the current state of the legal publishing industry and its implications for law libraries

1. The current state of the legal publishing industry and its implications for law libraries Kendall F. Svengalis Rhode Island LawPress N. Stonington, CT

2. Legal Publishing: A Brief History Independently Owned Legal Publishers (1978) Anderson Publishing Banks Baldwin Barclays Matthew Bender R.R. Bowker Bureau of National Affairs Butterworths Callaghan & Company Clark Boardman Commerce Clearing House Congressional Information Service Harrison Company Information Access Lawyers Cooperative/Bancroft Whitney

3. Legal Publishing: A Brief History Independently Owned Legal Publishers (cont.) LEXIS-NEXIS Little, Brown & Company Martindale-Hubbell Michie Company Prentice Hall Prentice Hall Law & Business Research Institute of America Shepard’s/McGraw-Hill Warren, Gorham & Lamont West Publishing Company John Wiley & Sons

4. What made legal publishers attractive acquisition targets? Higher profit margins than in other fields of publishing Lower risks in product development More favorable cash flow from subscription sales. Identifiable audience. No huge advances to authors. Ability to test ideas in marketplace before product development. Selling to professional market provides greater upward flexibility in pricing. Costs often paid by institutions or the user’s employer.

5. Thomson Legal and Regulatoryacquisitions, 1979-date Callaghan & Company (1979) Clark Boardman (1980) Warren, Gorham & Lamont (1980) Gale Research )1985) Carswell (1988) Sweet & Maxwell (1988) Law Book Company (1988) Lawyers Cooperative (1989) Bancroft-Whitney (1989) Research Institute of America (1989) Maxwell Macmillan (1991) Counterpoint Publishing (1994) Information Access (1994)

6. Thomson Legal and Regulatoryacquisitions, 1979-date (cont.) Information America (1994) Barclays (1995) Shepard’s treatises (1995) West Publishing Company (1996) Bank Baldwin (1996) Foundation Press (1996) Federal Publications (1998) Dialog (Info. Services Division) (2000) Findlaw (2001) Harrison Company (2002)

7. Divestitures pursuant to 1996 Thomson-West merger

8. Divestitures pursuant to 1996 Thomson West merger

9. Treatise subject areas with equal or greater market share with no divestitures*

10. Reed Elsevier Legal Division, 1979-date Congressional Information Service (1979) R.R. Bowker (1985) University Publications of America (1985) Martindale Hubbell (1990) Butterworths (1994) Michie (1994) Lexis-Nexis (1994) Shepard’s (1998) Matthew Bender & Company (1998) Anderson Publishing Co. (2002)

11. Wolters Kluwer, 1994-date Aspen Law & Business (1994) Commerce Clearing House (1995) Little, Brown treatises (minority) (1996) Wiley Law Publications (1997) Loislaw.com (2000)

12. Who’s left? BNA -- the only legal publisher on the 1978 list which has not been swallowed up by one of the three mega-publishers. American Bar Association American Lawyer Media Business Laws William S. Hein & Company James Publishing LRP Publications Lawyers & Judges Publishing Company Nolo Press Oceana Publications Practising Law Institute Tax Analysts

13. American Lawyer Media, Inc. (1997) American Lawyer Media LP + National Law Publishing 26 national and regional legal newspapers Law Journal Press Law Journal Newsletters Law.com National Law Journal Litigation Services Network Legal Tech Legal Market Information Source Diversity Publishing Division Law Student Division Custom Publishing Division

14. Big Three Control 80% of Market 2001 U.S. Sales (in billions) Thomson $1.976 Reed Elsevier $1.404 Wolters Kluwer $.780 Other $1.040 Total $5.200

15. The antitrust environment Both the theory and practice of antitrust enforcement in the United States have undergone a dramatic transformation over the past 30 years. In our current global environment, corporate mergers which would have been unthinkable 30 years ago are now routinely approved by regulatory authorities. There was a time, until about the mid-1970s, when a market concentration of 40% held by the top four firms in a given industry would have been viewed as having reached the threshold of noncompetitive pricing. Speaking at a 1971 AALL panel, Federal Trade Commission lawyer Marlene David asserted that: “contemporary economic evidence suggests that where the four largest firms in any given industry control 50% or more of the industry’s total sales, the likelihood of prices being set at economically competitive levels is not particularly great.”

16. The antitrust environment Indeed, Robert Pitofsky, former chairman of the Federal Trade Commission, warned in the late 1970s that because of touted efficiencies, “the day might come when as few as four firms would dominate a market and that would be bad history, bad policy, and bad law.” By the late 1990s, Pitofsky was presiding over a Federal Trade Commission far more acquiescent in the face of large scale mergers. Most judges appear to accept the view of the Chicago School that only two competitors are necessary to assure consumers of competitive prices and that only one is necessary if market entry is easy. Driven by restive shareholders and global markets, the number and size of corporate mergers in recent years dwarfs anything which has come before. Mergers involving companies with aggregate sales of $1 billion or more rose dramatically in the 1990s. The total number of mergers reported to the FTC and the Justice Department pursuant to the Hart-Scott-Rodino Act rose from 1,529 in 1991 to 4,926 in 2000.

