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annals of communications
The New Yorker - March 10, 1997

the bloomberg threat

Why does America’s newest media mogul
scare Dow Jones?

by ken auletta

It’s fabulous being Michael Bloomberg, as he is quick to tell you. His name is stamped on seventy-three thousand computer terminals that companies lease to receive the Bloomberg a treasure of up-to-the-minute and historical financial data. His seventy news bureaus produce Bloomberg News, which is carried by more than eight hundred newspapers around the world. His name is featured on television (Bloomberg Business News), on radio (Bloomberg News Radio), in magazines (Bloomberg Magazine and Bloomberg Personal), on the Internet (the Bloomberg Personal Website), and on books (the Bloomberg Press). His company, started fifteen years ago, earned two hundred million dollars last year, Bloomberg says, and according to friends has brought his net worth to about two billion dollars. Without attracting much public notice, Bloomberg not only has snatched away business customers from Dow Jones and threatened the future of Dow Jones’s Telerate unit but has stealthily attacked the far larger consumer market of news. Bloomberg was the keynote speaker this past January at the thirtieth annual Consumer Electronics Show, in Las Vegas, where Gary Shapiro, the president of the sponsoring organization, introduced him as “the William Randolph Hearst of the nineteen-nineties, except for the fact that he is somewhat more ethical perhaps, and kinder and gentler.” And, Shapiro added, to laughter from the audience, “Mr. Bloomberg is not only brilliant but, with the recent marriages of John Kennedy and Bill Gates, Mr. Bloomberg is, indisputably, America’s most eligible bachelor!” What Shapiro did not say was that Bloomberg, a bachelor by divorce, also fancies himself a bon vivant, who flies his own plane, dives out of helicopters to ski, and according to Bloomberg is pursued by gorgeous women. Bloomberg would not be cast as a leading man: he has pouches under his eyes, is slightly bucktoothed, and has the pleasant but unremarkable demeanor of a five-foot-nine-inch, fifty-five-year-old former Wall Street trader who hurriedly dresses in solemn gray or blue suits. His speech in Las Vegas, which was unscripted, revealed much about the way he thinks, and that in turn reveals reasons for his success. Bloomberg is a former engineer, but he cautioned his audience not to become infatuated by technology. He had just returned from skiing in Vail, where the hot product was not a consumer gadget not a new laptop, a new personal digital assistant, a new mouse, all featured at the show but bottled water. The point: specialized skills will matter less and less, and a liberal-arts education more and more. “We are making a terrible mistake in our school systems in trying to teach kids technology at the expense of reading and writing and getting along with each other,” he told a ballroom full of exhibitors. Context, that is to say, matters more than expertise. Listen to the customer, Bloomberg advised the exhibitors. As a trading-floor partner who designed and ran Salomon Brothers’ computer and informationretrieval system, Bloomberg said that his first mission was to understand the customer. He wondered whether this mission was too often neglected. His evidence: “All of you people keep producing devices where the letters and numbers are much too small for me to read, and the buttons are too small for my big fingers.” The products are designed by engineers who think too much of their own brilliance and too little about what customers need, he said. “If there’s one thing I worry about in my organization, it’s that we’re going to think that we’re smarter than these other people are.” The Bloomberg organization starts with the Bloomberg machine, a dedicated computer and color-coded keyboard, which is leased to companies for eleven hundred and ninety dollars a month. It generates real-time worldwide pricing of bonds, stocks, commodities, currencies, money markets, and mortgages, and it also breaks news and provides data, including filings of the Securities and Exchange Commission, stretching as far back as ten years. It includes “what if” scenarios that allow clients to compute the returns on alternative investments. It takes data and transforms them into a series of charts, which reveal, for example, how a company’s stock has performed versus the market over the past five years, or the pattern of a company’s dividends over, say, the past seven years. If a Wall Street trader or a prospective investor wants information on a company, Bloomberg computer’s data library analyzes sixty-five thousand corporations, using eight hundred separate categories of information. It allows clients to sell or buy stocks and bonds, or to buy airline tickets. There is an audio bank of radio news. In the upper-right-hand corner of each screen, a video report offers either Bloomberg news or access to a video vault ranging from Senate hearings, through press conferences, to interviews by Charlie Rose, whose program is produced at a studio in Bloomberg’s headquarters, on Park Avenue. All this information is punched into the computer system by an army of nine hundred employees in Princeton, New Jersey. Bloomberg “is the fox of the financial-services business,” says NBC’s president, Robert Wright, who is building a worldwide business-news service through CNBC. Wright observes that Bloomberg has a built-in advantage: “He is not a public company, so he doesn’t have to show a profit. He keeps coming and coming . . . and his box is known as the best in the information industry.”

