Monday, July 16, 2007

Globalization and its Discontents

Another wonderful program at AALL, “Legal Information – Globalization, Conglomerates, and Competition: Monopoly or Free Market! Ken Svengalis, compiler and publisher of the Legal Information Buyer’s Guide and Reference Manual, spoke about the mergers of legal publishing. He showed in-depth, historical figures about the number of publishing houses bought up, including dates, and how the concentration of publishing into 4 large companies that comprise 85% of the market has distorted the legal publishing market. This is an “oligopoly” - control of the market by a group, not a single company. The single largest publisher, Thomson-West, also publishes nearly every reporter, digest and most codes and rules, the core primary materials of U.S. law. Thomson West alone controls 41% of the legal publishing market in the U.S., according to Svengalis. According to some economists, that market share by itself constitutes a monopoly.

In the 1980's Matthew Bender began a period of increasing prices on their treatise collection, double digits every year. This was the problem that first got Svengalis interested in pricing and distortions in publishing. Even many employees in the Bender organization recognized that their company was in a death spiral. They raised the prices, and libraries cancelled... Then they raised the price again to show continued or even increased profits. The cycle was unsupportable.

Matthew Bender pulled out of this dangerous cycle, firing that president and instituting more reasonable price increases. Their business model went bad very quickly because they publish secondary sources, which are easier for libraries to cancel when their budget is used up. The pricing problem became critical in 1996 when Thomson Publishing bought West and Westlaw. There were antitrust concerns voiced at the time, but many in the law library community, including the AALL leadership at the time, were concerned that West could be bought up by a corporate raider like Carl Icahn, and broken into tiny bits for profit, destroying American primary law publishing. So the Justice Department was advised by AALL, and concluded that antitrust concerns were overblown.

Now, Thomson West, and to a lesser extent, the other member of the “oligopoly” of legal publishing, are following that same “Matthew Bender” self-destructive practice. (See this “Legal Publishing in 2006 - goose that laid the golden egg”) And the death spiral is more destructive because Thomson-West publishes nearly every title in the core legal materials – nearly all reporters, digests and most statutes and rules come from them. Svengalis showed how the initial purchase price of legal materials has gone up fairly modestly, and the supplementation is where publishers are making their big profits with huge, and unsustainable price increases. He showed the price increases attributable to the various members of the oligopoly. He also discussed his analysis of the LMA contracts offered by West to libraries.

The program also featured Louisiana attorney David Anthony Szwak, (link ) who specializes in consumer protection. He has spoken at an earlier AALL meeting on identity theft. He spoke about the problems of legal materials pricing for lawyers and judges, as well as pro se. While we in law school libraries have been handed the LMA agreements to staunch the price increases (at least ostensibly), these other consumers of legal information are completely at the mercy of the predatory price increases.

All these slides will be available - initially on the AALL website for handouts, and soon on Ken Svengalis’ Rhode Island Law Press website (link) . You can buy a tape of the program from AALL link, (program A-3) and I highly recommend it. My notes here may seem lengthy, but they barely scratch the surface of this excellent program.

Some readers may be puzzled to read in my posts yesterday about Thomson West's research on user behavior and commitment to print after reading this post. I think the organization has a lot of different people, some of whom really know legal publishing and care about the users, while some top level managers at Thomson, perhaps, treat that branch as just another profit center, and demand high performance to pay back the purchase price. The damage to their market is the same regardless of where the decisions are made -- the question is whether the message will reach top decision-makers at each of the oligopoly members (besides Thomson-West, Svengalis lists Wolters-Kluwer, Reed-Elsevier and -- my notes fail here...). I am proud of AALL for sponsoring such an important program, one of such vital interest to our patrons of all types! Way to go!

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