17. Mergers reported to the FTC and Justice Department, FY1992-2001

18. $1 billion+ mergers, 1996-2000

19. Causes of merger frenzy Strategic response to an increasingly global economy Response to new economic conditions produced by deregulation (e.g. telecommunications, financial services, electric utilities). Desire to reduce overcapacity in more mature industries Evolving world of electronic commerce has had a substantial impact on the merger wave because consolidation often follows the emergence of a new marketplace.

20. Priorities in antitrust enforcement The Federal Trade Commission and Justice Department direct their limited resources at preserving competition in the most important areas of the economy: Health care Pharmaceuticals Retailing Information and technology Energy

21. The antitrust environment The concentration of the legal publishing industry has mirrored the trends of economic concentration generally. Two giants with integrated product lines control 65% of the market in legal information and the big three 80%. Prices move inexorably upward, propelled by market forces generally and those peculiar to the market for legal information.. Unprecedented era of product development. Heightened competitive rivalry between the two leading legal publishers,particularly in the areas of online and citator services. Market entry is relatively easy, but, nevertheless, a challenge to small publishers who attempt to compete against the superior marketing power and sophisticated offerings of major companies. Niche publishing is a common response. Smaller publishers seek to ride the pricing wave generated by the mega-publishers. Witness the pricing of even the ABA’s books.

22. Legal and Regulatory Publishing: One Stop Shopping

23. Balancing the legal publishing giants

24. Thomson Legal and Regulatory Division revenue (2001) U.S. legal $1.976 bn (70%) Non-U.S. legal .851 bn (30%) Total $2.827 bn (100%)

25. Thomson U.S. legal revenue split (2001) Online $1.067 bn Print $.790 bn CD-ROM $.119 bn Total $1.976 bn

26. Reed Elsevier U.S. legal revenue split (2001) Online $.786 bn Print $.421 bn Other electronic $.197 bn Total $1.404 bn

27. Wolters Kluwer U.S. legal revenue split (2001) Online $.530 bn Print $.250 bn Total $.780 bn

28. Alternatives to Lexis and Westlaw *Typical add-on to bar dues. **This is cost of all states; other options are available*Typical add-on to bar dues. **This is cost of all states; other options are available

29. Preferences for CALR in Ohio (2001)*

30. Preferences for CALR in Ohio (2001)*

31. Preferences for CALR in Ohio (2001)*

32. AALL Price Index for Legal Publications, 1973/74-1995/96: All Serials (including periodicals)

33. AALL Price Index for Legal Publications 2d, 1998-2002 Serial categories include: Periodicals (academic and commercial) (388 titles) Court reporters (14) Citators (30) Digests (57) Codes (61) Legal Encyclopedias (9) Looseleaf Services (48) Newsletters (36) Supplemented Legal Treatises (272) Total number of titles (915)

34. AALL Price Index for Legal Publications 2d, 1998-2002: Serials (including periodicals)

35. AALL Price Index for Legal Publications 2d, 1998-2002: Serials (excluding periodicals)

36. AALL Price Index for Legal Publications 2d, 1998-2002: Periodicals (All)

37. AALL Price Index for Legal Publications 2d, 1998-2002: Periodicals (Academic)

38. AALL Price Index for Legal Publications 2d, 1998-2002: Periodicals (Commercial)

39. AALL Price Index for Legal Publications 2d, 1998-2002: Reporters

40. AALL Price Index for Legal Publications 2d, 1998-2002: Citators

41. AALL Price Index for Legal Publications 2d, 1998-2002: Digests (all state, regional & fed.)

42. Rhode Island Digest, supplementation cost: 1998-2002

43. Ohio Digest, supplementation cost: 1998-2002

44. Indiana Digest 2d, supplementation cost: 1998-2002

45. Federal Practice Digest 4th supplementation cost, 1998-

46. AALL Price Index for Legal Publications 2d, 1998-2002: Federal and state codes

47. AALL Price Index for Legal Publications 2d, 1998-2002: Legal Encyclopedias

48. American Jurisprudence 2d supplementation costs, 1993-

49. Am. Jur. 2d: analysis of 2001 supplementation costs

50. AALL Price Index for Legal Publications 2d, 1998-2002: Looseleaf services

51. AALL Price Index for Legal Publications 2d, 1998-2002: Newsletters

52. AALL Price Index for Legal Publications 2d, 1998-2002: Supplemented Treatises

53. Hypothetical budget shortfall, 1998-2003

54. Hypothetical budget shortfall, 2004-2008

55. Comparison of AALL Library Budgets: 1997, 1999 and 2001

56. