Bloomberg is redoubling efforts to convince customers of the value of its new pricing model for its Bloomberg Data License service of intraday and end-of-day market and reference data—known as the New Commercial Model (NCM)—which it originally introduced in March, and which could see the cost of Data License increase by between 30 and 100 percent over three years.
The pricing model, which is part of the vendor’s new customer engagement model for enterprise Data License customers, came into effect from the start of June for existing contracts facing renewal and from April 1 for new accounts, according to a letter sent to clients in March by Bloomberg president and chief executive Daniel Doctoroff. However, in recent weeks, sources say the vendor’s sales management team has contacted Data License clients to obtain feedback on the structure of the NCM, and to visit customers in person to re-explain the model.
Although Bloomberg declines to comment on why it was revisiting customers, banks and buy-side firms have criticized the model, which will lead to unbudgeted price rises of up to—and in some cases more than—100 percent. “Originally they gave us a detailed breakdown of every single security license, back-office license, estimated dollar spend, renewal dates and all the instruments that had been consumed on the feed,” says a source at one sell-side firm. “Then in the last two weeks they came back and said they want to re-present this…. Bloomberg is keen to make sure customers understand everything and show that it is not as bad as it first looks.”
Under the old commercial model, customers paid a monthly charge per security, with prices based on six categories of instrument type and three categories of data type—a security master incorporating corporate actions and prices; derived data; and issuer data—plus a sub-category of price-only data. Under the NCM, Bloomberg has retained the monthly charges and the link between prices and data/instrument type, but has replaced existing categories with a greater number of new categories which result in higher fees overall than in the old model. For example, the security master, corporate actions data and prices for a corporate security were previously bundled together for $1.50 per security per month, but are now sold separately for $1.70, $0.50 and $0.75 per security per month, respectively—a total of $2.95 per security per month.
Bloomberg has also expanded the six instrument categories—including a category covering corporate, government, and money market assets; one for municipals; agency pools; collateralized mortgage obligations, commercial mortgage-backed securities, whole loans and asset-backed securities; equity options, futures, warrants, funds indexes and currencies; and economic statistics—to 11 categories, by splitting out different asset types into new, individual categories, such as separate categories for funds, US government and syndicated loans.
Meanwhile, the vendor has divided issuer data into three component categories—credit risk data, fundamentals and estimates—meaning that monthly fees for a corporate security have more than doubled from $2.50 to $6.50 in the NCM. The cost of derived data has risen by up to 50 percent depending on the asset class, while the vendor now charges for accompanying corporate actions data, regardless of whether a corporate action event actually occurred that month. Under the NCM, multiple requests from firms who wish to view the data more than once per month will also now be charged between one and three cents per security per day, depending on the asset class and data type, whereas previously the first multi-request was free.
More Flexible
Bloomberg officials say the new model is intended to provide more flexibility and value, and to allow clients to “only pay for the data that they want and need.” But one market data manager at a European asset manager calls the change a “pure slicing and dicing” exercise, adding that if a business needs to subscribe to all the content, “You get nothing new or extra—you just have to pay a lot more for the same data.”
To soften the impact of the changes for existing clients, Bloomberg’s Data Solutions group will provide enterprise data license consultants to help clients manage their data usage, and is phasing in the increases, so clients renewing their Data License contract this year and early next year will see stepped cost increments, limited to a total increase of no more than 7 percent in the first year and a further 7 percent in the second. Some clients praise this softly-softly approach but are concerned about the impact after that initial two-year period.
“In our peer group, we are sharing knowledge on how much it will impact us. For some, it’s 2 percent, for others it’s 30 or 100 percent, depending on what data you take and how exposed you are to certain services,” says a market data vendor manager at a second European asset manager. “Seven percent in the first year, then another 7 percent in the second is fine, but after that, when it hits you fully—that’s what we’re worrying about.”
In addition to incremental rises, Bloomberg will also offer “optimization,” whereby if a firm has multiple contracts with the vendor across different branches or business units and requests the same data on the same security in the same month via those contracts, then—excluding intraday and derived data—the vendor will only charge between one and three cents for the second request, rather than twice the full price, which it expects to deliver better value for clients.
However, Jean-Pierre Gottdiener, manager at Paris-based consultancy Lucidine Conseil, says firms who have made the biggest efforts so far to reduce costs and administration by consolidating multiple contracts across branches will not be eligible to take advantage of optimization, and will have to pay the most. “If you only have one contract because you have already rationalized your request to Bloomberg, there will be no optimization and you will support nearly the full increase of the prices,” he says. “Some firms have made no optimization on Bloomberg and their increase was only 30 percent, whereas those who have already made an investment to rationalize Bloomberg face a rise of 100 percent.”
Some acknowledge that the vendor’s prices are fair, given that data volumes have increased considerably since the last time the vendor increased prices—more than a decade ago, according to Bloomberg officials—but Gottdiener adds that Bloomberg’s leading position in the market means “the industry is facing a real issue from the policy, and will probably need to find alternative solutions.”
In fact, the NCM has prompted dissatisfied buy- and sell-side firms to reassess their data consumption. Some participants have even said they will look to alternative parties for cheaper data for some parts of the Data License, such as corporate actions, where plenty of alternative providers exist. “Often with Bloomberg, you just absorb the whole universe and pump it everywhere, so it’s good that we now have to look at what data do we use, where we use it, and why,” adds the source at the second asset manager.
Source: Waters Technology 08.08. 2011