Michael Bloomberg has always understood that information is power. “Everyone talks about multimedia and interactivity,” Louis V. Eccleston, who runs Bloomberg’s sales force, says. “That’s what we’ve been doing since we started this business.” The combination of new technology and new services like Bloomberg’s and those of his two principal competitors Reuters and Telerate has helped democratize Wall Street. By providing more information, they free customers from relying solely on investment advisers or banks. Among the three major competitors, Bloomberg, the newest entrant in this market, trails. During the third quarter of 1996, according to the newsletter Electronic Information Report, Reuters had three hundred and forty thousand two hundred customers, Telerate an estimated ninety-four thousand five hundred, and Bloomberg sixty-five thousand. But Bloomberg has the momentum. The number of subscribers he claimed in this period jumped more than eighteen per cent since the end of 1995, while Reuters’ subscribers grew four per cent and Telerate’s fell an estimated four per cent. “We don’t use anything other than Bloomberg,” says James Singleton, of the Cypress Group, an equity investment company with a private capital pool of a billion dollars. “I always found the other ones harder to manipulate. If I’m looking at a company we’re thinking of making an investment in, I can get the information I need without having to reveal my initial interest to an investment bank.” The Bloomberg terminal is geared to a specialty market and generates, according to its creator, ninety-seven per cent of his company’s billion dollars in revenues. The size of this market is estimated to reach between ten and twenty billion dollars by the year 2000. “But the potential,” Bloomberg says, “is everything else” the consumer market. “My strategy is to build a worldwide network of serious news” in print, on television, on radio, and on-line. Bloomberg already has three thousand employees, a number he says will swell to four thousand by the end of the year. He is creeping up on the newspapers that carry his news wire, the same way he crept up on Telerate. In January, without making an announcement or otherwise attracting notice, he changed the credit line of the news service from Bloomberg Business News to Bloomberg News. He also expanded into covering sports and politics. Since 1993, he has bought a daily cartoon from the Cartoon Bank (a company recently acquired by The New Yorker). He is currently working out plans with the Mirror Group, as the Observer in London reported in January, to launch a daily financial newspaper that could compete with the Financial Times. Bloomberg refuses to confirm this, but he surely knows that as he expands from the specialty market to the consumer market the competition thickens. “There is absolutely no reason we can’t do as well as CNN and NBC,” he asserts. “There is no resource they have that we don’t have. Don’t forget, we have five hundred journalists. Admittedly, not all of them are good on television. But we have seventy bureaus. Who else has seventy bureaus?” Actually, Reuters has a hundred and sixty-one. Robert Wright, of NBC, suggests that Bloomberg is just bloviating. “What he’s done to date I don’t see as threatening,” he says. It is, rather, to his immediate business competitors that Bloomberg poses a real threat, and Bloomberg who says that in ten years he expects to be “what Dow Jones used to be” has focussed on Dow Jones & Co. and, in particular, on the Wall Street Journal, which he would love to own. According to an analysis of Dow Jones produced in an instant from a Bloomberg terminal the total cash common dividend jumped three hundred and seventy-three per cent from 1990 to 1995, while the company’s R. & D. expenditures dropped eighteen per cent and its earnings reinvested in the business