its war coverage?

Yet Bloomberg is not what it was, either. The charismatic, inspirational and quite brilliantly entrepreneurial founder is grappling with New York's metropolitan budget, not persuading a giant bank to trash Reuters and take his terminals instead. Bloomberg staffers say, very quietly, the excitement has gone, they're not so driven. There is not the hunger and passion that Michael Bloomberg brought. Ironically, the founder's political ambition may have saved his biggest rival.

The market, too, is saturated. The big orders are not coming so easily now - the chances are, those that wanted to switch have done so already. Some are turning back to Reuters.

Just in time, Reuters may have stopped the rot. Customers too, are under no illusion: duopoly is better than monopoly. They want competition, they want this war to run and run.

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