Morningstar Data and Direct were our first and second largest products by revenue, respectively, in 2017, and we were pleased by the strong level of year-over-year organic revenue growth that each achieved. Morningstar Data grew revenue organically by 7.2%, while Morningstar Direct grew by 12.6%. Both of these businesses are key investment areas for Morningstar, and we’ve been very focused on innovating upgrades, product extensions, and new features that benefit our clients in order to drive revenue growth.

Pricing for Morningstar Data is based on the number of investment vehicles covered, the amount of information provided for each security, the frequency of updates, the method of delivery, the size of the licensing firm, and the level of distribution. In 2017, Data revenue growth was primarily driven by sales to existing clients of data elements such as licensed access to an asset manager’s full holdings, or expanded-use cases (i.e.: clients buy data to use for one specific purpose, and then upgrade to use the same data for other purposes for an additional charge). In addition, Data revenue received a boost from clients preparing for MiFID II in Europe, as well as strong demand from U.S.-based clients for solutions that showcase, through a combination of data and proprietary research, how an advisor’s portfolio recommendation is in a client’s best interest.

Pricing for Direct is based on the number of licenses purchased by each client. For clients in the U.S., we generally charge an annual fee of $18,000 for the first user, $11,500 for the second user, and $9,800 for each additional user. Rather than legacy product replacement, revenue growth in 2017 was mainly driven by product enhancements, such as our new fixed-income analytics, and new datasets related to MiFID II requirements, such as 47 additional target market and investment fees data points. This growth was fairly evenly split between existing and new clients. The spread between revenue growth (12.6%) and the growth in licenses (11.1%) shows that we realized modest price increases in 2017.

Over the past several years, we’ve been rebuilding Morningstar Direct into a purely web-based platform, retooling existing capabilities, and developing new solutions to support the daily workflow of asset managers, manager researchers, and wealth managers. By developing the Morningstar cloud ecosystem, we will be able to deliver upgrades and innovations instantly, without any downtime to our clients. With the Manager Research edition in beta since last year, we look forward to introducing the Asset Manager edition into beta later in 2018.