September 28, 2010
Feasting on the Carcass: The push by TR Legal to pitch new titles as "ancillary" in the Shed West Era
Recently LLB contributing editor, Vicki Szymczak (Brooklyn Law School Library Director) broke the story that there is a new game afoot from TR Legal. She titled the post, New Publication Model for West. I would have called it "Oh Boy, a New Pricing Scheme for New Titles Published by the Folks in the Land of 10,000 Invoices." Or maybe I would have called it "Feasting on the Carcass: The Push by TR Legal to Pitch New Titles as Ancillary in the Shed West Era." Oh, wait, that's what I'm calling this post. While blog posts tend to have a half-life of 24 hours, Vicki's deserves much more attention from institutional buyers. I will try to add a little perspective on this new marketing scheme in this post.
Two snips from Vicki's post but her entire post really does requires your undivided attention:
Mr. Cahill to give me a call to explain why we do not have access to this new series of ALRs, and the 'why' has to do with how West intends to roll out new titles. As he explained to me, ALR-INT represents a new way to do business at West. This title is, what he called, an ancillary title. This means that currently it is available online only on commercial accounts and only on a per search charge basis.
In order to help protect the profit margin at West (ahem) due to the unprecedented shredding-shedding - of West materials at libraries, Mr. Cahill informed me that new products will all have an individual market plan. The market plan will take into consideration how West will make a profit off the title. If you buy both online and print, you will receive some sort of discount. But, you will not get a two for one. If you buy just the print, you won't get the online. And if you buy online, you won't get the print. However, if you buy both, you will get a discount. I thought that this is what I was doing when I bought ALR-INT. But apparently, I wasn't. This part of the explanation at least rings true. They need to make up the money that they are losing, and this is how they are going to do it.
Well, TR Legal can try.
Oh yes, TR Legal needs to make money in this Shed West era. The first strategy was to create a 21st Century across-database SE by way of WLN while selling it based on a 20th Century pricing scheme. The objective here was to expose WLN users to resources that were out-of-plan for those institutional buyers who provided out-of-plan access as a way in TR Legal marketing gurus' mindset to increase in-plan coverage in licenses because racking up huge ancillary costs that are getting ever harder to push to clients in the private sector was going to make in-plan expansion a cost-sensible decision. Let's add that TR Legal's sales force has been instructed to pitch WLN as a way to be "competitive." What utter nonsense.
Needless to say, adoption rate in these economic times is low; solo and small firms mostly so far. Those who know better, that would be institution buyers who rely of the judgement of professionals instead of amateurs -- ah, that would be law librarians -- aren't falling for this stunt. Eventually, Classic Westlaw's plug will have to be pulled. I'm thinking five years at the most.
So now comes a course adjustment from the marketing gurus who guessed wrong the last time. New publications -- some, if not all, according to Vicki's post -- will be ancillary and only if you buy both in print and online may discounting be available. Like that's going to be attractive. My biggest problem with this shift is that this new pricing scheme is not unlike what LexisNexis does for current titles -- have a SUB for a major MB secondary print title, get a discount for online access to the title if you keep the print title. It not, pay full price. This keeps me from adding some major titles to my LN contract. Last year CCH was offering a discount to switch from print to IntelliConnect for major loose-leaf sets we have in our collection. With improvements having been made to IntelliConnect since then, I may now be interested.
In TR Legal's case, we appear to be talking about new publications, not existing ones. Here's a publisher who can't keep sales up for their current print catalog because the Company is pricing itself out of the print market. Just how many "new titles" will be attractive as the Company tries to execute title-by-title marketing strategies designed to maximize profits off of each by selling some as "ancillary," particularly when we know the Company's historical profit margin targets, annual price increases, and format switcheroos. For online access, well, we all know how TR Legal likes to lock-in buyers to multi-year commitments. Anyone really interested in going down this path for a "new title" in print, online or both with the most difficult to work with legal publisher?
