 "Peter T Grauer")
Bond traders and equity investors swear by Bloomberg’s terminals. A strong brand equity coupled with a boom in speculative trading in the past two decades has made Bloomberg the largest and one of the world’s most profitable providers of financial information, news, data and analytics. Can the firm maintain its edge now that banks, its key customers, are on the retreat? Bloomberg LP Chairman Peter T Grauer tells Samie Modak and Krishna Kant the firm is expanding its enterprise business to keep growing. Edited excerpts:
How important is India for Bloomberg?
India is the second largest emerging market (for us) after Brazil and ahead of China and a number of other countries. The market for financial information, data and analysis is growing rapidly and would only get better as the Indian economy and financial services here become more sophisticated. We have been in India for 18 years now and are growing at a handsome double-digit rate. Our expectation for the future is very robust.
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Growth rates have come down in all our markets — developed and developing. But we don't tend to look at things on an annual basis. We have a longer a perspective. Being privately owned, we can afford to take calls that will bear fruit over next eight-10 years rather than next year. Emerging markets have contracted a little bit but once the global economy is back on its feet, they will overperform and the need for our services will continue to be great.
So you remain bullish on India?
I am not sure that I am bullish on any market around the world. In terms of our long term strategy, the need for us to be in markets that will make a difference going forward, certainly we will be in all those markets. Our products are in 172 countries around the world. We also want to be in the frontier markets, bigger emerging markets like India to play an important role in the development of the capital markets.
How is the marriage of data and news working for you?
This has enabled us to enrich our core product of information and analysis. Remember, we are first and foremost an information and technology company. A exposure to the world of media has buttressed our core product and enhanced the brand. Besides, it helps expand the demand for Bloomberg’s professional services (the terminal business) and increases our influence in the financial and business community. Our media offering is really part of the package, like different layers in a cake.
Professional services are the biggest part of our business, accounting for nearly 82 per cent of our revenue. We are the global leader in this, with nearly 35 per cent market share. It is followed by other services that are directly related to core business — trading solutions, data solutions and enterprise content. The growth in this segment has slowed down —we are now growing in single digits — but it remains our key driver.
Bloomberg’s growth coincided with the financialisation of the world economy. The process halted with the 2008 Lehman crisis and tighter banking regulations introduced in its wake.
We had record revenue growth for 32 years in a row, including in 2009 when we were up 2.9 per cent. We have had growth every year since then, we expect to have positive growth in 2014 as well. That said, growth is harder to come by. The big banks have gone through a major restructuring of their balance sheets. Many national and regional regulations have raised the capital requirements for banks. Our customers are big sell-side banks and they are now focused very aggressively on their cost structure and work flow on their trading desk.
This has also had negative effect on the growth rate in emerging markets. So, growth is harder to come by but then we are now expanding the enterprise business. We are using our skills in information, data and technology to help financial services firms improve their processes and product offerings. It’s still a small business but growing fast.
Does this make you a rival of IBM, Accenture and India’s own Tata Consultancy Services?
Not really, IBM is hardware and IT (information technology) services company, while we are into information, data and technology. There is, however, some overlap. Financial services are the biggest revenue generator for IBM, bringing in nearly $35 billion in revenue, and we might compete in some segments.
Traditional media faces headwinds especially in the developed world…
I think that trend continues. The traditional media continues to be under significant pressure. We don't expect that's going to chance in foreseeable future. It is a long term systematic decline that is going on in print media. We think it's going to be a less significant portion as consumers want digitize information on a variety of platform going forward. It's less so in a place like India or developing market than the developed market.
You acquired Businessweek and relaunched it. Could Bloomberg do something similar in India?
There’s nothing on the table right now but we are opportunistic. If something interesting comes our way, we might consider it. We bought Businessweek in 2009 and reformatted and redesigned it to make it more relevant to our target readers. We introduced 18 months ago a lifestyle magazine, alongside of Bloomberg markets, called Bloomberg Pursuits, a very high-end magazine that goes to our terminal subscribers. But we are always selective in acquisitions or launching new offline products. And, if we do this, it’s done in a manner that it enhances the overall Bloomberg brand and expands our product offerings.
You have a TV channel in India. Could we also see Bloomberg buying offline media like newspapers here?
There is nothing in the offing right now. Look, we are opportunistic and if there is an opportunity within a specific market to do something that enhances the brand and enables us to sell more products, certainly we are prepared to look at those — they don't seem to come by very often. Most of what we do is organically based. We are much better at growing our business by reinvesting in the core business. We continue to believe there is lot of opportunity to grow organically, which obviates the need to necessarily acquire things.
We have only done four or five acquisitions in the history of the company. The largest was of a billion-dollar business to enhance our legal business, called The Bureau of National Affairs. The Businessweek acquisition was very small. We have done some very small things that have accelerated our time to market, which otherwise would have taken long time to do. By and large, we are builders, not buyers.
What plans do you have for Bloomberg TV India?
The plan is to continue business as usual. We are pleased with our two partners. The venture is about three and half years old. We are behind what we had expected to be. But we expect to improve this. Bloomberg TV India is a very important part of our global product offering and the channel is now available on our terminals. So, people who are interested in the Indian market can access it from anywhere in the world. We are very committed to it.
Do you have similar arrangements in other parts of the world?
We have a similar relationship in the middle east, Indonesia, Mongolia and Mexico. We are in discussion with the Philippines. Turkey was number two after India. So we are selectively looking at more places to do that.
What about the competition from local data providers in India?
We don't really focus on local market share. We provide a high-end bundled offering of news, data and analytics, which covers all asset classes and all markets around the world. So, it's much different product offering than what is offered by local data and news providers.
Their products are smaller, more bespoke and mostly focused on one asset class such as fixed income or forex market. And, in most cases we aren't competing for the same dollar. So, we think those players will exist in lots of local markets around the world. Certainly, they won't have the global scale that we have and certainly can't compete on the global scale with us.
Mobility of terminal?
We have 319,000 subscribers around the world today about 205,000 are Bloomberg Anywhere subscribers, which means with a biometric security device they can access Bloomberg terminal from any browser. 85,000 of it get Bloomberg Anywhere on hand-held device.
Many complain about high prices charged by Bloomberg?
Maybe but we don't compete on price. Our pricing is the same everywhere. Whether you take two terminals or thousand terminals, everybody pays the same price for it. It’s $1,750 a month based on the last price increase. We move our prices every two years. We move them by a weighted global inflation index. In the interim period we spend billions of dollars investing in improving the functionality of the terminal.
