Vendors And Users Cautioned On Dow Jones At Waters' QRT Conference

Information industry consultant L. Michael Ridder warned vendors and users of what might happen if Dow Jones & Co. moves aggressively to exploit potential synergies between itself and Telerate.

Speaking at Waters Information Services Inc.'s Quotron- Reuters-Telerate conference in New York last month, Ridder said: "The major issue will be in U.S. equities, and the extent to which competitors and customers of Dow Jones might be hurt by its trying to maximize the value of the Broadtape franchise.

"For major users, I think this situation is another reason to take much of your market data requirements in-house. There is no reason to think that Dow Jones will restrict the ability of customers to use Dow Jones News directly, and, in fact, the technology and format of its year-old 9600 baud data feed seem designed to encourage this. For competitive quote vendors, I can only say that you may have a very difficult problem to deal with."

Ridder offered his own analysis of what might happen if Dow Jones applies some "aggressive business common sense" -- a commodity that he said hasn't been evident so far in the company's relationship with Telerate -- to the potential synergies between the two companies.

A starting point, Ridder said, might be for Dow Jones to exploit its jewel in the crown -- the Broadtape. The company "would design and implement from scratch several equities quotations, analytical and transactional services, which would serve the big Wall Street houses, retail stockbrokers and the institutional buy side. The product designers would have the right to plan changes in the format, coding, pricing and scope of the Broadtape and Dow Jones New/Retrieval.

"It wouldn't be necessary for Dow Jones to cancel its licensing agreements with other quote vendors," he said. These "would simply be at a competitive disadvantage, particularly in pricing, and free to do whatever they could about it, which might not be much."

Such a move by Dow Jones could preserve the $100 million annual revenue stream it derives from its quote-vendor distributors "while strangling them" at the same time, Ridder said. The company has already taken the first logical step in the fixed-income area, he added. Dow Jones integrated the pricing of Capital Markets Report (CMR) with Telerate's core fixed-income data service in the U.S. earlier this year (IMD, Feb. 5).

Ridder believes the pricing change is a test of what might happen if Dow Jones put licensees in other market areas at a similar competitive disadvantage. The test, he said, "could set a precedent for legal, marketing and operational problems" that might arise from such a move.

The foreign exchange market, meanwhile, may be more difficult, Ridder says. An interesting test of how hard Dow Jones is willing to play ball in this area, he adds, will be to see whether the company upgrades its International Banking Wire into "more of a trading format with page-formatting and few long items."

The real event to watch, however, is whether Quotron Systems Inc. is licensed to carry the International Banking Wire, Ridder says. Quotron recently launched F/X Trader, an automated interbank trading system for the foreign exchange market that will compete with The Trading Service, Telerate's offering (Trading Systems Technology, May 21). "Quotron," Ridder said, "is currently the largest single source of revenue for Dow Jones information services through its display of Dow Jones New/Retrieval and the Broadtape. And the Trading Service is Dow Jones' biggest immediate problem."

Ridder applauded the appointment of Dow Jones' Carl Valenti as president of Telerate (IMD, May 14). "He is a logical, no- nonsense guy," he said, "and brings an essential common presidency to the two parts of the information services group." But, "in view of comparative growth rates and margins, it is absurd that Dow Jones people are moving in on Telerate and not the other way around," he added.