FT : Thomson Reuters Poised For Windfall In Downturn
Tuesday, April 28, 2009
Anyone who thinks the news business is dead should look at the wire services. Privately owned Bloomberg is adding 950 staff, 100 of them journalists, an almost 10% expansion. News Corp is cutting jobs at the Wall Street Journal but adding them at Dow Jones newswires. Nor is this hiring spree mere bravura. While newspaper groups such as the New York Times and Independent News & Media are in survival mode, the wires are buzzing. London-listed shares of information group Thomson Reuters, for example, are at the same level as last May, when the merger of Reuters and Thomson closed. Since then, the FTSE has dropped by 35%.
Bulls have seized on the idea that instead of just wholesaling news and data, the wire services can now also sell it direct to consumers via the internet or mobile applications, cutting out the middle man. Perhaps. But the risk that such retail ventures cannibalise more important wholesale revenues – the reason, after all, that many such attempts have foundered in the past – remains as high as ever. A bigger problem is the banking crisis. Peter Grauer, Bloomberg’s chairman, believes the financial services industry will cut its information spending by 20% this year. Such shrinkage offers a replay of the slugging match that took place during the dotcom downturn, when Bloomberg got the better of Reuters. This time, Thomson Reuters may fare better. Bloomberg cannot count on the hedge funds it courted in the 2000s to pick up the slack. It is dominant in fixed income, not the best place to be now; Thomson Reuters is stronger in forex and commodities. Furthermore, Thomson Reuters’ legal and medical businesses provide ballast. Bloomberg’s largely one-trick business, renting terminals at $1,590 a month, hinges on body count. Thanks to merger savings, Thomson Reuters trades at 15 times forecast earnings, a 32% premium to its peers. Not much of a safety net.