TR Legal appears hell bent to reduce its subscriber base. When this doesn't work, watch out for some old mainstays getting a "new title" makeover -- the new "Joe's Federal Practice & Procedure" from the "editorial staff" replacing Wright & Miller, to echo Vicki's concern:
I wonder how long it will be before publications get new names and new subscriptions and be eligible for the new publication model?
Remember AM JUR Taxation being carved out of AM JUR as a standalone? Note the comments to Vicki's post. I do not mean to put words in Vicki's mouth, but I see no reason to trust TR Legal. Once "Plan B" fails, we can expect a "Plan C."
Time for a gut-check. If you study TRI's financial reports closely, you will find that TR Legal's 32% profit margin and revenue stream is what keeps Thomson Reuters flowing with cash. When will the folks at TR Legal in Eagan have the intestinal fortitude to tell the folks at TRI in New York City that these marketing stunts and pricing schemes are killing their business; that they simply will not succeed and can't continue because their buyers have caught on to the fact that they will no longer let TR Legal pick their pockets, their annual spend, to prop up the rest of the Professional Division's or, for that matter, the entire Company's products and services. From LLB's analysis of TRI's 2009 financial performance:
Do note profit margins in the Tax & Accounting and Healthcare & Science segments of the Professional Division remain in the 21-22% range and in TR's separate Markets (financial industry) Division the profit margin for 2009 was 19.3%. ... Obviously, buyers of TR Professional's products and services, particularly TR Legal's, should seek advice from buyers of TR Market's financial services industry's products and services.
Current TR Legal titles are being axed, online search services being downsized when not eliminated outright. They simply are not that good and are too expensive. New TR Legal titles? One has to be out of touch with reality to think this is going to work based on the Company's past business practices and institutional buyers' responses to them. Here is a publishing empire that has reached the dead-wrong conclusion after examining (1) its own products and services; (2) the competition's products and services; (3) price competition for legal resources that are becoming commodities; and (4) the actions taken by its base -- the private sector.
Triumphalism revised 16 months later. The sort of triumphalism written about in Westlaw rises to legal publishing fame by selling free information (April 29, 2009 issue of City Pages (Minneapolis)) is over.
At the time, people said Thomson paid too much [to acquire West]. They doubted that Thomson would be able to squeeze more profit out of West, which was already posting 25 percent returns. But since its takeover, Thomson has consistently managed to attain 30 percent or higher profit margins. Legal information seems to be the sponge that won't dry.
Nothing TR Legal is selling is worth the premium the Company is demanding. It's time to downsize, improve quality and institute pricing that will attract buyers back to the Company even if that means taking a substantial hit to profit margin.
Feasting on the carcass of TR Legal. TR Legal current strategies are heading down one path and the direction of that path for print and online is downward. The Company has the most to lose and so far it is succeeding at doing so by blissfully ignoring market conditions. For example, unlike TR Legal which maintained its status quo 13% pro forma annual price increases for print supplementation, LexisNexis cut its traditional 8% annual price increase last year to 4% in response to the economy. While I do not expect that to last, I will never forget it.
LexisNexis, Wolter Kluwers, BNA, and new players starting to make a market presence that can no longer be ignored are going to eat TR Legal for lunch because of this Company's failure to respond to new market forces that are structurally permanent. It just might be time for TR Legal to study what happened in the US auto industry circa 1980 when economic conditions prompted consumers to question the status quo. Our other major vendors are feasting on the carcass of TR Legal just like Japanese and Korean (and soon Chinese) automakers did to Detroit. A TR Legal cancellation for print or online or both does not always mean a total elimination of collection coverage or access. It's called substitution. Even shedding West reporters and digests does not ipso facto mean "because we have Westlaw." It can mean "because we have LexisNexis."
There is no doubt in my mind that every other vendor marketing strategy meeting starts with "well, we sure as hell are not going to do what TR Legal is doing." [JH]