Lost Expectations

Simon has drawn our attention to Peter Schwartz’s comments on the “Reinvention of Legal Research” that appear in the Huffington Post. The premise of the post appears to be that legal publishers are suffering because they are no longer able to impose “per-minute and per-use pricing structures” which allowed publishers to use law firms as information wholesalers. According to Schwartz, this pricing model facilitated cost recovery by law firms who passed these charges through to their clients.

The flaw in this argument, in Canada at least, is that it has been more than a decade since flat rate pricing models became the norm. There is nothing new about flat rate pricing. If anything is new, it has been the recent expansion in the availability of “per use” or “transactional” access to higher value data sets of secondary and international content that are not included in subscriptions to the core services.

There is also no real evidence that the large legal publishers are in trouble, according to the conventional meaning of the word “trouble”, i.e. “distress, affliction, difficulty, or need.” While there is evidence that major legal publishers are experiencing both “margin squeezes” and comparatively flat revenues in current market conditions, those margins have been historically very high.

The real issue being faced by the major legal publishers is the loss of the expectation of ever increasing revenue and profit from their online services that they had come to expect as a matter of right. This will be a traumatic experience for the executives who lead these companies and possibly for shareholders who have been led to believe that there were no limits to growth.

Learning to deal effectively with more modest expectations of growth and profit is something to which the major legal publishers will have to learn how to adapt. This change is long overdue in an industry where growth targets have long been excessive and where revenue targets are achieved by annual price increases rather than by new sales.