The Bloomberg Terminal
Prepared for:
Professor Yinglei Wang
Business Technology Management
BUSI 2803
November 4th 2018
Prepared by:
Jordan Ray 100137886
Jeff Easson
Nolan McGuigan 100140401
Brendan MacNeil
Riley Urquhart 100135772
Table of Contents
Introduction
-1.1 Introduction
-1.2 History
-1.3 Overview
Product / Market
-2.1 Bloomberg
-2.2 The Terminal
-2.3 Features
-2.4 Capabilities
-2.5 Competitors
Data
-3.1 Pricing
-3.2 Sales
-3.3 Market Share
-3.4 Market Growth
Conclusion
-4.1 Summary
-4.2 Recommendation
-4.3 Conclusion
The Bloomberg Terminal
Introduction
Intro
Management and analysis of financial data have never been more important than now, in today’s fast paced business world. One of the most recognizable names in all of finance is amongst the industry leaders in financial data, that name is Bloomberg. The companies staple product “The Bloomberg Professional Service” more commonly known as the Bloomberg Terminal is a robust piece of technology, and a key innovation in the world of professional finance. This report will in detail; outline the the story of Bloomberg, What the terminal can accomplish, who the terminal is built for, and why the Bloomberg terminal stands today as a titan in the professional financial data vending market.
History
The terminal first entered the market in the early 1980's and since then has strived to dominate the industry. Michael Bloomberg, one of the founders of Bloomberg LP, developed and manufactured the first innovative market system (IMS), he provided this system to Wall Street firms. In 1983, Merrill Lynch invested $30 million in IMS to help finance the development of "the Bloomberg" terminal computer system and by 1984, IMS was selling machines to all of Merrill Lynch's clients. (Bloomberg LP, 2018). In 1986 the terminal had begun to gain major traction in the market as Bloomberg provided five thousand terminals to subscribers (Bloomberg LP, 2018).
Bloomberg L.P. has since continued to launch other products to compliment the features of the terminal, however the terminal continues to be the company’s golden child, with 325,000 current subscribers at a starting price of 24,000 per subscriber, equalling an approximate revenue of $7,800,000,000 USD from the terminals alone. (Bloomberg LP, 2018)
Overview
The terminal does cater to a rather niche market, being primarily investors and finance professionals. However, the capabilities the terminal provides are unparalleled to those of competitors. The terminal is the Ferrari of financial analysis software. Providing subscribers with real-time data, powerful analytics and world-class communication tools. The terminal offers trading solutions, pre-trade / post-trade analytics, and updates subscribers with important breaking news on across the globe. (Bloomberg LP, 2018)
To accompany the market segment which Bloomberg strives for, Bloomberg provides an industry-leading customer service team, that is available all hours of the day in as many as one hundred and sixty countries across the globe (Bloomberg LP, 2018). Bloomberg offers information on the go, as you can operate the terminal at any time as well as anywhere you would like, you can access it via your mobile device as well as laptop with internet capabilities.
Product / Market
Bloomberg
Bloomberg L.P. Is a privately held financial, software, data, and media company headquartered in Midtown Manhattan, New York City. Bloomberg was founded by Michael Bloomberg in 1981, alongside Thomas Secunda, Duncan MacMillan, Charles Zegar, and a 30% ownership investment by investment bank Merrill Lynch.
Bloomberg L.P. provides financial software tools such as an analytics and equity trading platform, data services, and relevant news pieces to financial companies and organizations through the Bloomberg Terminal (via its Bloomberg Professional Service), which remains its core revenue-generating product. Bloomberg L.P. also includes a wire service (Bloomberg News), a global television network (Bloomberg Television), digital websites, radio stations (Bloomberg Radio), subscription-only newsletters, and two magazines: Bloomberg Businessweek and Bloomberg Markets. In 2014, Bloomberg L.P. launched Bloomberg Politics, a multiplatform media property that merged the company's political news teams.
