Of all the scandal bits now spinning around the revelation that employees of Bloomberg News had access to some sensitive data about users of Bloomberg's terminal software, the only one that likely matters to executives inside Bloomberg LP's 731 Lexington Avenue headquarters is, "Will this hurt the terminal business?"
The answer to that question is almost certainly that it won't — at least, not materially. Over the last 30 years, Bloomberg has built its subscription terminal software into an indispensable part of Wall Street's money machine, a tool whose thousands of functions are so deeply engrained in the trader's psyche that giving it up would be nearly impossible. For all the embarrassing revelations about Bloomberg News reporters snooping on Ben Bernanke and Alan Greenspan through their terminals, the more telling fact is this: Since the scandal broke last week, Bloomberg says that not one terminal client has called to cancel a subscription.
It's impossible to overstate the terminal's importance to the success of Bloomberg LP. It's the source of roughly 80 percent of the company's massive revenues ($7.9 billion in 2012), and the only reason Bloomberg is able to have a news division of its own, to say nothing of considering acquisitions of expensive major newspapers like the FT. Bloomberg employees are given year-end bonuses that are calculated based, in part, on terminal sales. And Dan Doctoroff, the company's CEO, is said to keep a hanging mobile of the solar system in his office.
"The terminal," he tells visitors, according to one insider, "is the sun."
The Bloomberg terminal's appeal has always been slightly hard to explain. It's not a particularly modern-looking piece of software (its interface resembles an MS-DOS server mated with a TI83), its learning curve is notoriously steep, and at about $2,000 a month for a single installation, it can be one of a bank's biggest recurring IT expenses. But the Bloomberg terminal has one thing going for it: Its users are addicts.
“It’s the behavioral issue,” one terminal-using financier told me, several weeks before the snooping scandal broke. “Why do people like Apple? They’re used to it. Android might be a superior system, but people are wedded to a device.”
Competitors have been trying to unseat Bloomberg in the terminal game since the early eighties, with little success. Thomson Reuters, Bloomberg’s biggest competitor in both news and financial data, rolled out its Eikon terminal in 2010 with a multi-million-dollar marketing campaign. Eikon was by many accounts cheaper, easier to use, and more aesthetically pleasing than the Bloomberg terminal, but users on Wall Street didn’t bite. Three years later, there are only about 30,000 Eikon users worldwide — roughly a tenth of Bloomberg’s base.
One New York equities trader, whose firm recently switched from Bloomberg terminals to Reuters Eikon terminals, told me told me before the snooping concerns were brought to light that the Reuters terminals are more user-friendly, and are able to do most (though not all) of what a Bloomberg terminal can when it comes to sorting and analyzing financial data. Still, he admitted feeling left out.
"The only reason I have a Reuters terminal is because my firm pays for it," he said.
Part of the Bloomberg terminal's stickiness is owed to its instant-message function, which bankers and traders use to communicate with their colleagues and counterparties. There's also the issue that many firms have customized their Bloomberg data platform with their own add-ons, making it prohibitively expensive and time-consuming to switch.
"It wouldn’t be painless" explained a portfolio manager at one well-known trading shop last month. "We’ve built a lot of things on top of Bloomberg that you would have to rebuild."
Even the terminal's atavistic interface has an odd appeal. It requires the use of an old-school command line, into which users type commands like “PHDC 1 ” (look up a company’s institutional shareholders) or “GOVT GGR ” (get government bond information). Navigating the system is notoriously tough to learn — which can make its subscribers feel intensely devoted to it, as if they’ve been inducted into an exclusive fraternity.
“It’s a yard stick in our industry,” the portfolio manager said. “If you can’t use it, you suck.”
Of course, with any beloved and trusted system, there are security concerns. The portfolio manager told the story of what happened when a co-worker failed to treat his Bloomberg with sufficient care. “One of our guys had to leave his terminal once and forgot to log out,” he reminisced. “His colleague IMed his entire Street coverage, and wrote, ‘Talk dirty to me.’” Horseplay may not be what the terminals were created for, but their social functions are part of what’s made them seem so indispensible.
It's still not clear to what extent Bloomberg News reporters were able to snoop on sources through the terminal. The company has claimed that only mundane details, like last login times, help desk transcripts, and broad data about function usage, were visible to journalists through the UUID and Z functions. I asked Bloomberg whether, as one SlashDot poster claimed, reporters were able to see which users ran analytics functions on a given stock, to which company spokesman Ty Trippet replied simply, "Reporters did not have access to specific searches of users."
Several former Bloomberg News employees told me that they had mostly used the UUID and Z functions for benign purposes, like seeing whether colleagues were logged on to their terminals. Many said they had considered the functions a novelty and not a serious reporting tool that gave them an edge over the competition. Moreover, they said that although Bloomberg terminals contain a massive amount of personal information about terminal users — phone numbers, e-mail addresses, work history — almost all of that information is available to all subscribers, not just Bloomberg News employees.
It does seem, at first glance, as if the information Bloomberg News reporters gained was used more for newsroom kicks than actual news-breaking. The incident that got the company in trouble — a reporter telling Goldman Sachs he'd seen that a Goldman partner hadn't logged in to his terminal in a while, and speculating that he might therefore have left the bank — is perhaps the clearest use case. Others aren't so scandalous.
"I used to monitor my boss," one former Bloomberg employee said.
But, for a minute, assume the worst. Assume that, for years, Bloomberg News reporters have been stealthily snooping on their sources through the terminal, gathering valuable information for stories with a wanton disregard for client privacy. Would clients flee?
Not many people think so. The Bloomberg terminal is more than a mere work aid — it's an entire information ecosystem, into which a generation of Wall Street traders have wrapped their habits and routines. Terminal clients who are offended at the breach of privacy can take some steps — renegotiating their contracts with Bloomberg, moving certain extra-sensitive functions like IM off the terminal — but unless they're willing to radically overhaul their company's work flow at great expense and annoyance, they can't just leave.
So while media watchers might rejoice in a legendarily secretive and cutthroat media organization coming under the microscope for a privacy breach, they shouldn't celebrate too hard. After the privacy issues are tied up and a few pro forma steps are taken to put clients at ease, it will be back to business as usual for Bloomberg.