Industry Insights

The global demand for market data, content and information products has been growing for several years and 2021 was no exception to that trend. For users, there has been new business requirements and a growing trend to use data for new and alternative purposes. For suppliers, we are seeing different guidelines and restrictions for usage policies, a focus on new use cases, and new and innovative pricing and fee levels.

Burton Taylor, a consulting firm that tracks global data spend by sectors and products, reported that the market data industry totaled $33 billion in 2020. For 2022, they anticipate that industry growth will be greater than the 5-year average with a 4.6% CAGR.

The purpose of this document is to give an update on status, new trends, opportunities, issues, and concerns. Following is summary of current topics:

1. Changes in usage levels and patterns
   • Business requirements are evolving, thus the need for additional levels and types of data beyond the traditional use to support transactions and obligations
   • Most large companies now have new roles for managing data and content – examples are Chief Data Officer or Data Scientist. These roles have responsibilities that go well beyond traditional business use and requirements
   • Many companies now have Data Warehouses, Data Lakes and other data storage containers that capture data for additional and new business purposes. (Note: A Data Lake is a vast pool of raw data, the purpose for which is not yet defined. A Data Warehouse is a repository for structured, filtered data that has already been processed for a specific purpose. The only real similarity between them is their high-level purpose of storing data.)
   • There is an increasing trend of using data for “secondary” purposes, not always defined, but beyond traditional purposes
   • Most large companies want to use data products and tools for developing new internal products, which can be used to support client requirements or to offer new derivative products to clients, with the objective to monetize the firm’s investment in content and data products
   • There is a growing trend for data users to use third party supplier data for external use to support changing client requirements and for inclusion in new product development
   • While this sounds optimistic and positive – the key factor to consider is that most of these new trends are not included in current usage guidelines and policies set by the suppliers. This will become the key and critical issue over the next five years.
2. Changes in guidelines and practices
   • There is growing difference between how data users and data suppliers understand usage guidelines in terms of restrictions and cost
   • Data users want to expand and widen usage rules, and data suppliers want to impose more restrictive usage rules (or increase charges to reduce these limitations) to protect their data rights and intellectual capital
   • We have seen an increasing trend on the part of supplier to want to know more about use cases – how is the client using the data, who is seeing it, what are the secondary or downstream use levels. Suppliers are of the opinion that the data is being used beyond the contractual usage terms
   • These usage discussions are more prevalent for certain market sectors – examples are environmental, social and governance (ESG) data, energy, indices, ratings and other niche data products. ESG data alone is expected to reach $5 billion in 2025, up from $2.2 billion in 2020
   • There is a higher focus on compliance than ever before
   • We are seeing a trend where suppliers require updates for MSA’s and other forms of documentation often with the business purpose of reducing or tightening usage guidelines
3. Changes in spend levels, fee models and negotiation practices
   • Spend levels for data and content is increasing across all market sectors
   • In past 5 years, we would see average increases across all suppliers to be in the 3% to 6% range – some up and some down. Prior to the pandemic, trends were moving closer to 6% to 10%. Post pandemic suppliers are asking for extreme increases from 30% to 100%
   • We are seeing more out of the norm proposals – where suppliers will start a negotiation with a large increase, well beyond market norms and practices. Rationale for increases can be varied – examples are, we need to bring you up to market standards, we feel that our products/services have been undervalued, or we feel that you are getting more usage than what is allowed by contract usage rules
   • We are seeing larger increases in certain data sectors – examples are ESG, energy, indices, ratings, science/pharma and others. We have seen cases where increases started at 100% and were negotiated down in the range of 20% to 50% for a single year. Multi-year agreements can mitigate some of these increases, but not down to the old levels
   • Some data products are gold standard or best in market or even single source – in these cases the supplier has more control over both fees and usage rules
   • Negotiations are becoming more complex and difficult and are taking more time, thus the need to begin these negotiations earlier than usual
   • There are still a good number of suppliers who have stayed within the practices of prior years, renewing contracts within the 3% to 5% annual increase range with reasonable contract negotiations – we are seeing this number dwindle
   • Some of the highest increases are being seen from Index and Ratings suppliers who feel that their data has long been undervalued or that one supplier charges higher rates than the other, thus they want to share in that level of profit
4. Changes in the Supplier Sector
   • We are continuing to note a growing trend for supplier consolidations and acquisitions. Two recent examples are Refinitiv and LSE and S&P and IHSMarkit. Both are material, will limit data user options and have an impact on contract negotiations
   • We are also seeing a growing trend for venture capital or private equity firms who are investing in, or acquiring, data suppliers. This often results in new usage and higher fee models
   • As noted earlier, suppliers are increasing their focus on use case as well as on non-compliant use on the part of their clients
5. General Commentary
   • For the past few years, we have seen a move to “raw” data and data feeds, away from end user desk top products or data that has been enhanced by the supplier – these falls in line with the evolution of data warehouses and secondary use levels
   • We project that there will be further increases in data usage – both for traditional use requirements as well an expanded use with new data opportunities
   • We project that client budgets for data will increase in line with expansion in use levels
   • As a last comment – managing and procuring data products and tools is different than sourcing other products and services. Correctly stated, clients do not buy the data and content – rather they lease the right to use the data, for a fixed fee over a fixed period with rules on how the data can be used. The ownership and the associated intellectual capital of the data remains with the supplier. It is important that all stakeholders understand this, as lack of compliance can lead to expensive audits and resulting fees.