Opening Cross: There’s Nothing to Fear But Fear Itself… And Data Fees

Which is why, in theory, I don’t have a problem with fees. Data providers should be able to charge what they think their data is worth, without fear of being held to artificially low levels. It’s not immoral to expect to make a profit, and it’s not unethical to raise your fees if you see fit. Because in theory, there would be sufficient competition that if your pricing became excessive, consumers would simply take their business elsewhere. Where this does become a problem, however, is when a provider occupies a utility-like position, or when consolidation means that someone has a monopoly on a segment of the market. And right now, data consumers have a problem with S&P Global Market Intelligence, which sources say is planning hefty price increases following its acquisition of SNL Financial, which provides highly respected datasets on financial institutions.

Now just to be clear, we’re not even stating as fact that S&P will introduce significant fee increases—after all, we haven’t seen a price notification, and nor have customers, since nothing has yet been communicated in writing, our sources say—but just that the mere suggestion of increases has sent many firms into a panic about how they will pay for the higher fees, or where they will find alternative data sources. 

SNL is certainly considered especially good at what it does, but that doesn’t mean it can’t be replaced or replicated, or even that firms won’t turn instead to completely new types of fundamental data. For example, providers like satellite imagery analysis vendor RS Metrics are moving fundamental analysis closer to the source by—instead of capturing information from company statements or financial results—analyzing satellite photos of retail stores, restaurants and factories to draw conclusions about customer traffic (as an indicator of sales revenue) or incoming materials and outgoing product (as an indicator of production and supply). In this manner, they can identify trends and extrapolate their impact on a company’s share price at the exact same time that the company itself sees those sales hit its bottom line—and well before the company reveals them in its quarterly report.

Of course, incorporating new datasets like these comes at a price—not just the purchase price, but also the cost of interpreting and managing them internally—though one would argue that the value they potentially create outstrips the cost, not to mention that DUDE! It’s satellite photos! Like Will Smith in Enemy of the State! But nobody expects vendors or exchanges to give their intellectual property away for free…. Or do they?

There are some who have championed free availability of certain datasets, like The Freedom Index Company. And Euronext is joining the movement, with plans for a family of European indexes that will not charge license fees for user firms to create tradable products based on the indexes. The exchange is still finalizing the full commercial proposition around the indexes, so it doesn’t necessarily mean that the indexes will be entirely fee-free, but this model could be a step in the right direction towards much simpler license policies that ensure revenue for their creator while also easing the cost and compliance burden on those users who—while benefitting from the indexes—are ultimately help promote the indexes as the basis for investment. 

And while I may not have a problem with fees in theory, I don’t have any problem with anyone looking to lower them, either.