Recently, JPMorgan Chase (NYSE:JPM) CEO Jamie Dimon announced that the company would be eliminating a significant number of its Bloomberg terminals.
In this clip, Chris Hill and Bill Mann explain what such a terminal does, how it's related to the Bloomberg news organization, and how much one machine costs to rent (hint: it's not cheap). They also discuss the competition, how the company is starting to lose its iron grip on the market, and what JPMorgan Chase's move is probably meant to convey and to whom.
A full transcript follows the video.
This podcast was recorded on Jan. 13, 2016.
Chris Hill: Let's move over to financial services. JPMorgan is one of those big Wall Street banks that makes a lot of money. That doesn't mean that CEO Jamie Dimon isn't looking to tighten up the purse strings a little bit, and now we see reports that he's looking to cut the Bloomberg terminals at his business. And when you consider that a Bloomberg terminal costs $21,000 a year to rent, and they've got ... a couple thousand?
Bill Mann: They're spending easily a couple thousand! I saw a number, and you would hope that I would have verified it before I came in to the studio, but I saw a number that was in the eight digits for how much they're spending on Bloomberg each year at JPMorgan.
Hill: I kind of like that Jamie Dimon is saying, "You know what? We don't need all these, and maybe we don't need any of these."
Mann: Yeah, I think that probably, one, the folks at ... I'm trying to use a word other than "mafia," but I'm going to fail at it. I think Bloomberg is the closest thing to a mafia power that exists in finance, because it is such a default, and they have been able, for years, to come in and say, "Well, this is our pricing. Discount? No. There's no discount. This is our pricing." So even for places like JPMorgan, there are now credible alternatives to Bloomberg, and one that is very exciting to a lot of people is called Eikon.
Hill: It's not tied to Carl Icahn, is it?
Mann: No, but that would be awesome. Different spelling. So, Carl Icahn ... I bet he's going to try to take credit for it now, like, "Why didn't I think of that?" So they may be negotiating a little bit, but it may be as much a message for his staff inside, "If you want this $21K a year terminal, you had best be producing. So if you're a producer, we have no problem whatsoever. But if you're not a producer, this is the beginning of a list of things that are at question, probably including your job, but we'll start here."
Hill: And for those unfamiliar, Bloomberg, as general consumers, as retail investors, we're much more likely to encounter Bloomberg the news organization, Bloomberg podcasts, etc., and Michael Bloomberg built that media empire. But the goose that lays the golden egg year after year for Bloomberg is these terminals, which cost $21,000 a year, and essentially give you any financial information you could ever want at your fingertips. And in the 1980s and '90s, I could see where, "This is a must-have, we have to have this." But now, I just look at it, and I don't know.
Mann: Bloomberg is the closest thing that they have on Wall Street that is like the owl network in the Harry Potter world. They have their own news service, and it's a closed environment, but they also have a messaging service that is highly prized, because everyone on Wall Street -- and by Wall Street, I don't just mean New York City, I mean San Francisco, Tokyo, Kazakhstan, whatever, whoever's in finance -- they have a Bloomberg terminal so they can speak with each other. It's a secured messaging system. And it's closed. I think the vapor lock they have on that business is breaking a little bit, and Jamie Dimon is swinging a hammer. But it's not something that people who are outside of finance are necessarily familiar with, just how dependent people are in finance on Bloomberg.
Hill: And I can see, particularly for smaller outfits, not necessarily for something the size of JPMorgan, one of the benefits is, it's a little bit of a status symbol. You're bringing clients in, "Oh, yeah, we're in touch with everything, because we've got a Bloomberg terminal."
Mann: Every picture of every trading floor or every PM shop you've ever seen seems to have a Bloomberg terminal in the back, and it has some chart or whatever. That's an expensive backdrop. We don't have one. We don't use Bloomberg at all. I think we are ... yeah, we're definitely out of the ordinary. Whenever we get asked by a broker, "Send us your Bloomberg contact," and we don't have one ... But I don't see the need for us. I really don't. And I think the absolute need among people in finance is declining.