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Lexis, Westlaw, Wolters Kluwer – Advantage Won, Advantage Lost

The day is not far off when the providers of free legal information services will be able to match the services provided by Lexis, Westlaw and Wolters Kluwer.

There was a time when I would have said that this was not possible. My belief was based on the idea that the free services would always be playing catch up to a moving target, as the major legal publishers continued to enhance their products with high quality content and product innovation.

The scenario that makes the seemingly impossible possible is the “attack” on all things “Editorial” in the major legal publishing houses and with it, the lessening of their ability to provide the enhancements necessary to continue to differentiate their content from that offered by the free services in the market for legal information. (I use the word “attack” for effect, not having yet found a less inflammatory word that describes that the scale of the cut backs in the editorial departments of the big three companies).

With the reduction in editorial staffing and with it, editorial enhancements, one can see the day coming when the free services are able to challenge the major legal publishers. This can be easily be done by combining secondary and primary content in similar manner to the major legal publishers.

In Canada, for example, this can be accomplished by alliances between the smaller commercial and academic publishers with LexUM and/or CANLII. LexUM in particular could transform the Canadian market by licensing or acquiring secondary content from smaller commercial legal publishers such as Wilson & LaFleur, Emond Montgomery and/or Irwin Law, and mounting the secondary content on LexUM with direct links to the primary data available through CANLII.

Real competition and real pressure to cut costs

Real competition in the market place combined with real pressure by the consumers of legal information to reduce their spending, has transformed what was comparatively easy business to make money into an industry struggling to maintain profit margins.

Revenues are declining, caused by fewer subscribers paying less for service, as customers chose one product over an another rather than buy competing services. With profit margins threatened by these developments, cost cutting has become the order of the day. From reports from various sources, it appears that this is being done primarily at the expense of Editorial, the traditional “engine of real growth” in the legal publishing industry.

Automating data processing and using search engines

Automating data processing and using search engines to create value added features is a great equalizer. Anything that an automated process can do for the commercial publishers can be equally well done for the free services. The end result is that any product enhancements resulting from such processes will be the same from every data source – anything you can do, a free service can do just as well if not better.

Primary data is the most amenable to automated processes. However, when the data is the same from every source, the only differentiation that will remain is retro data, a deficiency that can be easily remedied by the free services with a few government grants.

Scaling back Editorial

The second option being pursued is cutting staff. Specifically editorial staff. The contribution of editorial to legal publishing has always been underestimated and undervalued by corporate owners. Editorial built the business and established the standards on which the reputations of the major legal publishing houses are based.

Cutting some editorial staff is necessary but, if not done with an eye to the future, can result in the dumbing down of content and the loss of the competitive advantage that the commercial services presently have over the free services. Restructuring thoughtfully for the future needs to be at the heart of any process that reduces editorial staff if the objective is to strengthen the companies.

Advantage Won

The major legal publishers won their leading positions in the market for legal information by providing high quality editorial enhancements over many decades. These editorial enhancements were provided in both good years and in bad. Early in my professional career, the quality of the product really did matter as much as the profit margins.

The editorial enhancements were provided by in house editors and/or freelance editors trained by the legal publishers who exercised their skills on both primary and secondary content. The work done in writing headnotes and preparing case and statute citations is irreplaceable. These require the application of the human intelligence to deliver an acceptable outcome. Cases need to be summarized in context. Incomplete and inaccurate references in judgments and texts need to be identified and expanded or corrected.

“Editorial” was also largely responsible for the key product development initiatives that drove growth. The loss is not restricted to primary content. New titles and new editions of secondary works require intensive editorial work that cannot be replaced by automated processes. The option available to the major legal publishers is to publish less, creating the opportunity for smaller publishing houses to take their place. Stripped of trained editorial staff, the major legal publishers will come to have little to differentiate themselves from the free services.

Advantage Lost?

The hard won advantage that today’s major legal publishers have acquired over many years can be lost.

The history of legal publishing is characterized by the rise and fall of legal publishing houses. It has happened before and it can happen again. In Canada, Canada Law Book was partly supplanted by Burroughs, which in turn was absorbed by Carswell. It is not inevitable that the current big three continue to dominate their markets. If they make the wrong choices in difficult times, they will not.

Advantage Lost, Advantage Won Again

In the recent past, the proprietor of a publishing house would sell off a business that could no longer meet its revenue and profit margin requirements, or when the proprietor no longer believed in its potential. The examples of this practice are too numerous to mention. Most recently, think of newspaper ownership.