plunged a hundred and twenty-seven per cent. Joseph Nocera has reported in Fortune that some members of the Bancroft family, which controls the voting stock of the company, are unhappy with its dwindling profit margins and its stock performance. To try to placate the family, Bloomberg and others say, Dow Jones has increased its dividend payments even as its earnings declined, but that increase has starved Telerate of investment money. Not surprisingly, predators are circling. The hedge-fund manager Michael Price, who in 1995 made a nifty fortune when he helped prod Chase Manhattan Bank into merging with Chemical, announced in January that he had acquired four and a half million shares of Dow Jones, or just under five per cent. James Cramer, another hedge-fund manager, disclosed that he now owned a million shares. One corporate giant that covets Dow Jones is General Electric, which owns NBC. “There is an opportunity for G.E. if we could be a white knight for the company with the family,” an important G.E. executive told me. “But it would work for G.E. only if Dow Jones should become a more profit-driven company.” This executive speculates that G.E. could buy a twenty-to-twenty-five-per-cent stake, and then link the Dow Jones news operations with NBC, CNBC, and the joint Microsoft/NBC effort, MSNBC. But, this executive makes clear, G.E. would want to see Dow Jones sell Telerate. So would Cramer, who believes that the subsidiary depresses the stock price of the parent company. “I think the franchise the Wall Street Journal, Smart Money, and its book publishing is worth twice what the stock price is now,” he said the other day. Dow Jones, which traded at fifty-six dollars a share in 1987, now trades in the high thirties, despite the biggest rise in the stock market’s history. To protect itself, the Dow Jones company like the Times, the Washington Post, and Reuters has a mechanism to repel sharks. Voting power is vested in the family, which controls a majority of the stock; in the case of Reuters, a trust has super-voting rights. Peter Job, the C.E.O. of Reuters, like Peter Kann, the chairman and C.E.O. of Dow Jones, is a former journalist for whom phrases like “the public trust” are as vital as “shareholder value.” As Job puts it, a company “like Reuters is very heavily reliant on and totally dedicated to impartial behavior.” Nevertheless, Kann knows that the Dow Jones shareholders are restive. Recently, he met with NBC’s Wright to discuss a joint venture. According to an NBC official, Wright, looking at his vulnerability overseas business news proposed that they join forces “outside the U.S.” Kann, however, according to a well-placed Dow Jones source, wanted to focus on his company’s weakest point television business news and distribution inside the United States and proposed that they “weave together the resources” of the business-news operations of the Dow Jones New York television station and CNBC’s national cable business-news channel. With neither party wanting to dilute its strength, they parted amicably. But word of G.E.’s interest has obviously spread. When I asked the garrulous James Cramer about it, he said sharply, “I have no interest in commenting on that.” A natural buyer for Telerate might be Bloomberg. Bloomberg said recently that he would not come close to paying the billion six hundred million dollars that Dow Jones paid when it acquired Telerate. He also said he thinks that one day soon the family will “start screaming,” and added, “My job is to sit back and wait.” “Michael is on a mission now,” says his close friend Morris W. Offit, who founded the Offit Bank and was a fellow-partner at Salomon Brothers. “He realizes he can transform an industry. It’s very rare in life that you have that opportunity. . . . He definitely wants to be king of the media. And he’s coming at it through the back door.”

