Bloomberg Making Nice to China Pays Off; Highly Profitable Conferences Help Stoke Terminal Business

The Financial Times has an important story tonight about what appears to be a prettily profitable piece of the Bloomberg media operation, its China conference business. By the company’s own admission, this operation is also strategically important by boosting the sales of Bloomberg’s core and still very high margin terminals in China. Might this have something to do with the fact that Bloomberg has made some credulity-straining defenses of President Xi Jinping, as well as the fact that his company killed an important story that would have embarrassed the government?

Needless to say, after two years of the Democratic Party falling all over itself to substantiate claims that Trump was unduly close to “Russia,” here is evidence of Bloomberg looking awfully cognitively captured by the Chinese officialdom due to the advantages to his business of playing nice with them.

Bloomberg’s Juicy China Conference Business

Running conferences is extremely profitable if you do it well. The big risk is the fixed costs, as in the rental of the conference facility, advertising, salaries of the staffers running the operation, and likely commitments to minimum spends on catering. Some conferences feature paid speakers or big-ticket entertainers at keynote events, but professional conference organizers instead turn these at least partly into “pay to play” events for sponsors. The variable costs are not high and are mainly meals, refreshments, signage and perhaps security. So if you get it right, a very high percentage of revenues can drop to the bottom line.

The Financial Times reports that the Bloomberg conference operation represents about 15% of the Bloomberg news operation’s revenues; note that the journalistic product, despite being widely syndicated, is really an afterthought designed to enhance the value and prestige of the lucrative terminals. As Felix Salmon explained in a 2018 Slate story:

Alongside its incredibly lucrative terminal business, Bloomberg has a much smaller media business, which, as far as anybody can tell, has never made money. It was never really supposed to: Bloomberg Media, which includes the website Businessweek and a ludicrously expensive TV station, was designed to garner audience and influence for the brand, which would help Bloomberg’s journalists get scoops and ultimately drive terminal sales. The website was the most visible part of that strategy, but the financial black hole was always Bloomberg TV, a Mike Bloomberg pet project whose aggregate losses make Businessweek’s [possible $25 million a year in losses] look like spare change lost down the back of the sofa.

In other words, being unduly concerned about the profits or not of anything on the Bloomberg Media side of the house misses the point. It’s there for the benefit of the financial data business and Bloomberg’s personal vanity.

The flip side is that Bloomberg is not totally inattentive to the economics of his media operation. Salmon described long-form that the Bloomberg paywall was silly and amounted to the billionaire trying to pick up couch lint. But he’s been rumored to do things on the news side to help keep costs down, like having simple write-ups of routine earnings updates done by bots.

Nevertheless, Bloomberg clearly regards the China conference operation as strategically important…because China is strategically important to his business. And it also happens that this effort has its eye-poppingly high revenues relative to the number of conference participants, which makes one wonder what exactly conference sponsors, the main source of revenues for the China conference enterprise, think they are paying for.

Key points from the Financial Times account:

Bloomberg media chief Justin Smith told the Financial Times that live events now make up nearly 15 per cent of all revenues for the news division that sits within the billionaire’s financial data company….. thanks largely to the success of one event: the New Economy Forum. Mr Bloomberg launched the conference last year, aimed at connecting global business leaders with the Chinese elite. 

Only in its second year, the NEF already makes up about 65 per cent of all live events revenue for Bloomberg Media, according to a spokesperson. Based on a forecast by consultancy Burton-Taylor, which expects Bloomberg Media’s total revenues to reach $310m this year, that could equate to about $30m for the NEF alone. 

Bloomberg acknowledged that the NEF is profitable but said he saw its real advantage as boosting customer relations, particularly as sales of Bloomberg terminals in China are growing quickly.

Even so, the economics of these conferences are erm…striking. Consider:

The World Economic Forum, which hosts the annual Davos summit, this year made SFr345m ($352m), according to its annual report. The group said 13 per cent of total revenues came from Davos, which would equate to $46m. But the Davos meeting in the Swiss mountains attracts about 3,000 people each year, compared to only 400 for the NEF. 

So for Davos, the revenues per head are $46 million/3,000 attendees or roughly $15,300 per head. For Bloomberg, they are $30 million/400 guests or $75,000 per head. Those conference sponsors sure must think that Bloomberg guest list is exceptionally valuable.

Bloomberg Toadies to China

Even though Bloomberg is making the right noises about putting his business in a blind trust if he were to become President, he already appears to be unduly attentive to not ruffling the feathers of Chinese officials. See, for instance, this 2019 interview where he tries to depict Xi Jinping as democratically accountable. It’s so obviously not credible that Bloomberg stumbles over his own claims:

Bloomberg’s attempt to defend China as making progress on climate change and pollution merely by moving coal-fired electrical plants away from cities is even more cringe-making when you realize that Bloomberg has tried to position himself as trying to curb carbon emissions. Bloomberg, former Treasury Secretary Hank Paulson, and Tom Steyer funded a series of reports called “Risky Business” on the dangers of climate change. Note that Paulson, who built strong relationships in China when he was head of Goldman, helped design the NEF, along with Henry Kissinger.

This follows a troubling history of Bloomberg News covering, or at least trying to, for Xi Jinping. In 2012, before he became president, Bloomberg broke an important story on his family. The government struck all new visa applications for Bloomberg reporters.

The next chapter, per a 2015 account in the New Yorker:

While reporting the story about Xi Jinping’s family, [Michael] Forsythe and his colleagues at Bloomberg stumbled upon a skein of financial ties between Politburo members and Wang Jianlin [the richest man in Asia]. They were preparing to publish a story on the connections in late 2013, but it was reportedly spiked. According to a widely publicized account of a conference call between Bloomberg offices in New York and Hong Kong, Matthew Winkler, then the editor-in-chief, likened the decision not to publish the story to the self-censorship of foreign news bureaus that wanted to continue reporting in Nazi Germany.

“If we run the story, we will be kicked out of China,’’ Winkler told the reporters on the conference call, according to the Times, which trumpeted the story of Bloomberg’s capitulation to the Chinese Communist Party on its front page on November 9, 2013. A few days later, as the story was making headlines around the world, Forsythe was suspended, in part for leaking details of the Bloomberg deliberations. Bloomberg editors didn’t explain Forsythe’s suspension or comment much other than to say that the story was still “active,’’ implying that it needed more work.

Nobody knew exactly what was in the unpublished story, beyond that it was about the movie tycoon and Xi Jinping, but it became legendary among journalists….

The entire episode of the Wang Jianlin story was devastating to Bloomberg’s investigative team. At least five Bloomberg reporters and editors resigned as a result. Shortly after the controversy, Michael Bloomberg finished his third term as New York City mayor and returned to the helm of Bloomberg L.P. According to people familiar with Bloomberg’s efforts, he made expansion in China a priority for the company and asked well-connected friends to advocate for the company in China on his behalf. In one of his last interviews as mayor, Bloomberg told Forbes that his plans for the year ahead were to play golf in New Zealand and Hawaii and to “end up in China to give some speeches on behalf of the company.”

Forsythe did re-report the story after he joined the New York Times, but he may not have been able to get access to the same amount of financial data that he could when at Bloomberg. But his final piece did describe how Xi’s sister and her husband had bought shares in a Wang company for about $29 million when their price rose to $240 million. Not a good look for an official who professes to be serious about opposing corruption.

Bloomberg tries to brush off the Chinese government’s tolerance for his news operations. Again from the Financial Times:

Mr Bloomberg told the FT that Bloomberg is the news service that China “respects the most because they think we’re straight up . . . we’re a professional product; it isn’t the man in the street who reads our stuff”.