Bloomberg L.P. Is Headquartered at Bloomberg Tower 731 Lexington Avenue, New York City, New York, United States, however as of 2016 Bloomberg had 176 offices globally, over 19,000 employees servicing those offices, and approximately $9 Billion USD in revenue.(Bloomberg LP, 2018)
Terminal
In 1981, Salomon Brothers was acquired, and Michael Bloomberg, a general partner, was given a $10 million partnership settlement. Bloomberg, having previously designed in-house computerized financial systems for Salomon, used his $10 million severance cheque to start Innovative Market Systems (IMS). Bloomberg developed and built his own computerized system to provide real-time market data, financial calculations and other financial analytics to Wall Street firms.
In 1986, the company was renamed Bloomberg L.P., and 5,000 terminals had been installed in subscribers' offices. Within a few years, ancillary products including Bloomberg Tradebook (a trading platform), the Bloomberg Messaging Service, and the Bloomberg newswire were launched. Bloomberg launched its news services division in 1990. Bloomberg.com was first established on September 29, 1993, as a financial portal with information on markets, currency conversion, news and events, and Bloomberg Terminal subscriptions.
The Bloomberg Terminal formally known as the “Bloomberg Professional Service” accounted for more than 85 percent of Bloomberg L.P.'s annual revenue. Starting at $24,000 per user per year, the service allows subscribers to access the Bloomberg Professional service to monitor and analyze real-time financial data, search financial news, obtain price quotes and send electronic messages through the Bloomberg Messaging Service. The Terminal covers both public and private markets globally.
All Bloomberg Terminals are leased in two-year cycles (in the late 1990s and early 2000s, three-year contracts were an option), with leases originally based on how many displays were connected to each terminal (this predated the move to Windows-based application). Most Bloomberg setups have between two and six displays. It is available for an annual fee of $20,000 per user ($24,000 per year for the small number of firms that use only one terminal). As of October 2016, there were 325,000 Bloomberg Terminal subscribers worldwide. (Burton-Taylor International,2017)
Features
The Bloomberg Terminal includes a number of proprietary features ranging from it’s custom keyboard to it’s iconic multi-monitor displays.
Although similar to a standard desktop QWERTY style keyboard, Bloomberg terminals substitute the function keys on a standard keyboard (i.e., F4) with market sector keys, such as CORP (corporate debt), EQUITY (equity shares) and CURNCY (currency markets). In addition, the keyboard incorporates colour coding to ease use by the following:
Market sectors keys (i.e., EQUITY) are coloured yellow.
Cancel and Log-in keys are colored red.
"Go" keys (i.e., HOME) are colored green.
Exhibit 1: The bloomberg Keyboard
Source:Bloomberg
Source:Bloomberg
Exhibit 2: The bloomberg display
Capabilities
The Bloomberg Terminal now functions as an application within the Windows environment. From a user's perspective, there are essentially 3 distinct levels to the system:
Core Terminal
The Core Terminal refers to the original Bloomberg system; which typically consists of four windows, also known as Panels, each Panel contains a separate instance of the terminal command line. As the user enters tickers and functions, they can call up and display the real-time data of the market, with each different screen simultaneously running a program to analyze other tickers, functions, values and markets in real time. This use of multiple screens with user-demanded, specific pieces of differing data—across all relevant markets—allows the user to view diverse and countless volumes of information in real-time. Accessing market data, as it develops, allows the user to make trades and investments in all markets across the world, without having any lag in information. Users can run all four windows on a single monitor or spread them out amongst many monitors, maximizing the information shown on each, to effectually create up to four terminals.
