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October 17/18, 2015 | FT| By Matthew Garrahan and Ben McLannahan
The party to celebrate Bloomberg Businessweek magazine's 85th anniversary took place under a 21,000lb fibreglass model of a blue whale at the American Museum of Natural History. It was a fitting location, for gathered in Manhattan on that evening last December were some of the biggest beasts in US politics, finance and entertainment. Private-equity billionaires Henry Kravis and Steve Schwarzman were in attendance, along with Henry Kissinger, George Lucas and Lady Gaga. Yet few were bigger than the host: Michael Bloomberg, the magazine's owner and former mayor of New York.

From his first election victory in late 2001 to the end of his final term in December 2013, the plutocrat politician had loomed large on the New York landscape. He helped revive the city in the aftermath of the September 11 attacks, oversaw a steep fall in recorded crime and passed a landmark smoking ban - something that once seemed impossible. He pushed to improve public health, trying - and failing - to limit soft drink consumption.

He had more success with efforts to curb carbon emissions and used his own money to start a national movement for gun control. Respected by New Yorkers, if never adored - with a fortune estimated by Forbes at $38.6bn, he was not exactly a man of the people - Bloomberg won admirers for his drive. He was the mayor who got things done.

When he left office, Bloomberg, now 73, seemed content with full-time philanthropy. But, as the months went on, it was clear he had unfinished business at the company he co-founded in October 1981. By the time of the anniversary party, he had resumed duties as chief executive. After more than a decade in exile, the king had returned home.

Bloomberg, which declined to comment for this article, is a privately held company: the man whose name is on the door owns about 90 per cent of it. It was set up to deliver markets data to customers in financial institutions, who pay handsomely (up to $24,000 a year) for Bloomberg's distinctive terminals. In 1990, the editorial side of the business, which now employs more than 2,400 people, was created to give terminal subscribers up-to-date news.

The terminal was historically the company's main focus. But that focus had drifted while Bloomberg was serving his three terms as mayor (not content with the usual two, he successfully proposed term limits be extended and won a third election victory). In his absence, fiefdoms sprung up, with some top managers not talking to each other, according to one insider. The company had enhanced its consumer-news business, which offered for free some of the same content that appeared on its expensive terminals. Tensions between the two sides of the business were made worse by a couple of high-profile crises: in 2012, Bloomberg reporting threatened terminal sales in China; the following year, Bloomberg journalists were found to have used their access to terminals to snoop on bankers.

None of this seemed to be on the minds of those at the Businessweek bash, as executives toasted the success of the title they had acquired in 2009 as part of a drive to produce the kind of expansive consumer journalism not usually associated with its news service. Bloomberg singled out for praise the magazine's editor, Josh Tyrangiel, who had become one of his company's most senior content chiefs. Few there could have anticipated the sweeping changes that he was about to make.

Fast-forward 10 months: Tyrangiel has left Bloomberg to run a news show for Vice Media. The rising star is just one of several key figures to have left the company since the owner's return. Dan Doctoroff, a long-time ally and confidant of Bloomberg's, left his role as chief executive once it became clear the founder was itching to get more involved; Matt Winkler, the bow tie-wearing father of the company's news operation and the author of its stringent 376-page style-guide, The Bloomberg Way (reporters are taught, among other things, to avoid use of the word "but") stepped down soon afterwards; Joshua Topolsky, hired to launch a free website that would aggregate the best Bloomberg news content, left this summer after less than a year in the job.

According to Barry Diller, who has has known his fellow billionaire for decades, Bloomberg is glad to be back. "He is excited to get up in the morning . . . you can tell," says Diller. "He is a curious individual, so when he came back and so much had changed he got excited all over again. He is genuinely on the case."

Bloomberg will need all his determination, for it is not just his news operation that faces significant changes. The dominance of the company's lucrative terminals business is being challenged by a new competitor, Symphony, a messaging platform backed by a consortium of big investment banks. Other, cheaper services are also gaining momentum. The man who, in the early 1980s, disrupted the global market for financial market and information is now confronted with disruption himself. As technology continues to change the face of markets and media, does he still have what it takes to succeed?

