Goldman Sachs was not happy to learn that Bloomberg News reporters had access to information about the working hours and news habits of its staff via the terminals it leases from Bloomberg. And given the money at stake, Bloomberg was probably even less happy.
The issue apparently came to light when an unidentified Bloomberg News reporter casually asked a source at Goldman if a partner still worked for the firm, according to the New York Post. The reporter's question was prompted after he noticed that the partner hadn't logged in to his Bloomberg terminal lately. Incensed that a reporter had that kind of info on their employees, Goldman confronted Bloomberg LP and received assurances that the parent company would curtail reporters' ability to get that kind of information. (Our colleagues at Quartz describe what the reporters could access.)
But let's talk about those terminals. Since Michael Bloomberg, a former partner at Salomon Brothers, starting leasing computer terminals to Wall Street in 1982 (originally under the name Market Master), his boxes, which give subscribers a steady stream of news and market info — have been a common (but pricey) part of any trading office. Bloomberg is a privately held company, so exactly how many terminals it leases is not public. But financial data does leak out: at the end of last year, the Financial Times reported that Bloomberg has more than 315,000 subscribers. The going price is about $20,000 a year according to the Post. So, an imprecise, back-of-the-envelope calculation puts Bloomberg LP's terminal subscription revenue at $6.3 billion — which would be the lionshare of teh company's reported $7.92 billion in total revenue. This stream of fees has made Michael Bloomberg a very rich man and allowed Bloomberg News to become one of teh biggest employers of journalists in the country — meaning Bloomberg is best understood as a terminal company that happens to have a newsroom, cable channel, and weekly magazine.
Bloomberg News wasn't founded to be a money-maker in the traditional sense of media; instead, it was formed to feed the stream of news shown on the terminals. A Vanity Fair feature on Bloomberg News from 2008 explains the impetus:
By bringing on one of the best-known members of the Old Guard, Bloomberg News got more attention than it had received in the 18 years since Michael Bloomberg created it after realizing that his eponymous financial-information company had to start producing exclusive editorial content if it wanted to safeguard against an erosion of subscribers to its computer terminals. Even today, after a two-year period in which Mike Bloomberg flirted with a presidential run and in which secretive negotiations concerning a possible sale of his company valued it at upwards of $20 billion, very little is known about an operation with one of the largest editorial staffs in the world.
When the news division was still young, Bloomberg built a way for reporters to access customer data, according to the Post. Over the next 15 years, that access was never revoked, giving an enterprising finance reporter a window into the industry he covers that his peers couldn't match. It's as if a sports reporter worked for a company that managed the private phone system agents used to talk to teams. It would be pretty hard for a good reporter to resist taking a peek at who's been calling whom, if the info was just laid out in front of them.
For Bloomberg, that's a massive problem. There's an implicit level of trust users have in news services. This site, for example, can tell where you're reading this article from, what browser you're using, and so on. But unlike Bloomberg terminals — which have access to even more data given the closed nature of its system — you're not paying money to The Atlantic Wire. If companies thought that Bloomberg was tracking their information to break stories for its news service, it would undermine confidence in the terminals as a tool even as people more broadly become wary of data-sharing.
And, the thing that makes Bloomberg's terminal business such a money maker (they're expensive, so they don't have to sell that many) also makes it very vulnerable to a few customers deciding for whatever reason to cancel subscriptions.
The financial world is taking notice. This afternoon, Business Insider reported that similar data access occurred while Bloomberg News was covering massive 2011 losses incurred by JP Morgan Chase due to a rogue trader. That trader, Bruno Iskil, left the firm, which Bloomberg News may have learned about due to its proprietary data. Business Insider spoke with a source at Chase: "They were pretty blatant about saying they noticed if you haven't logged into your Bloomberg or you haven't been trading in a while."
In its original article, the Post quotes a Bloomberg spokesperson: “In light of [Goldman’s] concern as well as a general heightened sensitivity to data access, we decided to disable journalist access to this customer relationship information for all clients." The company had little choice. A scoop about a Goldman partner leaving the company or an inept trader is not worth gambling $6 billion in annual revenue.
Update, 4:21 p.m.: A memo sent to Bloomberg employees and shared with The Atlantic Wire outlines the data the reporters had access to and the steps the company has taken to ensure that such access doesn't happen again.
Last month we changed our policy so that all reporters only have access to the same customer relationship data available to our clients. Additionally, we decided to further centralize our data security efforts by appointing Steve Ross, one of our most senior executives, to the new position of Client Data Compliance Officer. Steve is responsible for reviewing and, if necessary, enhancing protocols which among other things will continue to ensure that our news operations never have access to confidential customer data.
The memo ends, "Client trust is our highest priority and the cornerstone of our business, and we are deeply committed to ensuring the complete integrity and confidentiality of our clients' data in all situations and at all times."
Update, May 11: An article in The Times indicates that "several hundred" reporters took advantage of the access.