Launchpad
The Bloomberg Launchpad is utilized as a customizable display consisting of a number of smaller windows, these are called components. Each component is dedicated to permanently displaying one particular set of data. A typical user would be a broker who wishes to keep a list of up to 30 stocks visible they may be tracking at all times: The launchpad allows the user to create a small component which will show these prices constantly. This saves the user from having to check each stock independently in the 4 terminal windows. Other functions, such as email inboxes, calculation tools and news tickers can be similarly displayed. The Instant Bloomberg messaging / chat tool is a Launchpad component, as are the chat windows it creates. These components are effective in streamlining workflow. Granting the Terminal complete access to relevant work related applications.
Application programming interface
The Bloomberg Open API (BLPAPI) application programming interface (API) is designed to allow third-party applications. These applications include Microsoft Excel, amongst others to access Bloomberg data via the Terminal and Bloomberg's other proprietary market data products. This allows the user to access Bloomberg data from the Terminal to then create their own calculations; by accessing historical, and reference market data from other programs, allowing the capability to build the desired formulae. The Bloomberg Terminal installation is shipped with Excel add-ins which facilitate the construction of spreadsheets which consume market data. In addition, Bloomberg offers free BLPAPI SDKs which allows Bloomberg subscribers to build their own software with access to market data in computer programming languages such as; C, C++, Java, .NET, Perl, and Python, on Windows, Linux, macOS, and Solaris.(Bloomberg LP, 2018)
Competitors
In the financial data vendor market the largest competitor to the Bloomberg terminal is Thomson Reuters Eikon platform. Bloomberg and Thomson Reuters battle closely, splitting approximately 30% each of the market share. The combined 60% market share of the two make up the sum of “tier one” financial data vendors. (Burton-Taylor International,2017)
Other competitors who may offer a web-based, or downloadable platform for free, or entry level pricing include Yahoo Finance, TradingView.com, SeekingAlpha, Money.Net, the Infront Professional Terminal, Sentieo, Morningstar Direct, Zacks Investment Research, Capital IQ, Advantage Data Inc, and Dow Jones amongst others. Although many of these platforms only offer limited usability in comparison to the “tier one” terminals. According to Burton-Taylor International Consulting, the market for financial data and analytics was worth almost $25 billion as of 2011.
Data
Sales
The Bloomberg terminal has been a leader in financial news and data services since its inception in 1981 when Co-founder, Michael Bloomberg, was laid off from his partner position in Salomon Brothers, a leading Wall Street fixed income trading company, and realized there was a high demand on Wall Street for premium financial news, and many were willing to pay large sums of money for this luxury. Michael Bloomberg seized this opportunity, selling his first 22 “market master” terminals to Merrill Lynch in 1982 and having sold over 8,000 by 1990. Merrill Lynch was also the first investor in the Michael Bloomberg’s company (Bloomberg L.P as of 1987) alongside this purchase, at 30%, putting the companies first valuations at 100m USD. Merrill Lynch was forced to sell off the remaining 20% of its stake in the 2008 crash for a value of 4.42 Billion USD, a >20,000% increase, valuing Bloomberg at 22.4 Billion USD, with a fairer valuation closer to 30 Billion USD. (Merced,Story, 2008)
Pricing
For the first decade, the terminals were sold for only $1,000 a month, about half of what they are now at $24,000 a year for a single subscription, and $20,000 for multiple. Bloomberg also now offers an academic pricing deal for only $4,166 per terminal to research institutes, with a minimum requirement of leasing 12 for 2 years. Bloomberg also offers professional data services for legal and political information, pricing in at $5,400 and $68,400 per year, respectively. The Terminal price is about par with Thomson Reuters’ Eikon platform at $22,000, and much more than Factset, a low cost competitor, at $12,000, and Standard & Poor’s Capital IQ platform at $7,500. Factset and Capital IQ have 5.6% and 4.5% (Burton-Taylor International,2017) market share respectively, focusing on the same features as Bloomberg with less comprehensivity and speed, but a lighter budget option for Investment Bankers that need the same information and analytical tools but can’t pay the high price.
