Here is my question: Say Bloomberg/T.Reuters try to acquire research content for their information solutions platforms they offer as a subscription to financial firms (FX trading/Sales, Investment Management, etc) on a contract basis. Bloomberg/Reuters now own 96% of this market. What is the incentive for research firms to offer their info to B&TR? How does B&TR get this research and information?
Can anyone explain this business model?
I assume you are talking about sell side research. If that’s the case, here is how it works: The sell side research firm posts their research on those platforms (there are others as well that they post on) for free. This helps to distribute the research so that they may reach more clients on the buyside. It also helps media sources get access to the research so they can quote the analyst in the newspaper, etc. (this is good because it potentially drives commissions at the brokerage firm by getting the analyst’s name out as some sort of supposed expert). The institutional salespeople who work at the brokerage firm manage their T/R accounts to see who is accessing the research their analysts publish, and then contact those people to collect payment (i.e., "heyyyyy, I know you’ve been reading a lot of our research lately, why don’t you pay us or we are going to cut off your entitlements on T/R and you won’t see it anymore). Other times, you have to pay first to even see the research on T/R (it depends on the firm). I am not exactly sure how it works on Bloomberg, but I assume it is similar. Other firms do not try to monetize the research distribution per se, but charge heavily in the form of “accrued commissions” on an annual basis necessary to talk to an analyst at the firm. Citi does this, for example. I think pretty much everyone has access to Citi research on T/R, but if you don’t pay Citi a MINIMUM of $500K a year in trade commissions (or possibly some flat fee of some kind), you don’t get to talk to their analysts (i.e., if you are a buyside analyst or PM, they won’t allow you to talk to the sellside analyst). So they monetize it that way. (Side note: Citi, you can suck it, we are never going to pay that much for your low value add research.) T/R is just the online research pimp. They don’t really add any value, and the service is weak at best, but they do charge a lot for the privelege of slow load times and inconsistent service.
Great response! Thank you so much. Last question, what does a relationship manager do at TR, for example? Are they in direct contact with the user? If so, besides schmoozing them so they renew their contracts, what else do they do? Find new research sources? Do they do for the their users? Thanks!
Also how does TR get paid if for example the user pays Citi for research posted on TRs platform?
Relationship Manager lol. I didn’t know that was their title. That is a sales person. They try to upsell more services and keep people on the buyside from leaving T/R for competitors, etc. (not so much an option now since Thomson, the Evil Empire, was allowed to acquire Reuters – Really DOJ? Really? Bad idea). I think they also offer some research tools to the sellside. I sat in on a meeting one time on the sellside where the guy was trying to sell us something, but I don’t remember what it was exactly. But yeah, basically it’s just sales. To be honest with, I think their main job is to try to understand how many people are using the service. I think you are only supposed to have a license per so many X employees. For example, where I work, everyone uses one license and shares the password (why pay more?). I think if the “Relationship Manager” visited the office and saw that, they might try to make us pay for additional licenses.
Mason88 Wrote: ------------------------------------------------------- > Also how does TR get paid if for example the user > pays Citi for research posted on TRs platform? The buyside firm buys a license to use the TR platform. The sellside pays nothing, as they provide the content to TR (they even upload it for TR – basically TR does nothing but host a website).
Hey Bromion, can I chat with you offline? Thanks!
Sure, post your email and I will contact you.
bromion, just sent you an email.