Friday, February 10, 2012

Welcome to Bloomberg Law: No Deals No Discounts No Apology

Almost a modern day parody of Henry Ford's color palette for the Model T ("You can have any color as long as it's black.") Bloomberg is entering the legal marketplace with monochromatic contract as in, "You can have any contract you want as long as it's Bloomberg's standard contract."

So what's the Upside?

In exchange for a rigid pricing system you get transparent and predictable pricing, no excluded charges, nothing to explain to clients and a product you can launch and leave open on your desktop as a reference portal to be used as needed throughout the day.You also get the Bloomberg track record of contrarian innovation and successful disruption as a late market entrant into the financial services data and news media markets.

And Yet...

There is palpable skepticism in the law library community regarding Bloomberg's pricing claims for Bloomberg Law. After all, hadn't we been promised "flat fee" contracts before? But there was always "a rub" --- new content and or new functionality that became the "cash cow" for driving profits for the Lexis and Westlaw. It seemed that no matter how well you negotiated your contract - within a few months there would be new surprises. Content from a 3rd party vendor or a new function link appeared which triggered unanticipated charges.

The legacy of profitability models used by Lexis and Westlaw continually undermined the promises of price predictability

Can the Cycle of Skepticism Be Broken?

Here is the thought pattern: Flat fee contracts lead to increased use. The increased use was then used against the law firm to justify dramatic price increases during he next contract renewal. It is widely believed that the only way to avoid dramatic price increases is to limit use of the "flat fee" contract - thus severely impairing the value of the "flat fee" contract. Why should we believe that Bloomberg will be different?

For a Clue to the Future Look to Bloomberg's Past

In 1982 Mike Bloomberg developed his first financial terminal with a 10 million dollar severance check from Salomon Brothers.

The first Bloomberg terminal was called Market Master. It was a bond math calculator that sold for $995 for a single license. 30 years and 30,000 functions later a single license increased to $1,655. Bloomberg has had predictable increases of about 6% every two years. Bloomberg says that the price increases are used to improve the workflows, data feed, content and functionality. Today Bloomberg has over 30,000 functions and has poured terabytes of business, legal and government news and financial data into the system and none of it is excluded!

A 2007 Fortune article Bloomberg's Money Machine described Blooomberg's ever growing content:

"Bloomberg just kept adding more stuff," which is like saying the Pilgrims were followed by many more immigrants. From its start in bonds, Bloomberg gradually poured in data and analytics on commodities, equities, foreign securities of all kinds, energy, mortgage-backed securities, derivatives, mutual funds, real estate, hedge funds, foreign exchange. Its oceans of information today include earnings estimates, SEC filings, merger and acquisition facts, legal documents and data on 1.3 million people"

Yes BNA Is Included at No Additional Cost

Bloomberg appears to be staying true to the business model and is including acquisitions both big and small in Bloomberg Law at no additional cost. When they bought Business Week, it was fully integrated. Now Bloomberg is telling subscribers that as soon as all of the BNA material including all newsletters,e.g. the pricey "Daily Report for Executives" and all BNA research platforms such as the Intellectual Property Library are converted, all BNA content -- including content not previously subscribed to will be available at no additional cost to the Bloomberg Law subscribers.

Will the Wall Street Journal and Financial Times Be Next

Rumors of Bloomberg's purchase of the Financial Times have been denied on both sides. Speculation swirls around the competition for access to the Wall Street Journal when the LexisNexis exclusive deal  ends in the next 18 to 24 months. . Last week Lex Fenwick, a former Bloomberg CEO became CEO of Dow Jones which owns the Wall Street Journal. One can only assume he and Dan Doctoroff, the current President and CEO of Bloomberg have each other on "speedial."

Against the Grain not Against the Odds

An April 2011 article in Wall Street Technology entitled "Inside Bloomberg" describes Bloomberg's response to the recent recession this way: "when most of the industry was hunkering down, slashing costs and laying off workers Bloomberg did what it often does, it tacked the other way and began the biggest period of growth it has ever seen, in terms of employees and product development." One quarter of Bloomberg's 12,000 employees are considered research and development staff.

This presents a fairly stark contrast to Bloomberg's well established rivals. From Westlaw we have seen layoffs and contractions in client support. From Lexis we have seen repeated delays in the rollout of its new Lexis Advance product. Add to this, the recent rumors that both Westlaw and LexisNexis might be sold by their respective owners ThomsonReuters and Reed Elsevier. If you were a "betting man" where would you put your money?

Bloomberg's Secret Value Strategy.

One of Bloomberg's strategies on the business terminal side has been to erode dependence on other products. In educating their existing terminal customers on even a few more of the 30,000 functions they hope to wean them off other products. This has been called "Bloomberg Value Solutions." The strategy isn't  designed to sell you more, but to help you save money.

What would this strategy mean in the legal market?

For the past decade legal information centers have been subscribing to an increasing variety of specialized databases to support finance and securities practices. IP practices require all manner of scientific and technical data. Bloomberg with its deep well of financial data could well pose a value strategy which would eliminate products such as Capital IQ, Mergermarket, Bureau van Dijk, Hoovers. It's $990 Million acquisition of BNA could offer a "value strategy" aimed at CCH and Law 360. Large firms subscribe to hundreds of specialized newsletters, (covering everything from aviation to zoning). If  Bloomberg goes shopping or decides to compete in these specialty areas, this could help firms consolidate the roster of stand-alone products with their attendant raft of specialized headaches including:  idiosyncratic licensing, variant publishing formats and  password management.

