Wednesday, February 15, 2012

"No Soup For You!" Are Legal Publishers Using A Seinfeld Episode as a Business Strategy?

Why are legal publishers using the “Seinfeld Soupman strategy” of banishing customers who "opt out" of firmwide contracts rather than maintaining relationships on which to build future good will and market share?

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Lexis, ThomsonReuters and Wolters Kluwer CCH have been edging toward increasingly desperate measures in at attempt to coerce the continuation of firmwide contracts rather than listening for the new opportunities in the marketplace.

Greg Lambert's 3 Geeks post reported several weeks ago that Westlaw will end "pay as you go" access. TR Ending Legal Pay as You Go. Lexis ended "pay as you go" access several years ago, but had allowed access by credit card until mid 2011. The Lexis "rationale" for shutting down access to Lexis by Credit Card.is "explained" in an hilariously incomprehensible posting on their website. Lexis had also stopped selling the digital  Matthew Bender treatise library in order to drive use onto the Lexis platform.  Wolter’s Kluwer stopped allowing firms to purchase individual passwords to online products several years ago in order to force everyone into more lucrative, large firmwide contracts.

Take Note Bloomberg BNA
The only major publisher who continued to provide truly customized product selections was BNA, which allowed firms to have a mix of firmwide licenses and limited user licenses for individual products based on the firm’s need. I urge Bloomberg/BNA to allow this type of custom licensing to continue for non-Bloomberg Law subscribers. (Bloomberg Law subscribers will have access to all digital BNA products without needing separate licenses.)

What’s Wrong with Half a Loaf?

Would it be so terrible for the online vendors to rethink the “firmwide” approach to "flat fee" contracts? Can no one think of an innovative middle ground?

Why not acknowledge that the market place had fundamentally changed? Cost recovery for online research is declining and budgets are tightening. As law firms get larger and the array of practice and industry groups expand, selling customized slices of online content will become ever more appealing and may be the only way multiple vendors can continue to coexist in large firms.

Let’s face it, today’s mega firm may have absorbed the equivalent of 6 smaller firms, so why not regain some of that lost market share by selling to a few practice groups or the equivalent of 2 or 3 small firms if the firm doesn't want a firmwide contract?

The Myth of Indispensability

The fact is, that large publishers appear to be taking their own marketing pieces much too seriously. Or at least they want to perpetuate the myth that lawyers can't effectively practice law without their products. There are already a number of mid-sized firms that have moved to “sole source” relationships with either Lexis or Westlaw and reports from the field indicate that they are doing just fine. An increasing number of firms have given up the CCH Tax platform in favor of the less expensive RIA Checkpoint product. Losing direct access to a small subset of content, may be overcome with a little extra research effort or the assistance of the research staff, but the savings have completely offset the inconvenience.

There are lawyers who conjure apocalyptic consequences at the thought of losing their favorite resource. I suspect that this is generational characteristic.

Older lawyers who started out conducting legal research in print treatises and then moved online tend to have a stronger sense of a legal publisher’s brand and the reputation of specific products which I don’t see in the post-Google generation of lawyers.

Can “Tying Arrangements” Be Far Behind?

The trajectory of current practices suggests that legal publishers are inching toward "tying arrangements" in order to maintain revenue and force law firms to keep unwanted content, products or licenses that are not aligned with the firm's needs.

Right now, no major vendor limits the sale of print materials or ebooks to online subscribers, but this strategy may lie along the ’desperation trajectory” that is emerging in the marketplace.

Black’s Law Dictionary defines a "tying arrangement "as “ A seller's agreement to sell one product or service only if the buyer also buys a different product or service; a seller's refusal to sell one product or service unless the buyer also buys a different product or service. • The product or service that the buyer wants to buy is known as the tying product or tying service; the different product or service that the seller insists on selling is known as the tied product or tied service. Tying arrangements may be illegal under the Sherman or Clayton Act if their effect is too anti competitive.”

Law firms need to be able to select their own mix of "best of breed" sources to support their practices, at a cost that is calibrated to their own budgets and the products' perceived value. Any attempt to further restrict law firms choices for content and format is likely to backfire and will certainly not demonstrate the creativity and nimbleness of thought demanded by the new "law firm economics."

Wake Up -- This is an Opportunity and Not the Threat That You Think It Is

Perhaps the day of the “monolithic service provider” --"being all things to all practice groups” is waning. Maybe firms are getting too large and too complex and a more flexible set of assumptions will be the key strategy for legal publishers to survive the upcoming wave of “sole provider wars.”

Digging a moat around your products and pulling up the drawbridge will only further isolate publishers from the marketplace they purport to be serving.

4 comments:

  1. Another insightful posting! I hope the vendors are listening! As for 'tying', wouldn't the requirement for a law firm to have a Lexis contract in order to purchase a license to the Wall St. Journal or Factiva qualify?

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  2. Jean-
    So well put on every point.
    I'd like to add that the proliferation of new products that are often more critical to many of our practice groups forces us to scrutinize our content mix and how we spend our money. This exercise highlights the fact that Lexis and Westlaw are not the go to resources for all lawyers.

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  3. Thank you, Jean. I'm wondering if any firm has tried pulling expensive databases away from the attorneys and only purchasing licenses for the Research Librarians? If it were possible to only license certain large databases to a small group of power-users, I think there is would be a potential for savings, even if this model means hiring more researchers.

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  4. I have also been giving that deal some thought lately. It deserves a separate blog post. Thanks!

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