In the current climate, however, there are not many potential buyers. Bloomberg BNA is the one of the few with its ambition equal to its resources. In addition to having a differentiated pricing model, Bloomberg BNA believes in the potential of the legal information business. If not true, the rumours that is of the sale of Westlaw to Bloomberg BNA as reported by Sean Hocking on practicelaw.org, they should be.

One certainty is that continuous editorial downsizing can only lessen further the value of all three major legal publishers if and when a business is sold or wound up. The editorial advantage won over many years can be lost. In the hands of the right owner, it can be won again.

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Comments

  1. David Collier-Brown

    Let me propose a model that might work well with the current technology: payment for currency.

    Right now, we have cases and their head matter, journal articles, looseleafs and annuals, and also a regular but slower updating of encyclopedias like Halsbury’s.

    If I were a smallish publisher, I would spend my precious experts’ hours on head matter and topical articles about what new cases, legislation and issues in the mundane world mean to the profession.

    I’d use my nearly-as-precious editorial time in continuously updating my “looseleafs”, annuals and encyclopedias with the new material, and adding links from the journal articles to the more permanent works.

    I’d charge my customers for access to the new material, and keep a steady flow of old material out to the public domain, some months after my customers got it. Especially the journal articles and head matter.

    The purpose of the free material is
    – for law students to not be studying obsolete material,
    – to make prospective customers aware of how good a job I’ve been doing in the past, and
    – to not have to host and update it after it has stopped making me money.

    The looseleafs and annuals I’d tend to keep private to my customer for a somewhat longer period, and the encyclopedias longer still, on the order of a calendar year or perhaps more.

    My emphasis would be on getting the new material automatically in the hands of my customers, by the same sort of update scheme that I currently use to keep the street-map on my phone up to date. I could see sending out an update to ipads and androids as often as nightly, so that my customers’ books could update themselves as their owners slept.

    Finally, I’d invite corrections from my customers in real-time, and invite them all to write op-eds for my journals about cases and matters of interest to them. I’d want an active “letters” column of a somewhat electronic sort, but one moderated by my editorial team, not an on-line free-for-all.

    This kind of curation, I claim, would make a credible business model for a technology-oriented business in the law or the sciences. More important, it would deliver real value for money to lawyers or researchers in any growing field

    –dave
    [Disclosure: some of these ideas are derivatives of the effort of a friend to write the editing software a lawyer or researcher would use in a world where they could subscribe to such a service]

  2. Thanks Gary

    This is another most incisive piece that, in my view, is accurate and well argued in all respects. I’m pleased too that it considers issues in my own next Slaw column, entitled “All Gone West (or East)”, which addresses the plight of freelancers and the increased trend towards outsourcing everything. I seek to make a point similar to yours that “this might be fine if the skills being retained were equal to or better than those of the publisher that invests in retained technical skills, market intimacy and subject expertise. However, this is not likely to be the case and even where it is readily available, detailed input is not always required”.

    With opinions, I suspect, similar to yours, I attempted to argue recently in http://www.slaw.ca/2014/01/02/ever-cuddled-an-aardvark-ever-studied-zymurgy/, that a failure to invest in added-value content combined with expert publishing/editorial skills will result in the sorts of outcomes that you describe so well.

  3. Gary,

    I have had a number of discussions over the past few weeks on the topic of brand debasing. You have hit on the editorial aspect of this general problem. Let me give some specific example of how vendors are sacrificing their brand.

    West is the premier brand in the U.S. industry. Yet, the parent (Thomson-Reuters) is casting aside the West brand for T-R. Rebranding West as Thomson-Reuters is like Rolls-Royce rebranding itself as Yugo.

    At LexisNexis, the established Martinedall-Hubbell has been cast aside. What is the value of an AV lawyer ranking going to be coming from CARSDIRECT.COM rather than Martindale-Hubbell?

    On the editorial front (the subject here), case summaries on Lexis have gone from being the best in the industry to completely worthless just over the past year. If Lexis were going to degrade its content to such a degree, it would have been better off simply getting rid of case summaries.

    The larger vendors are under pressure from their parent corporations to increase profits now. The process of debasing the brand to meet short term financial goals will allow other vendors to step in. Companies can implode quite suddenly. I expect there will be major changes in the legal publishing pecking order coming over the next two to three years.

  4. The big “khuna” in this race is Google. If you go to scholar.google.com you’ll first think it is only focused on the US. It can only pull up US cases, but it does an incredible job with them. If you play around a little farther, you’ll see that it actually knows about Canadian cases, it just doesn’t give you the text of them yet. It can tell uyou the citation of the case, how the case was cited, related cases, and even many pull quotes from the cases.