Michael Bloomberg is the son of a Boston bookkeeper who never earned more than six thousand dollars a year. His mother was a strong-willed housewife, who dominated the household, insisting that the family gather for dinner. To this day, the son phones his mother, who is eighty-eight, the first thing each morning from work. “When she says that I should do something and I don’t do it, I have a sort of guilty feeling,” he says. Michael attended public schools and worked his way up to Eagle Scout, collecting every merit badge he could. In high school, he worked part time for a Cambridge electronics company, and in 1960 he enrolled as an engineering student at Johns Hopkins, in Baltimore, paying his tuition with a National Defense college loan. For the first three years, he was a C student. “What I really liked doing and what I was good at was dealing with people,” he writes in “Bloomberg by Bloomberg,” a forthcoming autobiography. “I became president of my fraternity, president of the Inter-Fraternity Council, class president, and all-around Big Man on Campus.” From Johns Hopkins he went to the Harvard Business School, and there, too, he was an average student, graduating in 1966. Flat feet kept Bloomberg out of the Army, and he took a job at Salomon Brothers, regarding it as a place where a kid from a blue-collar background could rise on merit. He thought that he, like everyone else, including senior partners, would eventually have a desk and a phone on the trading-room floor. However, he had an apprenticeship to serve. His first job was in “the Cage”: there he counted bond and stock certificates by hand, sent them to banks as collateral for overnight loans, and, when the banks returned the certificates the next morning, registered them in the firm’s inventory. His second job was in the purchase-and-sales department, and there he leafed through stacks of Wall Street Journals to find historical stock prices, or went through piles of paper searching for stock-ownership lists. Wall Street was drowning in paper, and during the late sixties the New York Stock Exchange closed on Wednesdays to catch up on paperwork. More than a few firms went under. Eventually, Michael Bloomberg joined the equities department, and became part of a new effort to trade stocks, like bonds, in bulk. Serendipity played a role in Bloomberg’s upward trajectory at Salomon. Arriving at the office each morning at seven o’clock, he was the second to appear, after Billy Salomon, the firm’s managing partner. “When he needed to borrow a match or talk sports, I was the only other one in the trading room, so he talked to me,” Bloomberg writes. “Woody Allen once said that eighty per cent of life is showing up. I believe that.” Bloomberg was made a partner in 1972, and later worked in the fixed-income department. He was a controversial figure. Traders tend to be impatient, demanding quick answers: buy or sell, yes or no. Bloomberg was more impatient than most, and his temper led him to smash more than a few telephones. He agitated for the firm to automate its Dickensian paper system, and in the early seventies he prevailed upon Salomon to install computers at the desks of all traders and to connect these work stations to an I.B.M. mainframe computer. He came to understand that if Salomon had the best information, it would make the best trades. Bloomberg urged young software programmers to devise ways to deliver that information. One of them Thomas Secunda, who was then a twenty-four-year-old Ph.D. candidate in mathematics and today oversees Bloomberg’s R. & D. efforts recalled, “When I started on Wall Street, in 1979, two types of computing were done.” The back office and the salesmen worked on terminals, but they didn’t interact. Salesmen, if they were asked for a bond yield, didn’t have the information in their computer, so they had to look it up in a book or use a calculator. “What Mike discovered is: Why not use the tools we have and become interactive?” Secunda said. “All the traders loved us. It freed them liberated them!” But the man who today extolls the importance of human relationships had poisoned relationships with many of his partners. “I was very vocal that we were going in the wrong direction,” Bloomberg recalls. When the firm announced in 1981 that it had been bought by the Philbro Corporation, a commodities-trading giant, Bloomberg was one of about half a dozen partners who were not invited to stay: “They threw me out after fifteen years.” But Morris Offit thinks that Bloomberg probably desired this outcome. “He developed at Salomon’s equity desk the genesis for a business, and nobody at Salomon was acute or alert enough to recognize this,” Offit says. Bloomberg cashed out his partnership, and, he says, netted more than ten million dollars. That gave him the capital to start his own firm, and he had an idea about customizing information. As a former trader in stocks and bonds, he understood the needs of customers, and, as an engineer, he understood the technology. He invested three hundred thousand dollars, opened a one-room office, and hired three Salomon protégés Tom Secunda to create the analytics, Duncan MacMillan to learn customers’ needs, and Chuck Zegar to create the software. (The three remain with Bloomberg and are the only employees to have a small equity stake in the company.) Then Bloomberg searched for partners. He arranged to