Michael Bloomberg made his first fortune as an equities trader and partner of Salomon Brothers, picking up a $10m windfall when the firm was sold in 1981. He immediately ploughed some of the proceeds into a new business venture - "a company that would help financial organisations," he wrote in his 1997 autobiography Bloomberg by Bloomberg . The idea, he explained, was to collate market data and provide computer software "that would let non-mathematicians do analysis on that information". This service would eventually come wrapped in a box with a screen: the Bloomberg terminal.

The terminal has become an essential cog in the engine that drives the financial system, with sales generating 80 per cent of Bloomberg revenues, which were an estimated $8.5bn in 2014, according to Douglas Taylor, founding partner of Burton-Taylor International Consulting. No surprise, then, that at the company's Manhattan headquarters on Lexington Avenue, the terminal is viewed with near reverence. A glass-walled display charts the evolution of the devices from chunky 1980s original to the sleeker, matte models of 2015.

Today, the company accounts for 32 per cent of the global market in financial data and information. But its biggest customers - Wall Street's leading investment banks - are grappling with tougher regulatory requirements introduced since the 2008 financial crisis, which have eaten into their profits. These banks want to cut costs where they can: several banking sources told the FT that their institutions were actively reducing the numbers of installed Bloomberg terminals and moving staff to cheaper alternatives.

Morgan Downey, formerly an oil trader and global head of commodities at Bloomberg, launched one such alternative last year. He describes Money.net, a browser-based tool (costing a flat $95 per month), as offering everything and more that Bloomberg does through its terminal.

Downey believes the $30bn financial-data industry - twice the size of the global music business - is at a similar stage to the US airline sector in the early 1980s, when the cost of flying economy from New York to Los Angeles dropped about 90 per cent thanks to a new generation of carriers. Similar price falls in Bloomberg's core market are inevitable, he says, blaming the high cost of a terminal subscription on the company's "silly spending" on other services, such as its business-news television network and radio station. "The terminal is the only thing that has worked," he says. "Is it a good product? Yeah, it's OK. But is it worth $24,000 a year? Heck no."

With US competitors undercutting it athome, Bloomberg has looked elsewhere for growth. The number of global users stands at about 326,000 around the world, according to a spokesperson, and should end this year about 4,000 up on the year before, as the company pushes more deeply into newer markets in Asia and Africa.

The path to international growth has not always been easy - China in particular has been fraught with problems. Sales of Bloomberg terminals there took a hit three years ago, after Bloomberg News ran an investigation about the family wealth of Xi Jinping, now the country's president. Peter Grauer, chairman of Bloomberg, suggested last year that the company "should have rethought" its reports.

Tensions between Bloomberg's editorial and terminal divisions surfaced again in 2013 - but for different reasons. Goldman Sachs found evidence that journalists with Bloomberg News had used their access to the company's terminals to spy on bankers. Bloomberg apologised and reviewed its practices but the damage was done: a consortium of banks, led by Goldman and including Morgan Stanley, invested in a new messaging platform, Symphony, which launched recently, billed as a "WhatsApp" for business.

Bloomberg has seen off plenty of rivals before - the company has outperformed its nearest competitor Thomson Reuters for years - but this is the first time it has faced one owned by its biggest customers: banks, which Bloomberg referred to in his autobiography as the "distracted, growing giants". Alphabet, Google's renamed parent company, has also invested in Symphony, valuing the new company at about $600m. "The question that I keep hearing being asked is: is the [Bloomberg] terminal invulnerable?" says one former Bloomberg executive. "Can the technology it embraces or the approach it has taken withstand any assault?"

As mayor of New York, Michael Bloomberg was a leading player on the global stage, a fiscally prudent, socially progressive voice with the clout that comes from being elected leader of the self-proclaimed world's greatest city. Before, he had enjoyed the trappings of wealth and the social influence that only the super-rich enjoy. But as mayor he had power to change the world around him.

