MARKET DATA BUSINESS AND PRICING MODELS (I)

1. IDENTIFYING AND DEALING WITH CONTENT PROVIDER BUSINESS MODELSJillian Hamer, The Boston Consulting GroupWillem Noorlander, BST AmericaSLA Annual Conference14 June 2006

2. This presentation takes an in-depth look at business models used by content providers and how to use them effectively to benefit your organization. To maximize your investment, it is critical to obtain an understanding of the components of content provider business models, including pricing, business principles, definition and rules for usage, exceptions, discount options, risk and value criteria. Topics discussed include: getting the content provider to bring the appropriate business model to the negotiation and evaluating the model(s) in order to obtain maximum benefit for your company.

3. MARKET DATA BUSINESS AND PRICING MODELS (I) • Rate Card model • Rate Card with minimum commitment model • Rate Card, mixed usage of products, volume discount model • Per user pricing • Content usage model • Combination usage and data license • Business Unit/Division pricing

4. MARKET DATA BUSINESS AND PRICING MODELS (II) • Flat fee, with usage cap • Flat fee, with usage cap, additional fees beyond usage cap • Flat fee model, associate with identified users • Volume Discount model • Enterprise model • Client contributed data model • Client tailored model

5. INFORMATION BUYER BUSINESS MODELS Time Materials investment Cost recovery • Sunk cost • Expensed to business units or external clients • Face value or marked up • Time or time + expense • Revenue generating • Based on a standard multiplier • Corporate business unit center with annual budget • Covers traditional expenses (hard copy sources) but other funding needed for electronic sources • May include ‘tin-cup’ funding relationships with businesses, • for specialists and/or sources • Models include • Transactional charges • at cost • marked up • Lump charge to a specific business for a negotiated range of services/sources • Allocation or other accounting device • ultimately factored into product or service cost • What are your business constraints -- • Regulatory? • Price sensitivity?

6. USERS AND USAGE OCCASIONSWho will do the research? Select the provider model accordingly High Researcher Specialist Researcher Complexity Outsource Self-service Low Repetitious Custom Scope

7. OUR GOAL IS TO FIT THE SOURCE SELECTION AND PRICE STRUCTURE TO THE USE WE REQUIRE Specialist researchers End users Researchers Outsource partners • Platforms • Pricing • Reducing overhead • Minimizing risk • As few as possible, • chosen for ease of use, coverage of our business • Enterprise, flat fee • Seamless login • Allocate all costs • No training • No experiments! • We want it all • Mixed usage, volume discount, flat fee w/cap, PAYG for marginal sources • Allocate all predictable costs • Minimize transactional • Vendors train • License for internal redistribution • Highly specialized niche sources • Flat fee for identified users, PAYG • Allocate all predictable costs • Have access to everything relevant • Fill gaps in their sourcing to meet our recurring specific needs • Enterprise, flat fee; no incremental cost • Transactional, so hard to minimize • Risk management = relationship management

8. MATCHING UP NEED, PRODUCT, AND PRICE • Timeliness – do you need real time, some time soon, or is time not a factor? • Exclusivity -- is 80% enough or do you need the 20% not generally available? • Quality – how important are control by an editorial team, rigorous processing (scrubbing, adding meta data, regularizing if web-scraping involved)? • Continuity – will you have switching costs if the vendor fails? How will you spot the signs? Do you need a well established vendor with solid business results year over year, or is an exciting new web offering OK for now? Be realistic: short embargoes, exclusive content, high quality, and stable end user access cost more

9. PRICING MODELS DRIVE CONTENT COSTS • To manage costs at the next renewal, clarify what will drive the price up • How much volume (reports, pages, etc.) can you download without incurring higher costs? • How many people can actually use the service without incurring higher costs? • Do not agree to a mixed pricing model that is driven by both these variables – have it either driven by download volume or by number of users, but not both If you plan charges to recover the expense of the data, make sure you obtain a retail unit price from the vendor

10. CAVEAT EMPTORBe alert for sights and sounds that signal content provider misfit • Royalty structures • Does your aggregator seem unconcerned about usage levels? • low royalty rates • loose reporting practices • losing suppliers? • Our ‘solution’ • Our ‘value added’ • ‘SOX made us do it’ • ‘We want to be your business partner’ • ‘The market determines the value of the source’

11. YOU’RE READY TO MAKE YOUR CHOICE What makes things work for both parties? You bring to the table Content provider brings to the table • A well described need and usage specifications • Understanding of the value of the product to your business • Willingness to put in place a Master Service Agreement that covers • All appropriate employees • To use the data the way they need to • With Ts&Cs that lower your risk and the CP’s • A single point of distribution • You understand the cost base and its fit with your cost recovery requirements • Feedback on what sources and features are useful and what is valuable beyond the monetary • A content product that meets that need • A pricing model that meets your need and responds to the value to your business • CP recognizes that these reduce his cost base • Good internal communication so that your users are supported but do not receive sales pitches • Valid, timely, usage data to support your analysis of market penetration and market share within your company

12. Vendor X: Q3-2004 vs. Q3-2005 – ALL POSITIONS 18K All Regions:KG:2005:QRT3 16K 14K 12K ) s D I r e 10K s U / e c i r P l i a 8K t e R ( M U S 6K All Regions:Partner:2004:QRT3 4K All Regions:KG:2004:QRT3 2K All Regions:Nonpartner:2004:QRT3 All Regions:Nonpartner:2005:QRT3 All Regions:Partner:2005:QRT3 0K -200 0 200 400 600 800 1000 1200 1400 1600 SUM(#UserIDs) Sum of #UserIDs vs. sum of RetailPrice/UserIDs. Shape shows details about Region:Position:QRT. The marks are labelled by Region:Position:QRT.

13. GETTING THE MOST OUT OF YOUR CHOICE Content provider support You • Train your team • Reporting • Information about upcoming changes • Seek feedback about products • New product beta tests • Determine who and how trains end users • Take advantage of the information in the invoice and usage data • Verify strategy, measure value • plot the relative performance trend • defend cost recovery methodology • Minimize risk – you know who is using the data • Target training measures • Keep users up to date • Give balanced feedback, not just gripes • Participate in test, user advisory groups

14. Jillian Hamer Willem Noorlander • Director • The Boston Consulting Group, Inc. • 415-732-8000 (office) • 408 981-9040 (mobile) • 415 732-8200 (fax) • Hamer.Jillian@bcg.com • http://www.bcg.com • Partner • BST America, LLC • 212-430-6565 (office) • 914-443-1291 (mobile) • 212-430-6649 (fax) • bill.noorlander@bstamerica.com • http://www.bstamerica.com