pitch Merrill Lynch & Company’s capital-markets chief, Ed Moriarty. They met in a boardroom filled with Merrill Lynch lawyers, traders, computer programmers, and others. Bloomberg had arrived alone. He told them that the machine he would offer their traders was just about ready for delivery. He promised that to help them select investments he could offer a “what if” scenario analysis of their stock or bond portfolios, and a yield-curve analysis that would be updated instantly, along with graphs of the futures market as it changed, plus he would track every transaction and instantly mark their trading positions to market, plus there would be a secure E-mail system to communicate with customers, suppliers, and co-workers. No one else offered these features. When a Merrill Lynch executive said that the company could build the same system, Bloomberg offered to do the job in six months with Merrill Lynch under no obligation to buy the system if it fell short. Moriarty naturally accepted the offer. Bloomberg invested four million dollars of his own capital in a crash program, and he won his gamble. Merrill Lynch ordered twenty terminals. (Eventually, the company ordered a thousand.) Merrill Lynch also decided to invest thirty million dollars for thirty-per-cent ownership of Innovative Market Systems, the name Bloomberg gave his new company. Dan Tully, who was then a member of the executive committee and later became chairman and C.E.O. of Merrill Lynch, recalls, “We believed he had the analytics and he was focussed and he was very entrepreneurial and it would enhance our thrust into fixed-income markets. Merrill was not a player in capital markets then.” As part of the arrangement, Bloomberg agreed to a five-year moratorium on the sale of his service to any of Merrill Lynch’s fourteen major competitors. And, Bloomberg recalls, he pocketed twenty-four million dollars. (The partnership continues, though altered slightly. Last December, Merrill sold a third of its original ownership position back to Bloomberg for two hundred million dollars.) Other clients followed the Bank of England, the Vatican, the World Bank, the Federal Reserve but after two years Bloomberg realized that he wanted those fourteen major competitors. He went to Merrill Lynch to plead his case, and Tully overruled his own traders, who wanted to keep the proprietary system to themselves. “I felt that clients ultimately did not want a Bloomberg-Merrill Lynch machine on their desks,” he recalls. It was at about this time that the product, and the company, gained a new name: Bloomberg. No one had to twist Mike Bloomberg’s arm; in his autobiography he writes of the “desire to see one’s name in print.”

Bloomberg’s business life has been marked by a longing for more, and that longing led to his association with Matthew Winkler. Winkler had been a Wall Street Journal reporter who covered the securities industry, and in 1988 he teamed up with the technology writer Michael Miller to write about Bloomberg. In 1987, when Winkler had been asked to help edit a new financial section, the Journal’s bond tables were supplied exclusively by Bloomberg. “It bothered me,” Winkler recalls. Why didn’t the Journal run bond prices and yields from its own Telerate? Not that executives at Telerate ever complained. They were, he sensed, too smug to notice. The more Winkler poked around and explored the two systems, the more certain he became that Bloomberg was about to eat Dow Jones’s lunch. Winkler and Miller wrote a front-page story about how Bloomberg was waging a successful guerrilla war against his larger competitors. At that time, the Bloomberg service did not supply text or news, as Telerate and Reuters did. Now, however, Bloomberg, to avoid his company’s becoming marginalized as a niche service, had to expand his definition of information; and, to be the only box on a client’s desk, he had to attack Dow Jones where it was strongest in news. A year after the Journal story appeared, he invited Winkler to lunch, and after talking for hours he asked Winkler to build him a news service. Startled, Winkler said he needed to think about it. Winkler became Bloomberg’s four hundred and fifty-fifth employee. It took Dow Jones a year and a half to realize that Bloomberg, who was a subscriber to its news service, was aiming for its throat. In August of 1990, Dow Jones announced the cancellation of its contracts with Bloomberg, and, by reporting the fact on its news wire and in the Journal, provided Bloomberg with free publicity. Bloomberg and Winkler accelerated the expansion of their news staff. Unlike the providers of other services, Bloomberg offered his free, stipulating only that a newspaper print the credit line “Bloomberg Business News.” He also provided a free terminal, first to the Times and then to most other major newspapers, calculating that he would get more out of the exchange in free publicity and credibility than it would cost. By 1995, Bloomberg boasts, his news service was carried “in more American newspapers than any other news service, after the A.P.” In the early nineties, Bloomberg was also longing to expand into radio and television an idea broached by Jonathan Fram, an executive of the Financial News Network (FNN). Fram suggested that Bloomberg bid against Dow Jones and NBC to buy FNN, but Bloomberg said that he built businesses, he didn’t buy them. Fram persisted, so