LEXIS-NEXIS has acquired three online services from the U.K.-based FT Group, including the proprietary online host FT Profile; FT Discovery, a fixed-price Web product; and FT NewsWatch, an intranet current-awareness service. The three services formed the Business Information Products division (BIP) of the Financial Times Electronic Publishing group.
The acquisition of BIP by LEXIS-NEXIS is one more step in the ongoing consolidation of the information industry, and was no doubt triggered in part by the recent joint venture between Dow Jones and Reuters in which the two companies' online business information services were merged into Factiva.
Commenting on the sale, Stephen Hill, chief executive of the FT Group, said: "The FT Group's strategy is to be a leader in the provision of business information, comment, and analysis, with a global perspective. Our historic archive services have a strong niche but lack the scale required to compete successfully in the worldwide market."
Currently employing around 130 staff members, BIP has users in Europe and Asia, but little presence in the U.S. As such, the acquisition gives LEXIS-NEXIS a welcome boost to its European aspirations. "The deal gives us 3,000 new customers in Europe and Asia and significantly strengthens our position in European business information," said Jon Webb, managing director of LEXIS-NEXIS Europe.
As part of the deal, the FT Group will extend its existing license agreement to allow LEXIS-NEXIS to offer online access to the full text of the Financial Times newspaper in Europe. (Previously, distribution was limited to the U.S. and Asian markets.) Additionally, LEXIS-NEXIS' licensing agreements for the FT's European Intelligence Wire and Asia Intelligence Wire have been extended.
The acquisition itself, however, brings little in the way of new content to LEXIS-NEXIS—apart from the French newspaper Les Echos, the Spanish business paper Expansion, and a new FT product called Global Newswire.
For the FT Group the sale provides an orderly exit from a business in which it was struggling to compete, allowing it to focus more sharply on its growing range of Web products targeted at end-users. This includes FT.com, the site of the Financial Times newspaper, and FTYourMoney.com, a personal finance site. The company has also just announced a $30 million equity stake in The Industry Standard, a U.S. Internet business magazine, and a joint venture with CBS to produce a European version of CBS.MarketWatch—a free Web-based financial and market news information service—to be called FTMarketwatch.com.
While the sale of BIP signals a farewell to the traditional information industry for the FT, FT.com marketing communications director Paul Waddington stresses that it does not mean an exit from the archival database business. "The deal excludes the data production area of the business, including the Business Research Centre and World Reporter [the database jointly developed with Dialog and Dow Jones]—which is a key resource, both for licensing to third parties and also to drive the databases within FT.com."
Interestingly, the Global Archive that sits behind FT.com—which remains with the FT Group—is a subset of FT Profile and offers archival access to around 3,000 news-oriented sources. Additionally, while it is not being publicly stated, it seems likely that LEXIS-NEXIS may also begin to supply archival content to FT.com users in the future.
For the moment it is not known how BIP's products will be incorporated into the LEXIS-NEXIS operation. Nor is it clear what licensing implications there may be—not least in respect to World Reporter. "We will be working closely with our licensor partners in coming weeks to migrate the sources, and put them in both services where appropriate," said Webb. "It's too early to say whether we will face any difficulties over this."
The Products in More Detail
Originally three separate services (World Reporter, World Exporter, and Magic), FT Profile gained an early reputation for the breadth of its full-text sources and its simple but effective search capabilities. Over time the original MS-DOS commands have been supplemented with a Windows interface, but, despite several attempts and a great deal of development time, there is today still only a beta Web version of the service. Currently FT Profile provides access to around 7,000 sources, including newspapers and business journals, company profiles and financial information, industry and market reports, and sector and country analysis.
Released in 1995, FT Discovery is a Web-based desktop service that provides access to around 4,000 sources of business information, including the full text of the Financial Times, World Reporter, company reports, country and sector analysis, as well as real-time news.
FT NewsWatch, launched last year, is a current-awareness service that delivers news and information through corporate intranets. It includes content from the Financial Times and World Reporter, with an option to take Asia Intelligence Wire and China Intelligence Wire, too. Users are able to run preset searches that can be retrieved at any time from any location on the corporate intranet.
Show Me the Money!
The sale of BIP neatly underscores the challenge faced by the online industry in recent years. According to FT.com, LEXIS-NEXIS paid "less than £10 million ($16.5 million)" for the business, adding that it "generated annual revenues of about £15 million, but was losing money."
It is instructive to note that when, in 1987, the FT acquired Datasolve (as FT Profile was then known), it itself paid £10 million. That it has failed even to realize its original investment (leaving aside the impact of inflation and the ongoing costs incurred by the business over the past 13 years) is a sad reflection on the financial health of the industry. "I think you will find that other companies in the online business—Reuters, Dow Jones, etc.—have experienced the same difficulties," said Waddington. "The industry promised a great deal, but it has never really delivered on that promise."
True, the FT Group has suffered from the additional burden of poor management over the past 10 years. After persuading its parent (international media organization Pearson plc) that it was capable of becoming a global player, the FT Group was given the funds to make a string of acquisitions, including the Analysis Corp. in 1991, Extel and the Broadcast Monitoring Service in 1994, Interactive Data Corp. in 1995, and Asia Intelligence Wire in 1996. But it subsequently failed to leverage these assets effectively, and the sale of Extel to Primark last year, followed by the sale of BIP, suggests that many of them are now being shed.
"I think BIP lost the plot," said Karen Blakeman, chair of the U.K. Online Users Group (UKOLUG). "I found it increasingly difficult to understand as a user how their products slotted together, if at all, and they always seemed to be 12 to 18 months behind everyone else."
A source of amusement even then, it now seems laughable that, in 1993, the U.K. Office of Fair Trading felt compelled to refer FT Profile to the Monopoly & Mergers Commission as having "a market share sufficient to make it a monopolist in terms of the Fair Trading Act."
Which Way Forward?
The sale also draws attention to the quandary the industry is in today in developing a successful strategy for the future. Does it stick to its knitting, or does it succumb to the blandishments of the Web?
The FT has clearly concluded that the traditional model is not the way forward. With the plethora of free information services on the Web, says Waddington, relying on expensive monthly or annual commitments by large corporations is not the way forward. Better to chase end-users on the Web and forget subscription services. "We think the upside in electronic information is going to be in Internet business models based around traffic and advertising revenue—and increasing amounts of e-commerce—rather than direct subscription," he says.
In contrast, LEXIS-NEXIS believes that while the Web offers an important new distribution channel, it does not invalidate the traditional business model. Nor does it invalidate the potential of the corporate market. "We must not confuse the difference between being a Web player, and providing quality information solutions for businesses and professionals who need the reliability and security that a service like LEXIS-NEXIS can give them," said Webb.
Neither approach guarantees success. Today the Web-based model is untested by time. The traditional model, on the other hand, continues to disappoint. Last December, when Reed Elsevier issued a profits warning it added that LEXIS-NEXIS was showing "only small increases in revenue in very competitive markets."