A while back, I posted about industries in which a B2B platform becomes so dominant that the industry’s participants worry about the platform’s potential to develop monopoly power.  In some of these cases, the industry’s participants will form a consortium (or cooperative) to try to dislodge the budding monopolist. I provided examples from retail, real estate, taxicabs and publishers.   The main point of the post, though, was how hard it is for these consortia to form and succeed.  One industry, however, has quite the successful track record in forming consortia: financial services.

Financial Services Consortia

Financial services consortia brought us some very successful companies and some attempts to toss out near monopolists:

• Visa and MasterCard networks
• ATM networks
• NACHA network
• Early Warning and Clarient Global in risk data-sharing
• VantageScore formed by the oligopolist credit bureaus to try to dislodge Fair Isaac’s FICO score

Now the investment banks are seeking unseat one of the most dominant platforms in their industry: Bloomberg.

Bloomberg’s Dominance

The Bloomberg terminal is the dominant platform for news, information, and chat in the trading industry.  Bloomberg terminals sit on the desks of an estimated 325,000 traders.  In some areas of financial services (e.g., bond trading), you might as well not exist if you do not have a terminal on your desk.

If you are not familiar with what the Bloomberg terminal is, you should listen to FiveThirtyEight’s great podcast on the subject.  It really is amazing that a clunky, non-internet based, keyboard-based application, with a terrible UI continues to dominate an industry.  It is a true tribute the benefits of the network effect.  It does not matter if the UI is nice if all the people you need to chat with to trade are on the Bloomberg Instant Messaging (IB) system!

The banks that depend on Bloomberg terminals are not happy about this dependency for several reasons:

• At $2,000 per month, Bloomberg is pulling about $8 billion out of the financial services industry every year.
• Bloomberg caused a ruckus when someone figured out Bloomberg journalists had special to usage data generated by the platform.
• Bloomberg represents a potential single point of failure for parts of the industry.

Symphony, A Consortium Response

To take on Bloomberg, 14+ banks have formed Symphony, a messaging service that hopes to expand to information services.  Investors in Symphony include Goldman Sachs (which contributed its messaging service), BNY Mellon, BlackRock, Citadel, Citibank, Credit Suisse, Deutsche Bank, JP Morgan, Merrill Lynch and Morgan Stanley among others.  If that were not a serious enough crew, yesterday Symphony announced it had raised another $100 million (at a valuation of $650 million) from UBS, Societe Generale and one other investor that knows as little about dominant platforms:  Google.  (Apparently Google would like a little piece of an $8 billion+ information market it does not participate in!)

Symphony’s messaging service appears to cost $15 per user per month (for companies with more than 50 users) according to Symphony’s website.  That’s a nice penetration price.

It’s setting up to be quite a battle.  Symphony also announced that it has signed up McGrawHill and News Corp’s Dow Jones as information services.  These two companies are not only natural competitors to Bloomberg, they are also owned/managed by folks with different political leanings than Michael Bloomberg. This is a consortium likely to put up quite the fight.  And Bloomberg is likely to fight back with all of its considerable resources!

This is going to be one terminal battle!  Pull up a seat and watch some real heavyweights duke it out!