Bloomberg hired him to help build a business. (Meanwhile, NBC outbid Dow Jones, and merged FNN into CNBC, which is now a lucrative cable business-news network.) Bloomberg and Fram’s first foray, in 1992, was to spend thirteen and a half million dollars to acquire WNEW, a New York City radio station that featured songs by Frank Sinatra and Judy Garland. Bloomberg dropped this format, substituted business and hard news, and gave the station new call letters, WBBR. Once again, Bloomberg used computer technology to shape his product and reduce costs. He quickly realized that he could build a radio network with a single computerized, digitized radio station and without buying a distribution system that WBBR could feed (for a fee or a portion of ad revenues) Bloomberg Business News reports to stations across America. And Bloomberg discovered that his New York AM radio station, though its audience shrank by twothirds after he changed the call letters, was nevertheless able to promote the Bloomberg brand name. Today, a hundred and twenty-five radio stations subscribe to Bloomberg Business News. Television was Bloomberg’s next venture; after all, the same workstation that permits a reporter to write, record, edit, and produce pieces for radio lends itself, with the addition of a robotic camera, to television. He began producing a daily two-hour news program for the USA Network; produced a daily half-hour business show for PBS stations; invited PBS to produce from his headquarters studio both “The Charlie Rose Show” and “Adam Smith’s Money World”; and provided a twenty-four-hour news service, Bloomberg Information Television, for satellite television here and in French, Japanese, Italian, Spanish around the world. His eventual goal, Bloomberg says, is twenty-four-hour local and international news everywhere, produced in the local language and by local talent. One day, not long ago, I stood with Jonathan Fram as he looked at rows of computer workstations and robotic cameras at Bloomberg’s headquarters. “You could call this the assembly line of content providers,” Fram observed. “The reporter is the reporter, the producer, the writer, the editor, and the creative talent. His reports go right to the transmitter, right to the Internet. It takes out all the infrastructure.” The process is cost-efficient, but it removes the check-and-balance function performed by an editor or a producer, who presses a reporter to provide more sources, to make another phone call to check a fact. Matt Winkler, who is an unabashed Bloomberg fan and helped him write his book, reluctantly admits to “some discomfort” over the fact that editors on the TV and radio side of the news operation have been rendered superfluous. He is not surprised, though. He recalls, “The first thing Bloomberg said to me when I came was ‘What do we need editors for?’ ” In the case of the wire service, Winkler prevailed, but, he confessed, “TV and radio is Mike Bloomberg’s baby.” Bloomberg could use a check and a balance. Although he claims he would never pressure a reporter on behalf of a friend, he says he would call to get a friend’s book promoted. And, as an active Democrat, he continues to make contributions to Democratic candidates and to such moderate Republicans as New York’s Mayor Rudolph Giuliani. In fact, he admits to a somewhat immodest desire to go into government himself. “If I ever ran, it would be for a job in the executive branch of government mayor, governor, or president,” he writes in his memoir. “I think I’d be great in any of these three executive jobs that mirror my experience. (Those wanting competent government needn’t worry. I have no current plans to enter the public arena.)” Bloomberg’s activism extends to philanthropy. “I don’t think he respects people who make millions of dollars and don’t give back to society,” Patricia Harris, who oversees Bloomberg’s charitable effort, observes, and Bloomberg says, “I’ve never met Ted Turner, but I’m predisposed to like him because he gives away money.” Bloomberg says he derived this attitude from his father, who always contributed to the N.A.A.C.P., and encouraged his son to become a Cub Scout to help the elderly to the polls on Election Day. Bloomberg succeeded Morris Offit as the chairman of the board of Johns Hopkins, and flies his helicopter to Baltimore to spend an average of one day each week there. Bloomberg has pledged to give fifty-five million dollars over five years to the university. And last year, according to Bloomberg, he gave away thirty-five million dollars. He says he intends to give away before he dies what Offit estimates to be a twobillion-dollar fortune. “If you give it away before you die, you get enormous pleasure,” Bloomberg says. “And you get a chance to see the money used as you wanted.” Otherwise, Bloomberg’s private life is filled with a routine of work, dinner parties, and family his two teen-age daughters and his former wife, Susan. Bloomberg and his ex-wife have established relationships with others, yet to this day he refers to her as his closest confidante. People find that strange, but even stranger is his incessant talk about attractive women he has never met such as the actress Sharon Stone. It is locker-room chatter, but without the prurience. He does not much enjoy movies, the theatre, or television. “I fundamentally don’t like watching other people do things,” he says.

