Dan discusses whether a recent story in the New York Post is an example of Bloomberg terminals impending death or merely hyperbole.
Stop me if you've heard this before: The death of Bloomberg's terminal is coming.
It's a theory that has been floated out in the industry somewhat regularly over the past few years. Banks, looking for any way possible to cut costs, are trying to shed themselves of as many of their Bloomberg terminals as possible, which hold a $21,000 per-user yearly subscription price tag.
Last week that idea picked up steam when the New York Post reported that this July an eight-year agreement requiring Bank of America to maintain the number of Bloomberg terminals it has will expire, giving the firm an opportunity to decrease the amount of terminals it has, which, the paper reports, currently amounts to $420 million annually.
The deal originated in 2008 when Merrill Lynch, which was acquired by Bank of America in January 2009, sold its 20 percent share in Bloomberg for $4.4 billion. Part of the agreement, according to the report, was that Merrill Lynch would not decrease the amount of Bloomberg terminals it had. That requirement ends this July.
The story reports that sources have said Bank of America CEO Brian Moynihan is considering reducing the amount of Bloomberg terminals by up to 25 percent, or roughly 5,000 terminals.
This news comes on the heels of the New York Post reporting earlier this month that JPMorgan is contemplating getting rid of "thousands" of Bloomberg terminals over the next two or three years, and is currently in negotiations with Thomson Reuters about replacing "1,000 to 2,000 terminals worldwide during the next two years."
True or False
The concept that banks might be looking to lower the heavy price tag they carry for Bloomberg terminals is no surprise. Time and again the same complaints have been voiced: The terminals cost too much. We don't need all the features. Its applications are more a matter of quantity than quality.
But how real are the threats of firms actually leaving? Let's be honest, as US editor Anthony Malakian detailed in his fantastic feature looking at the Bloomberg terminal this past summer, the markets and Bloomberg terminals are intertwined too tightly for there to be a realistic break.
"If you're on the sell side and dealing with the most important asset managers, you've got to have it," said a trader at a tier-1 investment bank. A Business Insider article quoted a trader saying, "The fact is, Bloomberg connects 100 percent of the Street, and all that human intelligence is what makes markets hum."
Larry Di Rita, a spokesman for Bank of America, outright told the New York Post the firm had no plans of changing its relationship with Bloomberg come July. JPMorgan declined to comment in the New York Post story regarding its future plans for its Bloomberg terminals.
Video Killed the Radio Star
Bloomberg terminals are like cable television. Streaming services like Netflix, Hulu, HBO GO and Showtime Anytime have become staples in many people's homes and caused them to question whether or not they actually need to pay for cable. However, there still seems to be something holding many people back from actually pulling the plug on their Time Warner or Optimum subscription.
Personally, for me, it comes down to live sporting events. I could pay for the various league passes, but it's easier for me to just cough up the monthly fee and be able to freely watch ESPN, FS1, MSG and my personal favorite, NFL RedZone.
The same goes for Bloomberg's terminals, particularly when it comes to Instant Bloomberg, the firm's chat application. Many firms are willing to eat the high costs of the terminal for the benefit of a few of its functions.
As we've written about before, Symphony Communication Services is making a push to disrupt that space. David Gurle, Symphony's CEO, has been adamant that the startup is not interested in completely replacing the Bloomberg terminal.
However, as I wrote about this summer, with capabilities continuing to be added to the Symphony platform, and a plethora of big backers, including the aforementioned JPMorgan and Bank of America, those continual denials from Symphony that Bloomberg is not a competitor don't ring as true.
So will the Bloomberg terminal ever completely die? With more than 320,000 users worldwide, the usage in the terminal will not evaporate overnight. However, just as cable continues to do battle with streaming services, firms will look to vendors like Symphony to outsource as many services as possible to reduce their subscription rates.
And while an immediate death is unlikely, one by a 1,000 cuts (or vendors) seems more possible.
Food for Thought
- All this talk about television makes me feel like I should at least make one show suggestion for you all. Showtime's Billions, featuring Paul Giamatti and Damian Lewis, is an interesting new series looking at the capital markets. Brody plays Bobby Axelrod, a billionaire (hence the name of the show) who runs one of the more successful hedge funds in the world. Giamatti is Chuck Rhoades, a US district attorney hell bent on pinning insider-trading charges on Axelrod. It's only two episodes in, but it might be worth a watch the next time you're looking for something new.
- My NFC/AFC championship game picks are as follows: New England Patriots (-3) over Denver Broncos. Carolina Panthers (-3) over Arizona Cardinals. As much as I hate the Patriots, I can't bear to root for a Super Bowl that would have the zombie carcass that is Peyton Manning out there throwing wounded ducks.
- Anthony Malakian and I are going to start recording a podcast every week and put it up on the website on Thursday afternoons. If you have any suggestions for what you'd like to hear us discuss, let us know! You can find Anthony on Twitter here.
While at Sibos Toronto, James shares some interviews covering topics on blockchain, fintechs and cybersecurity.Subscribe to Weekly Wrap emails