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David Anderson Announces Market Share Analysis for the Market DataIndustry

Total Market Size:

The total size of the market for market and reference data in the calendar year ended December31st 2008 was $15.76 billion USD with growth of 10%. If Credit Ratings agencies are included the size would be $20.2 Billion USD representing a much more meager 3% growth; obviously dragged down by the poor performance of the three credit ratings firms.

Bloomberg versus Thomson Reuters

Bloomberg and Reuters had always been the top two players in this sector, with Reuters merging with Thomson Financial to form Thomson Reuters Markets Division under the broader Thomson Reuters Corp. Currently the top two players represent more than 65% of the market with next largest vendor not even touching 4 's189; %.

Bloomberg have demonstrated substantial growth over recent years. The graph below on the left illustrates an interesting pattern of that growth with a clear and understandable slow down in 2008.

    

Quarter1 and the start of 2009

Bloomberg only releases a small amount of unaudited data but anecdotal evidence suggests that January was nearly flat and that February, March, April and part of May were possibly net negative sales months; In April 2009 Bloomberg stated publicly that they were 2.5% down from their all time high. Bloomberg'ss more immediate slow down, relative to other vendors, is more directly correlated to conditions in the financial markets for two reasons. Firstly, Bloomberg remains. for the moment, much more dependent on terminal based revenues than some of its competitors (e.g. Thomson Reuters). Secondly, we are reporting Bloomberg'ss figures immediately whereas Thomson Reuters's numbers take some time to filter through their financial reporting mechanisms. In all cases there is a lag effect as all vendors are able to brake against the downturn by the use of contractual terms that restrict how quickly a customer can cancel services.

Thomson Reuters Markets Division reported a 0.4% (after taking out the effects of currency fluctuations) growth figure for Q1 2009 which to all intents and purposes is flat growth.

's'sSticky's Datafeeds:

Stickiness is a phrase often used in this industry sector to describe certain products that are difficult for a customer to switch away from. Datafeeds both real time and 'send of day pricing's variants are prime examples of sticky products. Once a customer firm has implemented a datafeed into their business it is likely that the datafeed will become enmeshed and entwined with a whole host of the customer'ss applications. In such circumstances it would be very painful and potentially risky for that customer to switch to an alternative datafeed, even one that appears on the surface to be more commercially attractive.

Thomson Reuters Markets have dominated the real time datafeed market for many years and as such a significant part of their revenues seem insulated from the immediate effect of the downturn as evidenced by Thomson Reuters Markets overall flat revenues for Q1 2009 and the 9% growth they reported in their Enterprise division, where datafeed revenues are reported.

As stated the sticky nature of Datafeeds (amongst other factors) has provided Thomson Reuters Markets some succor in these vexing times but it also provides a succulent target for their competitors, something that Bloomberg have undoubtedly noted. Hence looking forwards it is entirely plausible that Bloomberg will endeavor to adapt the profile of their product portfolio to take advantage of elements that have helped to support Thomson Reuters Markets's revenues over the last two quarters (e.g. with their B-Pipe and B-Pod)

Looking Ahead:

Broadly there are two elements to consider looking forwards:

Firstly; How will the overall market perform:

It remains very unclear how much more trimming of costs customer firms are planning, some estimates have suggested a further 20% of budget reductions. Whatever the absolute number it seems clear the when overall 2009 revenues are reported they will reflect a notable decline.

Secondly; How will Individual vendors perform relative to each other:

During this period of decline in overall budgets it is very clear from the announcements emanating from all vendors, but especially the big two (Bloomberg and Thomson Reuters Markets), that they will be putting significant efforts into gaining share in a declining market.

In the last few years Bloomberg have been the gainers in market share terms. At the start of 2009 it seems that Thomson Reuters, for a variety of complex reasons, have regained a small amount of that lost ground. However, anecdotal evidence from the market suggests that Bloomberg are far from lying down as this new phase of the battle for market share commences. One thing is for sure the terrain on which this battle will be fought is different from how it was in the past, in that past certainties on both sides are well 's8230; uncertain now. What was once sacrosanct may very well not be as we move forward in 2009 and into 2010.

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