SPOOZ Inc (SPZI)

[songbirdia]

'I've got to have a Bloomberg'

(Exerpt from Fortune article about the Bloomberg product)

The mountains of information on a Bloomberg, and the functions that allow the data to be usefully analyzed, are both the service's glory and its occasional burden. One Manhattan value investor said recently he'd removed the Bloomberg from his desk because he was spending too much time on it. Some technical fumblers and old-school moguls also find the sheer size of the Bloomberg menu daunting.

Michael Steinhardt, the hedge fund pioneer, said recently that he has a Bloomberg on his desk but doesn't know how to use it. The retired chairman of Citigroup, Sandy Weill, says he uses his but wouldn't dare stray from the pages that show the price of Citi stock and changes in the major indexes, for fear he could never get back to them. (Another financial notable, Warren Buffett, does not have a Bloomberg on his desk, though a member of his staff uses one gratefully.)

To be sure, if you're willing to learn, training classes are freely given and hordes of Bloomberg customer-service people will "smother you with love" - that's how Lex Fenwick puts it. You could tax them with questions 24/7, and they would politely pass you around the world's time zones, from one help desk to another, normally talking or writing to you in your own language, even if that's Urdu.

As for Bloomberg prices, they have no direct connection to the mass of content the company has added over the years - they just go up periodically. Not by a bundle, either, since it is pretty clear that Bloomberg does not see itself as blessed with price elasticity. Late last year, the company raised rates roughly 5 percent, as it has done about every two years in the recent past.

Here are the current particulars: When a customer buys a standard Bloomberg Professional subscription he enters into a two-year contract, paying quarterly in advance. If the customer has just one Bloomberg, the rate is $1,800 per month. If he has multiple Bloombergs, which is overwhelmingly the case, the charge is $1,500 for each. Should the customer want Bloomberg to, for example, effect equity trades or supply flat-panel screens, there are additional charges; real-time stock prices are among the other items that cost extra.

An unusual element of this pricing structure - and a pillar of the business model - is that Bloomberg absolutely will not provide volume discounts. The monthly price if you have two Bloombergs is $1,500 for each; the price if you have 2,000 Bloombergs is $1,500 each. Neither can you buy only a portion of Bloomberg's data. It's the whole megillah or nothing.

Big news at Dow Jones
In contrast, Reuters and Thomson Financial are much more flexible about both price and what they will sell. Reuters actually has more terminals installed than Bloomberg but doesn't come close to getting as much in revenues out of each one.

Talk to a large number of Bloomberg customers, and you will find some who don't know what a subscription costs and others who think the price steep, to the point that they contemplate having their Bloombergs removed. In between, there are people who know precisely what they are paying and find the product worth it. The technical expert at a respected money-management firm recently called Bloomberg "an essential component of our business process" and went on to give his view of the world: "There are really two types of market-data users out there - the ones who have a Bloomberg and the ones who wish their firm would spring for one."

There are funny echoes of that opinion in a recent experience of Paul Darrah, an architect who oversaw the construction of Bloomberg's new Manhattan headquarters, then last year took a new job as head of real estate at Lehman Brothers. Darrah recalls being introduced early on to a Lehman executive who, hearing where Darrah had come from, tore into him about Bloomberg, gathering steam as he talked.

"It's like drugs," railed the executive, "like selling heroin, and they get you hooked, and they screw around with cables under your desks, and they keep selling ... All the traders are out there saying, 'I've got to have a Bloomberg, I've got to ... ' It's like crack cocaine, because everyone has to have it, right?" He stopped and pinned Darrah with a fierce look: "I'll bet you're a spy. They put you in here, didn't they?" It took a while, says Darrah, but finally the executive cooled down and allowed, "It's a brilliant product."

http://money.cnn.com/magazines/fortune/fortune_archive/2007/04/16/8404302/index3.htm