Stepping off the elevator into the Bloomberg offices, on the fifteenth floor of 499 Park Avenue, one is immediately engulfed in a traffic jam. People race from a glassed-in newsroom, where they all have identical desks and roughly four feet of space, to a central mall, where there is free fruit, vegetables, coffee, sodas, cereal, salads, and candy, and on to a central staircase leading to the nine other floors that constitute Bloomberg’s headquarters. There are no walled offices, no job titles, no dress code, no executive dining rooms, no exceptions to the rule that everyone wears an I.D. tag with the person’s first name printed boldly. One can peer into any of the glassed-in conference rooms, including a tiny one behind Michael Bloomberg’s small desk in the newsroom. There is an idea behind the commotion. “I came from Salomon,” Bloomberg explains. “Everyone that mattered sat in that trading room. Everyone took off their jacket and had the same desk.” Bloomberg is striving to create a culture, which he describes this way: “Very egalitarian. Very little bureaucracy. A meritocracy. A compassionate one.” Every employee receives a revenue-sharing bonus based on the growth of the company, a bonus that, when it is coupled with salary hikes, has averaged, according to Bloomberg, more than twenty per cent each year. For all Bloomberg’s ventures into new mass-market media, the heart of his business remains the Bloomberg. His competitors, fully aware that the Bloomberg, with its extensive analytical and historical resources, sets the pace in this specialty market, have been attempting to catch up. “This is the reason we have had nine hundred people in Princeton for ten years,” Bloomberg said. “If you could just buy it, I would have. The hardest thing to duplicate in our company is the Princeton operation. The data-collection people are analysts,” which is to say that they are not clerks. First Reuters and, more recently, Telerate have promised their customers the kind of information that was first provided by Bloomberg. “I would agree with you that we have not been sufficiently strong in analytics,” the Reuters C.E.O., Peter Job, says. The Reuters 3000 series, introduced in June of 1996, offers customers not just real-time quotes and news but the kind of historical and comparative information common on a Bloomberg. Still, Reuters remains the clear market leader: it is the strongest company in generating data on the currencies and interest rates of countries around the globe, and is also the strongest on the stocks of overseas companies. Reuters has other advantages as well. It is big (five billion dollars in revenues) and profitable (a billion ninety million dollars). The British-based company, now a hundred and forty-six years old, employs nearly two thousand journalists in a hundred and sixty-one news bureaus around the world, and nearly half of them provide TV news reports. As for Telerate, in addition to its link to the Dow Jones news wire and the Wall Street Journal, its strength has traditionally included providing upto-the-minute Treasury-bond prices through an exclusive arrangement with Cantor Fitzgerald, the nation’s largest bond broker. I asked Kenneth L. Burenga, the president and No. 2 official of Dow Jones and the acting chief executive officer of Telerate how he would sell his service to a prospective customer. At first, Burenga invoked the sum six hundred and fifty million dollars that the board had just voted to improve Telerate’s service, and only then did he cite its current advantages. “We have an offering of proprietary news and information you can’t get anywhere else,” he said. Since Telerate, like Reuters, collects more information on more markets than Bloomberg including information supplied by two thousand banks and exchanges and more than two thousand other providers he said that it offers “one-stop service.” And he added, “It is Dow Jones,” invoking an organization that is worldwide, that owns business newspapers and magazines, and that produces TV business-news programs. “We do something no one else does,” Burenga said. “Others only do pieces.” Telerate, however, suffers from real disadvantages, as its chairman and C.E.O., Peter Kann, acknowledged last December, when he publicly proclaimed Telerate’s results “disappointing.” Only recently has Telerate offered historical data on companies and on financial transactions to compete with Bloomberg’s data, which go back ten