Sunday, October 18, 2009

Analyze This: Bloomerberg and Thomson Reuters Up News Analysis Commitments

These are not the rosiest of times for financial information services, with fewer people using their services in the face of large-scale financial industry cutbacks, but out of adversity sometimes comes opportunity. While there are fewer professionals generating and consuming market analysis and opinion at investment banks and major buy-side firms, the thirst for market insights is as strong as ever, both among professionals and consumers of investments. That thirst may not be enough to float the salaries of as many investment bank analysts as in previous times, but there's plenty of money for financial information companies to fill in the gaps.

It's no surprise, then, that at virtually the same time there were deals announced by both Thomson Reuters and Bloomberg, L.P. to acquire two leading publishers of market insight and analysis. For Bloomberg the target is BusinessWeek, McGraw-Hill's prestigious but financially challenged business media outet, while Thomson Reuters is opting for, an online source of market insight and opinion that was growing very smartly until financial markets headed down last year. In both instances the timing of these deals certainly favors the buyers, who get to pick up assets at comfortable rates, but the ultimate outcomes of these deals may differ significantly.

For Bloomberg, the acquisition of BusinessWeek poses some major challenges but also unveils some major opportunities as well. BusinessWeek's print and online assets were redesigned recently to be targeted towards more online-oriented audiences, yet failed to attract major new audiences and advertisers. Taking the online know-how from the BusinessWeek team and its market analysts to combine it with a wealth of breaking news and opinion from Bloomberg may help Bloomberg to create a far more viable challenge to Dow Jones' Wall Street Journal, most especially in online markets. The rise of "prosumer" investors who expect greater depth from business information sources to help them manage private portfolios are obvious targets, people who will benefit not only from BusinessWeek editorial content but their sophisticated approach to online content design and management. This may help Bloomberg to extend towards the consumer spectrum of financial information services in print and online more effectively, with an overall global profile more similar to Dow Jones' consumer media news assets.

For Thomson Reuters, the acquisition of is a little more of a match for its core strengths, but also a bit less of a stretch towards direct competition with the consumer side of WSJ. BreakingViews focuses more than BusinessWeek on breaking in-depth company analysis, more akin to WSJ's Marketwatch portal but also more oriented than Marketwatch towards financial professionals. With a somewhat more "pro" than "prosumer" focus, BreakingViews may lack the broad consumer appeal of a BusinessWeek, but it's also more likely to command premium rates from advertisers seeking high-level executives and high net worth investors. While this may pose more of a challenge than Bloomberg may face in building a broader global consumer brand for financial information, it's also probably a focus that will provide returns more quickly and efficiently.

With strong arms already into broadcast television and radio, Bloomberg has an opportunity to create a deeper brand that can compete in broader markets, but it may be a long time for those markets to recover to the point that the investment may be worth it. This tends to argue towards BusinessWeek assets being refocused rapidly towards a prosumer profile more similar to what Thomson Reuters is seeking, but the shoe may not fit as gracefully. The media will buzz more for a while about the BusinessWeek acquisition, no doubt, given its penchant to feast on its own most prominent members whenever possible, but it seems as of Thomson Reuters may have opted for the better of these two deals from the perspective of building stronger information assets that can extend its strengths in both professional and consumer markets. Given the bargain basement price that Bloomberg has paid for BusinessWeek, at least they have very little to lose and plenty to gain.

For both Bloomberg and Thomson Reuters, they gain a wider array of assets to tailor to overlapping audiences for financial information markets that can smooth out revenue streams. It's been a grim period for financial markets, but market analysis is a key ingredient that can help financial information companies to ride out the gloomy periods until trade-related revenues pick up steam again.
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