Winning The Terminal Wars

A 1998 article in Investment News described Michael Bloomberg's 1981 product launch as entering a "field of "napping giants" when he created a new financial service that bore his name and "changed the standard of the industry."

A 1997 New York Times story "Traders want some Space Too" seemed to be suggesting that Bloomberg's closed data system would be doomed by the emergence of the internet. To make matters worse, Bloomberg was 3rd entrant into a field dominated by Reuters and Telerate/Dow Jones. How wrong they were! Telerate's most recent sales are listed at $664M, while Bloomberg's are estimated to be $7 billion.

Dow Jones and Reuters had hundred year jump on Bloomberg and yet, Bloomberg has thrashed Dow Jones Telerate into insignificance and today Bloomberg  rivals Reuters' share of the financial data market.

Can Bloomberg Have Comparable Success in the Legal market?

Since law firms are essentially information businesses, I have spent my career trying to harness and integrate the multidisciplinary resources needed to support the highly competitive and time sensitive information needs of lawyers. The genius of Bloomberg has been to continually integrate new streams of data that inform and transform the core data sets. Bloomberg started with financial data and built its news service to enhance the contextual value and analysis of that data.

One has to assume that Bloomberg will take a similar approach in redefining the legal information industry. As clients are demanding that lawyers not only understand the law but also understand their business challenges and related industry trends, Bloomberg's interweaving of law and business may be the very thing that every partner will want and perhaps need on their desktop n order to thrive as a rainmaker.

Sources:
Bloomberg's Plan for World Domination
Bloomberg company history
Bloomberg by the numbers
At Bloomberg, A modest Strategy to Rule the World.

See Related Blogposts::
Is Lexis the Next Acquisition for Bloomberg
Bloomberg Get's BNA's Intellectual Capital in the Capitol.
Bloomberg Law Takes on the Titans: An Interview With Lou Andriozzi
The Myth and the Madness of Cost Effective Lexis and Westlaw Training

11 comments:

  1. Wonderful article Jean! Any firm in the the renegoiation process of their WEXIS contracts should seriously consider Bloomberg.

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  2. Excellent article! Thanks for sharing your thoughts!

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  3. Very informative and I wholehearedly agree with the proposition that a true fixed fee contract takes the rub out of what historically has been a one-sided vendor friendly contract process, but in my firm's experience, not all functions on the Bloomberg Financial terminal are included in the flat fee..we've had to add functionality at additional cost....so history may not be precedential for additional content fees on Bloomberglaw once it has more market depth....and there are now charges for some docket functionality on Bloomberglaw, so there is already in place an exlusionary model on the main Bloomberglaw platform....

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  4. My "flat-rate" contract with WestLawNext is under $200/month, for limited access of course, but with the option to "buy" a specific document "outside" my plan for $90 to $120. A few months ago I opened an outside-my-plan document in a new tab in my browser, and then went back to my original tab. The following month I a received a bill for over $5,000.

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  5. Thanks for this detailed, insightful piece! The bane of every librarian's existence who negotiates Westlaw and Lexis contracts is just as you noted -- get a flat-rate contract, usage increases, and they use that to justify price increases -- with a straight face! Maybe Bloomberg Law will now set the standard in pricing. One can hope.

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  6. I think we should be worried that if Bloomberg does indeed acquire all these other specialized products, product competition and price competition will decrease. Law firms will have to deal with the Bloomberg Death Star, and may need to purchase the entire package in order to have access to a particular subset of products, even when the entire package would not be useful for that particular firm's practice.

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  7. Brilliant and insightful article, Jean. I'm as impressed with your hard-nosed reporting as I am your contextual analysis.

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  8. A few observations from the minority viewpoint:

    1) I will be shocked if Bloomberg actually makes all of the BNA content available at no additional cost, but if so I will give it a serious look.

    2) In general it has not been my experience that increased usage of Wexis contracts jacks up the contract cost at renewal time, and because our library is very virtual,I encourage my users to use Lexis and Westlaw them as much as they need to.

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  9. The reality is that the BNA material is available at no extra charge only to those firms who purchase Bloomberg Law for their entire office. If you have only 1 licence or 4 or 10 they have not announced what the BNA access, if any, will be.

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  10. To Anonymous re: docket costs on Bloomberg Law -- I've been a Bloomberg Law user for almost 2 years now and they do not charge anything additional for docket requests. The charge you may be seeing on your bill is in fact the PACER passthrough fee, which is not marked up by the way.

    I will note that my firm has saved a significant amount of money with Bloomberg Law's feature to charge only the first user to request an underlying document -- very economical for a heavy litigation shop that can rack up some big docket charges.

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  11. Antonio,
    My reference to docket fees was only meant to illustrate that Bloomberg Law has functionality presently to charge fees out of the fixed rate contract paradigm, so it wouldn't be difficult for them to charge "excluded" content fees - I didn't mean to imply that we pay anything more than Pacer pass through fees or first time document fees - and they've had functionality even with the Financial terminal to charge for services/content outside of the fixed rate Financial terminal contract cost....

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