years, or Reuters’, which go back five years or more. Customers complain that they cannot use Telerate’s service to trade securities or perform complicated financial analysis. The Schroder Wertheim & Company analyst Michael W. Ellmann cracks that some say “even God couldn’t fix it,” and adds, “I would bet God could fix it.” But, short of divine intervention, Ellmann is pessimistic about Telerate’s ability to halt its slide. In spending millions of dollars to fix Telerate, Dow Jones is making an assumption that the analytics and the historical data that Bloomberg has collected are easy to purchase “generic information,” as Burenga labels it. Burenga’s argument has some holes. He claims that these data are generic but that information from the Dow Jones service is “proprietary,” because it relies on good editors and the context they provide exactly the argument that Bloomberg and Job make on behalf of their data. And Telerate, by investing millions of dollars to improve its software as well as its data, implicitly accepts the notion that the company needs to do far more than buy generic information. Furthermore, Dow Jones appears to assume that its competitors will stand still. “We will increase our R. & D. spending by more than six hundred and fifty million dollars in the next three years. That’s just the increase!” Bloomberg says, adding that he now spends about seventy-five million dollars annually on R. & D. and about a hundred and fifty million dollars to maintain the Princeton operation. Reuters reports that it spent three hundred and forty-three million dollars on R. & D. last year alone, for all its products, and this included two hundred and fifty million dollars to improve the Reuters 3000, the product that takes aim at Bloomberg. So far, the most momentous change Telerate has made is to change its name to Dow Jones Markets, which it announced last week. Of course, Bloomberg has his own problems. His sales overseas lag behind those of Reuters and Telerate. “If you’re overseas, we’re way ahead,” Burenga says. “Bloomberg is unheard of in Asia.” Among customers interested in foreign exchange, he says, Reuters claims three-quarters of this market and Telerate the rest. The most serious weakness of Bloomberg’s system is that Bloomberg insists on retaining control of it: customers can’t combine Telerate, Reuters, and Bloomberg data. Nor can customers incorporate Bloomberg data into, say, their own trading models. By contrast, Job says, “Reuters has for some time been delivering all its products on standard computers.” Bloomberg, he says, is invested in the hardware business. In an era of “open systems,” where companies like Apple and Microsoft learned that they had to open their platforms, Bloomberg’s remains closed. “You can’t in this world brand a machine,” Job says. “Machines come and go. A box can’t be a brand.” In addition, he says, no customer wants to rely on one vender. “The customer has to be empowered by an open platform.” He also believes that many customers want one computer and keyboard on their desk, not two. Bloomberg has recently relaxed his stricture that customers lease his terminal. Now, under what he calls “open Bloomberg,” customers can get his data on their own computers, but they are still required to use a separate Bloomberg keyboard. “I don’t like the open idea, because I lose control,” Bloomberg says. He’d be happy to get out of the hardware business, he says, but he doesn’t want to offer his analytics unless you buy the whole system. Still, Michael Bloomberg is, at heart, a capitalist, not a zealot. “As things change, I will give in and change,” he says. His business model is predicated on certain assumptions: that his data are not generic, and therefore can’t be easily replicated; that his closed system will not be threatened by the spread of the Internet; and, finally, that he will not be threatened by technological advances. If Bloomberg has bet wrong on these, he loses. Bloomberg seems unfazed. “In my heart of hearts, there’s no competition,” he says, sounding as self-assured as a Telerate or, better, a Quotron executive must have sounded a decade ago. “I’ll have to work very hard to screw this one up. We’re way ahead in the critical-mass business with technology. It’s very hard to play catch-up ball. It’s very hard to kill momentum. Once you have momentum, it’s not like one Hail Mary pass will change it.”

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