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The BW acquisition: Can Bloomberg extend beyond its core?
October 15, 2009  News
Several hundred BusinessWeek employees filed into an auditorium
at the McGraw Hill headquarters yesterday morning to learn about their
future. On the stage were top editors and execs from Bloomberg LP, which
had just scooped up our 80-year-old weekly (and its Web site) at an undisclosed
(but no doubt fire-sale) price.
Here's what we heard: Bloomberg, which sells its "box" for $20,000 a
year, is swimming in money, unfettered by the grim advertising economy,
immensely ambitious, and dedicated to becoming the leading power in
financial and business news. Getting bought by such an outfit bodes
well for many at BusinessWeek. While restructuring and layoffs are
inevitable at a magazine losing $1 million a week, Bloomberg ranks as the
closest thing in journalism these days to a safe home.
Still, I'm trying to think ahead 10 years and wondering about the
future of Bloomberg's model. They have a proprietary technology
platform in a world moving toward open standards. Their box has an
interface that requires training courses--this in a global market where
simple, intuitive systems rise to the top. These limitations haven't mattered to
date, because Bloomberg holds a trump card: speedy and reliable data. Traders have plenty of incentive to pay for the boxes and
figure out how to use them, because real-time data is a must. If their
competitors get the news first, they lose. It's this dynamic which fuels the 300,000 (and counting) subscriptions for Bloomberg boxes.
How much can this market grow? To listen to Bloomberg execs, they make
money from the boxes and invest that money in more news-gathering
power, which makes the boxes even more attractive. It's a virtuous
cycle which presumably leads to continuous growth. With BusinessWeek,
Bloomberg hopes to extend its brand into the wider business audience,
including c-suite executives, and open up further markets for their
boxes.
I don't see it. In my experience, every continuous growth projection encounters some force that disrupts it.
Seems to me that for Bloomberg to reach wider business dominance, it must leverage the power of its box outside
the box--finding a way to sell premium data services for a fraction of
$20,000 a year on the Web. This will require far more than the virtuous
cycle. The company, which a generation ago innovated with the box, will
have to innovate again, developing a new business model. Of course, it
doesn't hurt to have $6 billion in box revenue and and an immense news
organization backing it up. But still, it will require establishing new
and cheaper services that provide a dose of magic from the box, but
without cannibalizing it.
The BusinessWeek acquisition may provide some of the missing pieces. Yet despite the ambitions expressed at yesterday's meeting, I'd bet
that the magazine will end up serving largely as a promotional tool for the
company. The real business will be online. That's where Bloomberg 2.0
will take shape.
(I postponed a flight to Colorado yesterday so that I could attend the meeting, and then I struggled to get a standby flight out here. By the way, I didn't hear one word at yesterday's meeting about how Bloomberg plans to use social media. If and when I get to meet the buyers, I'll be asking them that.)
UPDATE: I neglected to mention a key part of Bloomberg's strategy, as discussed at Tuesday's meeting: Television. They want to become the leading global TV network for business and financial news and analysis. They're far behind CNBS in the U.S. market, but apparently are faring better elsewhere.
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