Little wonder, perhaps, that the semi-retirement he'd toyed with did not last long. He realised that he had to refocus his company around its core product - the terminal - and, as part of that, needed to rethink the news division. Fiercely loyal to his top lieutenants, he had never publicly criticised Matt Winkler but, a matter of days after the Businessweek party, he replaced his right-hand man of 25 years with the editor of the Economist, John Micklethwait.

The move stunned Bloomberg journalists. With his floppy hair and quietly spoken manner, Micklethwait did not resemble the warrior required to shake up the company's news operation. From managing a staff of about 120 at the collegial Economist, where journalists' egos are subjugated to the extent that there are no bylines, he suddenly found himself overseeing more than 2,000 editorial staff.

Yet if the new prince was alarmed by this strange foreign court full of feuding barons, he didn't show it. Micklethwait has a steely temperament, friends say. In a statement, it was explained that he would "unite" Bloomberg's journalism, which had "expanded and diversified rapidly in recent years". His first job was to rein in the freewheeling consumer news division.

In 2013, the company had hired Justin Smith to run Bloomberg Media, the unit responsible for Bloomberg Businessweek as well as Bloomberg TV and radio. Smith came from Atlantic Media, where he had launched successful websites such as Quartz, and he was given carte blanche by Dan Doctoroff to create new online properties that would appeal to readers beyond Bloomberg's core audience of terminal users.

He quickly snapped up big-name reporters such as Mark Halperin and John Heilemann, two political journalists known for writing Game Change , the book about the 2008 US election race, when Barack Obama became president - for a reported $1m each a year. He also put Tyrangiel in charge of all Bloomberg's consumer media properties - including its television and radio stations.

With Smith in charge, Bloomberg Media had a livelier, more web-friendly style than the serious Winkler-ised prose of the news written for the terminals. But it was also a semi-autonomous entity, run in parallel to Bloomberg's news operation. According to insiders, the arrival of Micklethwait sparked a power struggle.

Overseeing this was the owner. In a lengthy profile in Politico magazine this summer, Bloomberg employees likened his managerial style to "putting cats in a bag". This was driven home to the departing digital editor Joshua Topolsky when colleagues at his leaving party presented him with a bag of soft toy cats.

It was clear which cat Bloomberg was backing: Micklethwait. In a lengthy memo to employees last month the editor-in-chief highlighted some of the changes he had enacted, such as ending "the anachronism of two separate newsrooms". He wanted Bloomberg "to be true to our purpose", which was to be the "chronicle of capitalism". Bloomberg has supported his moves, wondering aloud on more than one occasion, "Why do I need a website?" and making the case that freely available content could undermine the content on the terminal.

Where these changes leave Justin Smith is unclear. Bloomberg himself declined to comment for this article beyond one statement. "Justin [Smith] and I have a great relationship and we are fully in sync on the vision for Bloomberg Media," he said. "He has a tremendous track record here that speaks for itself."

Yet some feel that much of the work Smith has done since joining Bloomberg has been dismantled. "I don't know if Justin is trying to grin and bear it or not," says one person close to the situation. "They are unwinding all the bets he made in an extremely public way. That can't be comfortable."

The appointment of Micklethwait sent a signal to Bloomberg employees that its news operation had become too unwieldy. But insiders say they still struggle to understand what the boss wants from the editorial side of the business. "The problem is that one day he likes something or somebody," says one friend. "And the next day he doesn't."

Others disagree. "He knows what he's doing and he is very astute," says Sir Martin Sorrell, chief executive of WPP - and a board member of Bloomberg Philanthropies. "He is not a shrinking violet, that's for sure. He has a view - and it's always been a successful view."

Prominent admirers of the Bloomberg view are not in short supply. One recently urged him to consider a tilt at the biggest job of all. "With [Donald] Trump becoming very serious candidate, it's time for next billionaire candidate, Mike Bloomberg to step into ring," Rupert Murdoch tweeted this month. "Greatest mayor."

Bloomberg, though out of the political glare, is clearly enjoying himself back in his own kingdom. Upon seeing the Murdoch tweet, an insider told the FT that the former mayor's response was: "No fucking way."

Matthew Garrahan is the FT's global media editor. Ben McLannahan is the FT's US banking editor. Additional reporting by Shannon Bond