Adoption Rate Watch: Tracking WestlawNext as an Indicator of Customer Acceptance of the Current Gen Platform Model

WLN Adoption Since Launch
Quarter	Customers	WLN as % of Westlaw Revenue Base
2010 1Q	2,300	N/A
2010 2Q	5,700	N/A
2010 3Q	9,000	18%
2010 4Q	15,000	31%
2011 1Q	18,500	34%
2011 2Q	24,000	41%
2011 3Q	29,000	46%
2011 4Q	34,000	54%
2012 1Q	N/A	65%

Being first to the market can be a dream come true or a scary nightmare of lost opportunity. The WestlawNext launch confirmed the old "do the opposite of whatever TR Legal does" rule. Being second to launch has been advantageous for Lexis Advance. See "WestlawNext": What happens when a brand becomes synonymous with the negatives of all similiar products. Whether it will benefit the adoption rate of Lexis Advance remains to be seen. For now, the only indicator of customer sentiment for today's legal search platform model is tracking WestlawNext's adoption rate.
 
"WestlawNext has been sold to approximately 65% of Westlaw’s revenue base" according to Thomson Reuters Reports First-Quarter 2012 Results (May 2012). No additional information was provided in the Company's 1Q 2012 documentation. In previous quarterly presentations, the Company would identify the number of customers. See table, right. But that factoid isn't as interesting as the consistent omission of reporting the actual revenue being generated solely by the WestlawNext "premium" and related revenue generaton, meaning the investment community has no idea what the return on investment for WestlawNext really is.

About all one can say is that approximately 35% of Westlaw's revenue base has not jumped on the WLN bandwagon. However, note well that if Westlaw subscribers accepted (or insisted upon) WestlawNext with no premium add-on costs to them, their Classic Westlaw spend would be moved to the less than enlightening reporting category of "WestlawNext as a percentage of Westlaw's revenue base." Oh well, David Thomson knows the score.

I'm wondering if David Thomson is also scratching his head. If he was taken in by the Mad Men's marketing pitch for WLN, he has to be wondering why in the parlance of the Mafia, WLN isn't a "good earner" yet. Two years since launch now and WLN hasn't exactly had a psychedelic Purple Orange Haze effect on the market. Of course, Thomson is too smart to be taken in by narco-marketing but you know damn well that the MBA-types dive into their business modeling calculations before anything is given the green light. One very important factor is forecasting when a legacy platform can be killed based on an estimated adoption timeline for the new platform.

Quoting from Interview with Mark Schiff, Vice President of Product Marketing at Thomson Reuters regarding Launch of WestlawNext, The CRIV Sheet, May 2010 at 3 (conducted by Caren Biberman on Feb. 24, 2010):

The long term vision is that there be a single platform, WestlawNext, but there is no date for the retirement of Westlaw.com and Mark believes it will be “years.”

Right, "years" isn't exactly the kind of specificity any business model analysis will spit out; it certainly isn't the sort of forecast any enlightened corporate executive wants to base a $1 billion investment decision on. If drunk on the TRI corporate Kool-Aid, the predication might have been one (1) post-WLN launch multi-year Classic Westlaw license renewal before the remainder of the Westlaw subscriber base would be sufficiently small that they could be PO-ed by having no choice but to take WLN (or switch vendors). Under a worst case scenario, two (2) multi-year Westlaw renewals before all Westlaw revenue can be converted to WLN revenue.

In addition to serious concerns raised about West Search as a reliable search engine by law librarians, cost comparisons are another major issue even if TR Legal would eliminate the WLN "premium." Quoting from the abstract of Emily Marcum's The Quest for Client Savings in Online Research: WestlawNext V. Westlaw Classic (April 3, 2012 draft posted on SSRN; Paper not available to download as of June 12, 2012):

WestlawNext and Classic were each used exclusively in transactional mode for eight days. Cost to the client was assessed using a discount off retail model. Classic was found to be 51.6% cheaper. This difference was so stark that the experiment was terminated early and only two days of each platform in hourly mode was completed. WestlawNext hourly was four times more expensive than Classic, even with fewer minutes used.

I haven't had the opportunity to read the full analysis but the conclusion does dovetail into many law librarians' expectations that West Search's federated search model could ratchet up out-of-plan charges substantially. The same, of course, is true for Lexis Advance but at least one gets a sneak peak at an out-of-plan document first. Clearly a variable cost explosion is not going to increase WLN's adoption rate. Clearly, continued comparisons by legal information professionals where Classic Westlaw bests WestlawNext isn't going to increase the voluntary adoption of WLN. If anything, it might advance the take-it-or-leave-it involuntary adoption proposal as current licenses come up for renewal. The best way to sell WLN is to eliminate comparisons with Classic Westlaw and there is only one way to do that -- kill Classic Westlaw.

While the launch of and sales push for the adoption of full-text online legal database search services produced some Luddite reactions in the professional literature 30-plus years ago, that is not the case now. Today's law librarians are tech savvy and cost conscious. Out-of-plan licenses have increasing become the exception, not the norm, in the private sector. A study like Marcum's will only do one thing, namely, increase the march to in-plan only WLN licenses.

There is no doubt in my mind that despite all of the new platform's faults, WLN's adoption rate would be higher than it is today if Thomson Reuters had not applied its 20th century database selection in-plan/out-of-plan licensing scheme to its 21st century West Search federated search engine. One per seat flat rate price for the entire database universe is the only model that makes sense if a federated search engine is going to be the major selling point for current gen search platforms. The same, of course, is also true for Lexis Advance. But I seriously doubt WEXIS will ever consider going that route.

Now, if BLaw grabs and keeps more than a 15% share of the legal search market in the private sector, WEXIS business modelers may start crunching the numbers. Despite BLaw marketing, flat rate pricing is the norm but per seat flat rate for a vendor's entire database universe is not. At least, not yet. [JH]