Unbundling the Bloomberg Terminal

When I think about monopolies, I usually think about a company that has figured out how to deliver a superior experience to their customer. This is the reason Amazon, though arguably a monopoly, should not violate U.S. antitrust law: consumers are much better off in a world with Amazon.com than a world without it.

But there's an interesting upside to monopolies which I hadn't previously considered. Although we usually think about monopolies as owning a market such that all competitors are starved of customers, I argue that a known monopoly precludes the creation of competitors who cater to a unique subset of companies that, for one reason or another, prefer to do business with a non-monopolist.

Let me explain.

Consider the Bloomberg Terminal. It's the preeminent tech product of the financial services industry. It's vastly superior to other products, not only because of its features, but because its used by literally everyone in finance. This sounds great, until your 2008 Bloomberg Data Leak exposes the risk of having this entire ecosystem rely on a single monopolist with fallible data security. Thus, the problem of doing business with the monopolist is that any threat to the monopolist is a threat to your supply chain. If Bloomberg were to fail, the financial industry would be affected worse than the aftermath of 9/11.

The 2008 Data Leak served as a wake up call for the financial industry, and Symphony was borne from this collective awakening to the dangers of having trillions of dollars of trading data concentrated in a single, fallible company.

This makes rational sense, but it's still a Catch 22: Bloomberg is dangerous because it's a monopoly which can fail, but the reason it's so valuable to traders is because it's a monopoly which everyone uses. As a solution, Symphony sought to wedge itself into a subset of the Bloomberg stack: back-office communication.

This strategy has two benefits:

• It enhances a non-priority workflow of the Bloomberg Terminal, which is chat between back-office (administrative) employees

• It capitalizes on the familiar logic of Glass-Steagall which forces banks to separate their speculating from deposit-bearing activities

Symphony must prove that it can gradually integrate itself into more valuable segments of the banking business workflow. Unlike the Bloomberg workflow, in which the chat feature coexists in the same dashboard as FX trading graphs, Symphony is highlighting the platform risk of having this information bundled together. Yet this has been the value of Bloomberg chat all along: bankers can create trades across institutions in real time, given the number of counterparties on the network. Not only do all institutions use Bloomberg, but the chat portal is in the exact same app as the orderbook, news ticker, and real-time ship tracker. If information is value, then Bloomberg will undoubtably continue to own the communication workflow for font-office bankers. Without this capability, Symphony is simply outside of Bloomberg's territory in chat-enabled market-making.

But this doesn't capture the full picture. Symphony is betting that back-office bank employees don't need access to a Bloomberg terminal to communicate with their coworkers in real time. Symphony is not selling chat, but a hedge against compliance risk.

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