    Online law book publishers are driven by a subscription generated model. They want to sell you a bundle of books and then hit you unreasonably hard if you want something that is “out of plan.” Thomson (Carswell/West) even has the nerve to charge subscribers to look at the what’s interesting in the law teaser articles that they put on their front page.

    In their quest to monetize everything, they actually push us away. My personal opinion is that they should look at something like some of the cellular plans as a model where they sell you either a bucket of minutes and you can use them for all cases, statutes, etc. If you want something where they pay greater royalties, charges double or triple units. To keep with the cellular motto, one Canadian carrier charges you double minutes to call the US.

    On my Telus data plan for my tablet, I’m on a plan where I pay $6 a month if I only use an infinitesimal amount of data; if I use 500 megs in a month, I pay $20; and, if I use 5 gigs I pay $35.

    Right now I’m keeping my paid plan, but whenever I want something that is off plan, I now go to the free services and look there first. I can usually find what I want for free. Each time they push me to the free service (and the free service satisifies my need) they subtly moved me away from them and towards the free service.

    Being slow to react to this theat and delaying the inevitable price cuts that are coming is the equivalent of driving a car with bad brakes to save money. It is dangerous and real quickly, you’ll need new drums rather than simply new brake pads. Additionally, you might get killed or kill someone in the interim.

  5. “Kahuna,” not khuna. Sorry.

  6. Our Editorial team is both our differentiator and value driver. While it may be true that cuts are happening on the Editorial teams at some of our competitors, secondary legal information is our bread and butter. At Wolters Kluwer in Canada, we don’t have an extensive primary law database, so we need to make significant investments in Editorial enhancements and material. We steadfastly commission, review, and create secondary material of high Editorial quality, and commit to continuing this investment.

    I can assure every reader that significant investments are still being made in the in-house capabilities of the Legal and Business Editorial team at Wolters Kluwer in Canada. In recent years, we have made a change in our approach to hiring on our Editorial team, and newer team members are area experts, rather than Editorial generalists. About 80% of the team have legal backgrounds and several team members have years of practice experience. These expert editors not only ensure the currency and accuracy of secondary content but also its relevancy and comprehensiveness. We fully recognize that without this investment, there is little separating us from law firms’ free information updates.

    You are right in pointing out that margins are being squeezed across the industry as law firms rely increasingly on alternate sources of information for their research (like CanLii and Google). In-turn, we have made management rationalizations that affect other parts of the business to maintain our margins. We have not actively cut members on our Editorial team, but rather have made necessary staff cuts on Sales and Marketing teams.

    While you may be receiving less information from us that you don’t have to pay for like Direct Mail and Email pieces, you’ll know you can trust the Editorially-created information from us that you do pay for.

  7. Andrew

    I feel your pain; or did – but I no longer work for WK.
    But in all seriousness a quick review of the 2013 year end headlines may help:

    WK Legal sees sales dropping -3% instead of -6% as good. Legal & Regulatory in Europe in particular is lined up for more restructuring and divestments. Legacy revenues down -8-10% – basically flat lining, and the CCH current leadership seem to think this is an achievement.

    Reed’s 2013 presentation today showed 1% growth at best in legal and only by adjusting transfer pricing can they hold profitability at the parlous 15.9%; no mention of the headline new services from previous years funnily enough. Flatlining and likely to stay so until 2019 on these metrics.

    Thomson Q4 results showed legal as down -2% while Elite/Business of Law grew 7% and the 3% growth on an annual basis in legal came largely from the PLC acquisition.

    Informa’s business intelligence division dropped 9.6% and Wilmington’s legal team were down -11%.

    UK based reports and examples mostly, but all the big players too.

    Publishers seem to think that more data on more complex platforms enriched with more and more workflow and process tools is the solution. For a small and declining number of global price sensitive information professionals it probably still is. The mass markets that underpin billion pound revenue streams mean publishers especially simply have to be more circumspect.

    You can’t cut your way to competing with Google. You have to start from basics:
    Move away from erudition to expedition – clients want the matter moved on more than they need to be right. Content is not king, but it is not dead either.
    Don’t be afraid of moving from describing it to doing it – many client solutions are outsourcing and technology based more than content/knowledge based.

    Editorial skill sets are uniquely apposite to these challenges.
    Just make sure you don’t get stuck making ever straighter arrows in a back room when the guys with big guns turn up.

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