Market Share / Market Growth
Bloomberg and Reuters however, source all of their own data and news from their own journalists and researchers, not relying on outside sources (as the Terminal relied on Dow Jones for its news in the 1980’s, before launching Bloomberg News), allowing them to compete at the top tier. However, where many can’t compete is in Bloomberg’s cement on wall street, where early subscribers were Investment Banks such as Merrill Lynch and J.P Morgan buying terminals in the thousands, the Bank of England, Vatican and the White House also relying on it for the most immediate, accurate financial data, and major news outlets such as the Wall Street Journal and the New York Times sourcing it for references in their news articles, allowing the latter to have publications out before competitors who don’t have terminals. This led to the accelerated growth of Bloomberg L.P by 38% annually (majority fueled by the terminals) for the past three decades, radically outpacing the 10-12% growth of the financial data services industry. From revenues of merely over 100 million USD in 1990, that figure has since grown to 9.4 billion USD, with approximately 1.6billion USD coming from Bloomberg L.P.’s non-professional services, namely the former news service which they launched through the 1990’s, and Bloomberg Businessweek magazine in the 2000’s. Through the 2000’s it was estimated that Michael Bloomberg’s personal annual profit (at a 72% ownership stake , growing to 92% after the Merrill Lynch exit) was around 1.5 Billion USD.
The Bloomberg Terminal first to market advantage is not the only thing that brought them out ahead with 57% global market share by revenue in the financial data services industry and a 33% market share by users. This dominance is split between the Bloomberg Terminal with 325,000 users, and its direct competitor, the Thomson Reuters’ Eikon platform with 190,000 users and 23% market share by users. Although there are many factors, the foremost is carried on from Mr. Bloomberg’s fixed income experience: bond market data. It is common knowledge in investment banking that if one is going to trade any sort of bond or fixed income instrument, they will not be able to live without a Bloomberg Terminal. The reasoning is two fold: firstly, because most bond’s and fixed income instruments aren’t trading on an exchange, rather over-the-counter, i.e directly from trader to trader. This requires a common place for traders to contact each other to trade these instruments with each other, effectively creating their own marketplace, and this is the Bloomberg Terminal Instant Messaging platform, hosting the highest concentration of buy & sell side investment bankers of any platform or network in the world. Secondly, there is a complementary effect, where Bloomberg has secured itself as the leader in the most comprehensive and immediate bond market data provider (on yields, prices, etc…), thus drawing bond traders to its platform, which further perpetuates Bloomberg’s comprehensive/instant bond market data by having the people trading the bond’s on its own platform. (Global bond markets are over a $100 Trillion dollar industry, the U.S. alone makes up 33% of the global market.)
Further competitive advantages lie in the sheer size of Bloomberg L.P (the provider of the data for the Bloomberg Terminal) and their control over the specific industry of finance, having 19,000 employees, with many focusing on scouring the internet, financial markets, press releases, and annual reports, for the most recent and accurate proprietarily sourced data for its platform. This holds advantage over its main competitor, Thomson Reuters and its competitor to the terminal, Eikon, where reuters has more employees at 45,000, but is split across divisions in mass media coverage of many industries, where bloomberg focuses on one: finance. Where Reuters’ Eikon makes up 4.5 billion USD (40%) of the companies’ 11.2 billion USD annual revenue, Bloomberg’s Terminal makes up 7.2 billion USD (75%) of Bloomberg L.P’s 9.4 billion USD (Burton-Taylor International,2017) annual revenue thus boding much more attention and resource allocation to advancing this service. Further, due to Bloomberg’s birth on Wall Street, it is most cemented in that market of investment banking in North America, and extending to trading partners in Asia as well. Whereas Thomson Reuters, through their purchase of Reuters group in 2008, a british media company, are most prominent in the European market, more so than the terminal.
