Reuters is going ahead with its plan to launch aa paid-for consumer-facing news service after it had previously halted the plans. It was in dispute with Refinitiv – a former part of Thomson Reuters but owned since 2021 by the London Stock Exchange (LSE) . It began a 30-year agreement with Reuters in 2018 to be the exclusive distributor of Reuters’ news content to the financial community. That dispute has now been resolved by agreeing to operate the new services as a JV and an agreement to launch consumer subscription products. The companies did not specify when the paywall services will launch.
The LSE pays Thomson Reuters (TR) for news it distributes on Refinitiv terminals, as part of the 2021 acquisition. Thomson Reuters holds a minority stake in LSEG. The new agreement includes investment in 100 editorial roles in the Reuters newsroom focused on financial and markets coverage. It will include a “significant expansion” of Reuters India’s financial file and China equities coverage.
The re-designed Reuters. com website, had originally been seen as a bid to attract a professional audience as part of a wider strategy to boost revenue from its digital news readership. A subscription had been planned to cost $34.99 monthly, the same as Bloomberg’s digital subscription. But it was abruptly “paused” in 2022 just weeks before its planned launch. Refinitiv claimed it broke the terms of an agreement under which it pays Reuters a minimum of $325m a year for its output; the new service would effectively be poaching Refinitiv’s own clients. That agreement, incidentally, accounts for more than 50% of all Reuters’ revenue.
The dispute highlighted the extraordinary deal under which Reuters is due to receive its inflation-adjusted fee for 30 years. It had been agreed in 2018 when Thomson Reuters (TR) sold 55% of its Financial & Risk division to Blackstone private equity to create Refinitiv. The JV had seemed to value the “new” company at $30bn, based on the $17bn cash received by TR.
Refinitiv was intended to become a direct competitor for Bloomberg News in the US. But the following year, TR and Blackstone agreed to sell the partnership to the LSE, for $27bn – along with Reuters’ $10bn+ contract. The LSE had said its acquisition of Refinitiv would complete its transformation from an exchange operator into a group that also controlled the lucrative data at the heart of financial markets. The deal completed after two years of regulatory process. TR retained a 15% stake in LSE.
That’s where it gets interesting.
The Reuters news and information business had long been breakeven at best for TR. In 2017, it had made $27m EBITDA on revenue of $296m. Fast forward to 2020 and the Refinitiv deal effectively doubled the Reuters revenue to $628m – but the EBITDA increased to just $73m.
Put it another way: In 2020, Reuters had $332m (112%) more revenue than in 2017 but converted only 14% of it into profit. Not what you might expect from a business with more than 60% of its costs as people – and an unchanged headcount of some 2,800. In 2019, TR asserted that, because “the <Refinitiv> revenue is expected to be largely offset by associated expenses within the Reuters News segment, there is no corresponding increase to EBITDA”.
Nobody is saying that the 30-year contract was somehow part of Blackstone’s purchase price in the original Refinitiv deal. But there seem to have been no similar recharges when Refinitiv was TR’s Finance & Risk division.