We try not to indulge in media navel gazing here at FT Alphaville, but sometimes something comes along that just deserves a wider audience.
Step forward, Felix Salmon, the blog ambassador at Reuters, who has penned an interesting analysis on comment service Breakingviews, which also touches on the business of financial commentary itself. The back story here, of course, is that Reuters is in preliminary discussions to buy Breakingviews.
Here are the first few pars:
Cyrus Sanati confirms that my very own employer “is in preliminary discussions” about buying Breakingviews. Needless to say, I have no first-hand, or even second-hand, knowledge of such matters — nobody tells me anything, and nor should they. But I can say that this smells of desperation on the part of Breaking Views, and I will also confidently predict that the deal is not going to happen.
If I had to guess, I’d say that (a) Breakingviews has had talks with Thomson Reuters in the past, before we set up our own commentary service; that (b) faced with mounting losses Breakingviews called another meeting; and that (c) it then promptly leaked that meeting to the Times, characterizing it as “preliminary talks”, in an attempt to scare up some other buyer.
When I joined Reuters’s commentary group, it was clear to me that we were a Breakingviews killer: we were going to provide better commentary than they do, at the unbeatable price of $0.00. Reuters can afford to do that because journalism is always a loss center here: the profits come from terminal sales, and introducing a commentary service adds value to the terminals and makes them easier to sell. It doesn’t need to be priced separately.
What’s more, Breakingviews never really came to terms with the inherent tension in any subscription-based commentary service: analysis and commentary tends to be valuable and important insofar as it’s influential, and you only get influence when you have a large number of readers. The FT’s Lex column, whose alumni are now running not only Breakingviews but also the WSJ’s Heard on the Street column and the Reuters commentary group, became influential for one main reason: it was read by substantially everybody in the City of London, normally during their commute into work. Similarly, it’s hard to imagine Thomas Friedman having a fraction of his current influence if he didn’t work for the NYT. . .
The rest can be found here, including Salmon’s conclusion.
To Reuters, then, the value of Breakingviews can be broken down into three parts. There’s the value of its contracts; the value of its brand; and the value of its journalists. The contracts are clearly a wasting asset; the brand is associated with an outdated and increasingly quaint business model; and the journalists, insofar as we want them, can be much more easily hired individually and incorporated into the existing commentary group, rather than trying to engineer an awkward merger between two very different teams.
Before the Reuters commentary team was built, there was a case to be made that Reuters should buy Breakingviews and get a fully-formed commentary team with a certain amount of reputation which it could then repurpose to its own ends. The company didn’t go down that route, and — wonderfully — decided to build its own commentary team instead. At that point, any hope within the group of Breakingviews shareholders that it could exit via selling out to Reuters must have died. And I trust that’s what Reuters told Breakingviews at that “preliminary discussion”. If Breakingviews is looking to sell out, they should hope to find a different buyer.
