Synchronicity abounds. On Friday, there was a random email exchange at my company about George Carlin's 7 words you cannot say on television. So far as I know, George Carlin has never before been the subject of a conversation at my company. On Monday, we learned he had died.
Similarly, I've been posting recently about Westlaw and Lexis and their future role in legal research as the constellations shift and the planets realign. In one disruptive scenario, I suggested that Bloomberg might be the most likely publisher to challenge the dominance of Westlaw and Lexis. On Monday, a headline article in The New York Times, entitled "The New Fight for Financial News", ironically cast Thomson Reuters (which owns Westlaw) as the feisty underdog nipping at the heels of Bloomberg in the market for financial information.
The reality is that both companies are finding that growth and new opportunities in traditional domestic markets are slowing dramatically. With the economy likely heading into a recession (and tell anyone on Wall Street that we are not already in a depression), these twin pillars of the market for financial data are increasingly looking abroad for new growth opportunities. With saturated markets and the growing availability of low-cost information services, ranging down to free financial data portals at Google, Yahoo, and MSN, neither company will benefit from street fighting and brutal price wars in the United States.
Is the market for legal information any different?
This may come as a surprise to some people, but Bloomberg actually has a legal publishing product that is in many ways already superior to much of Westlaw and Lexis offer. I saw it several years ago and, frankly, my jaw went slack. The product was so deep in data - court cases, regulatory materials, dislsoure materials, and of course news. It had a clean interface. It integrated perfectly with the rest of the Bloomberg platform. The company had clearly spent a small fortune to build this product and my first thought was, "Whoa Nelly!" If I had been Westlaw or Lexis, I would have been shaking in my boots.
But as I thought more about the idea that Bloomberg might enter the market for legal information, I began to scratch my head. Why in the world would Bloomberg want to get into the law firms? What did they know that I did not know? Or what were they missing that I did know?
For several years, I did not hear much more about the Bloomberg legal product. No law firms mentioned it to us on us sales calls. We did not see their reps at conferences. But in the last six months, Bloomberg terminals have started showing up in law firm libraries. And the librarians like them. The terminals don't get used extensively, but their breadth of data impresses the librarians. Bloomberg representatives, including the most senior members of their legal team, are now also fixtures at the major conferences and training venues.
Here's the problem Bloomberg faces, however. Law firms are not like financial institutions. With some firms pulling in more than $1 million a partner, they can be incredibly lucrative. However, as partnerships, expenses come directly out of the pockets of the partners. And while a large firm may spend 1-2 percent of its budget on research, which can involve sums approaching $10 million annually - much of which goes to Westlaw and Lexis - the firms have also grown used to passing the bulk of these costs on to customers.
In a forthcoming post, I will discuss the history and the future of this onerous practice of client billback for research costs. But for the purposes of this post, the point is that law firms spend an average of several thousand dollars a year per attorney on research costs. The idea that they will shell out $12,000 to $18,000 a year to put a Bloomberg terminal on attorney desks - when they already have a Windows terminal on their desk - is not credible. Some law firms have Bloomberg terminals in common research areas close to attorney offices (which apparently are rarely used). Some might give an attorney a particularly powerful attorney a terminal on an ad hoc basis.
But I would be amazed if Bloomberg is generating more than a small fraction of its revenues from legal research at law firms. And until they provide more open web access to their data - which would undermine their business model - it is difficult to see how they can significantly grow their footprint in law firms unless the firms decide to drop either Westlaw or Lexis (or both).
So it is difficult to see clearly the strategic goal of Bloomberg's investment in legal research materials. As good as their product may be, they face the same thorny issues of high prices, market saturation, and sharp, nimble niche competitors that bedevil Westlaw and Lexis. And Bloomberg, unlike Westlaw and Lexis, prefers to build, not to buy. So unless they change their approach across multiple dimensions of their business, they are not likely to gain significant traction in this market unless they can figure out a way to take significant business away from Westlaw and Lexis. To date, they have not done so, and it is not even clear at this point, that a direct attack on Westlaw and Lexis is their goal.
While one should never underestimate Bloomberg, for now the only conclusion I can draw is that the legal research piece of the Bloomberg platform is a bit like the spiral escalator in the center of their new headquarters - flashy and impressive, but also expensive and frivolous and duplicative.
Next: Passing the Buck - the End of Client Billback.
