When Lex Fenwick started his job as CEO of Dow Jones & Co more than five months ago,he found it strange that one of Wall Street’s most historic and well-known brands did not have a direct pipeline into Wall Street itself.
The 130-year-old publisher of Dow Jones Newswires relies on third parties,including rivals Bloomberg LP and Thomson Reuters Corp ,to deliver its content to banks,brokers and funds; it does not have its own distribution channel.
Fenwick intends to address that with a plan to make the Wall Street Journal’s website a single portal for financial institutions to access all content from Dow Jones,including Newswires and risk and compliance tools.
Even bloggers have their own distribution platform,Fenwick,53,told Reuters in his first interview since Dow Jones’ owner,News Corp,hired the British executive from Bloomberg in February. For a rich content company to not have a distribution channel directly to an institutional customer seems to be shortsighted,he said.
Fenwick’s ambitions to sell directly to financial institutions is a change in strategy for Dow Jones. It comes at a critical juncture for Rupert Murdoch’s News Corp,which is preparing to spin off its slower-growing publishing assets from the more lucrative film studio,cable and broadcast TV networks.
As newspapers around the world suffer sharp drop-offs in advertising sales,the standalone publishing company will need to bolster its business with financial institutions and other companies to drive growth.
Fenwick said he intends to raise prices for the newswires,whether customers get them through WSJ.com or through market data platforms sold by Bloomberg,Thomson Reuters,FactSet Research Systems Inc and Interactive Data Corp.
That could be a tough sell given that many Wall Street banks,whose profitability has been sagging,are currently cutting staff and seeking to save costs.
When News Corp bought Dow Jones in 2007 for $5.6 billion,Murdoch mainly wanted to get his hands on the Journal. He invested in the paper and its website and cut costs,whittling down 17 printing facilities to nine and outsourcing print to metro newspapers.
Analysts estimate News Corp’s publishing assets to be worth $7 billion,dwarfed by the entertainment unit’s $52 billion. Newswires and the Factiva news database generated about $500 million in revenue last year,a quarter of overall Dow Jones revenue.
Last year,Dow Jones had the opportunity to bring in an executive with experience selling to business clients when Les Hinton stepped down as CEO in the wake of the phone-hacking scandal at a Murdoch paper in Britain.
Enter Fenwick,a 25-year veteran at Bloomberg,credited with building its European business,implementing a laser-like focus on customer service,and doubling revenue to $6 billion when he was CEO from 2001 to 2008.
Since joining Dow Jones,Fenwick has created a stir by voicing to sales staff and customers his dislike of the company’s reliance on distributing through rivals,the so-called feed business. Some of these sales staff and customers said Fenwick’s attitude has sparked speculation that his ultimate goal in creating a new platform is to cut out third-party distributors.
The idea of reselling or delivering through Thomson Reuters,Bloomberg or others it is very much a question mark if that is going to continue,said one such source,speaking on condition of anonymity. There was a very clear sense communicated by Lex to the sales organization that he did not like the feed business.
But Fenwick rejects that description of his strategy,saying there were no plans for Dow Jones to acquire the market data it would need to compete with its larger rivals,which can package news with real-time price quotes,charts and analytics.
He said he sees little near-term opportunity to loosen the stranglehold of the big data distributors.
We have plans to build and evolve our product. Absolutely,he said. But Reuters and Bloomberg have been doing this for 30 years. Do you really believe that anybody could go out and do something that is comparable in three years? In six years? It would have to be so disruptive and so extraordinary.
Bloomberg,Thomson Reuters,FactSet and IDC all declined to comment.
The WSJ.com is now mainly a consumer website that carries a selection of stories from Newswires but far from the entire feed. The goal of the project,dubbed Grand Central,is to crack open new markets using the brand cachet of the Journal,Fenwick said.
He sees hedge funds,independent retail brokerages,and corporate executive suites as areas where the company could pick up additional clients through direct sales – but the site won’t be targeting the big banks.
The likelihood of a high-end institutional guy at Goldman Sachs saying,’I am going to get the new DJ Grand Central product’ – we don’t sit here and honestly think that is going to happen,Fenwick said. Pricing is a key issue for Fenwick.
Currently,Dow Jones prices vary and it offers big discounts for large orders.
For example,Dow Jones news service – historically known as the broad tape – can cost as little as about $20 a user for big brokerages with tens of thousands of users,to as much as $900 for a firm with just one user,according to Douglas B. Taylor,managing partner at Burton-Taylor International Consulting LLC. The size of the difference is partly related to the costs of installation,which drop per user if there are more.
Fenwick said the bulk deals are likely to continue but at higher prices. We would like to put the prices up,as against down,he said.
On the website,Fenwick is seeking to create more standard,transparent pricing,which would mean a customer would pay the same per log-on whether ordering for one user or for many. He declined to be specific about the prices.
In some ways,Fenwick’s strategy takes a page from the playbook of his former employer: Bloomberg sells one product for one price – about $20,000 a year — to all customers.
But given the problems on Wall Street,some analysts say the banks are likely to push for discounts.
Bloomberg is the only one that has been able to stick to this very firm fixed-price model because they are most unique in terms of content,said Piper Jaffray analyst Peter Appert. Given the financial pressure the customers are under,it would be fairly challenging for Dow Jones.
Dow Jones,whose clients range from big banks like Bank of America Merrill Lynch to brokerages like Raymond James Financial Inc,has tried a proprietary platform before.
In 1990,it bought out the rest of electronic financial information company Telerate that it did not own for about $1.6 billion. But the acquisition was a disaster due to cultural clashes and weak product development. In 1998,Dow Jones dumped the remains of the business for little more than $500 million.