Conclusion
The Bloomberg terminal is one of the largest, most comprehensive financial services used in the business world. The terminal is a relative user-friendly piece of technology for any type of financial professional. With an annual fee of just over $20,000 for large firm, it is a worthwhile investment for a piece technology that pays immense dividends in terms of performance, In addition to the annual tax credit expense associated with leasing the terminal. According to Bloomberg's website, the terminal does more than just provide instant feedback and and help with the firm's equity, it eliminates many unwanted uses of paper which can help the environment. With most information on computers, only 0.4% of emissions produced by bloomberg include the use of paper. Bloomberg also provides free trials and help for students who are entering the world of finance. There are options for a BMC certification that looks great on a student resumes as well as many opportunities for students to work at bloomberg. With opportunities like this, it expands the use of the terminal as well as increases popularity for up and coming finance professionals.
Although there are different alternatives to the bloomberg's terminal that can be cheaper in cost, it is still not the preferred system amongst professionals. Bloomberg has most of the market share because of the overall functions it provides that competitors can't. The black face behind the terminal is know all over wall street as well as the tsx. With this popularity from many big firms it has been trusted for years and continues to be the gold standard for financial market news, data and trading tools according to Benziga.com. Some of the capabilities that Bloomberg provides over their competitors is the news, live chat with other professionals, equities, fixed income securities, derivatives and the mist goes on. These are easy to use functions as they are on the keyboard that is provided with the terminal.
Unfortunately there are some disadvantages that go along with the terminal with the main one being cost. A terminal this expensive can only reach the some of the richest companies in the world which eliminates the thought of bloomberg for smaller start up companies.
Although it is an expensive product, the cost will be paid for dividends as there is no other service that provides the same user feedback and accessibility for professionals. There is no system yet to date that has the popularity the solidarity by professionals like Bloomberg terminal and it has been one of the top leaders for year and will continue to be for years to come.
In conclusion, Bloomberg has been securing new clients since the release in 1981 and has gained incredible market share since then. It is trustworthy and reliable and provides no other data like its competitors. Cost isn't the only deciding factor when it comes to a firm's choice as there is more to it than that. No system can be earned quite as easily as Bloomberg's and with professionals being put under high stress scenarios, the simplicity of the technology provided can put ease on an individuals as they can still perform. The derivative feature on the terminal is one of the most helpful to professionals and not many other companies provides such a helpful tool. Acadia University should look at buying the terminal due to the benefit it provides the school and its students. If Acadia is known for having the terminal and places its students particularly, it will increase the credibility of its finance program and will create a better attraction to prospective students. For its students it will increase the qualification of its students and will give them real world experience in the finance world today. Lastly, Bloomberg is the best option and should be the only option when considering functionality, trustworthiness, performance and benefits it has to Acadia University.
Bibliography
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https://www.bloomberg.com/professional/solution/bloomberg-terminal/
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https://www.benzinga.com/investing/best-alternatives-to-bloomberg-terminal/
Bloomberg vs Capital IQ vs Factset vs Thomson Reuters Eikon. (n.d.). Retrieved from
https://www.wallstreetprep.com/knowledge/bloomberg-vs-capital-iq-vs-factset-vs-thomson-reuters-eikon/
Bloomberg vs Capital IQ vs Factset vs Thomson Reuters Eikon. (n.d.). Retrieved from https://www.wallstreetprep.com/knowledge/bloomberg-vs-capital-iq-vs-factset-vs-thomson-reuters-eikon/
Murphy, H. (2018, March 22). Bloomberg and Reuters lose data share to smaller rivals. Retrieved from https://www.ft.com/content/622855dc-2d31-11e8-9b4b-bc4b9f08f381
Agini, S. (2017, March 28). Bloomberg sees rare drop in terminal users. Retrieved from https://www.fnlondon.com/articles/bloomberg-sees-rare-drop-in-terminal-users-20170328
MICHAEL J. de la MERCED and LOUISE STORY. (2008, July 17). Bloomberg Expected to Buy Merrill's Stake in His Firm. Retrieved from https://www.nytimes.com/2008/07/17/business/17broker.html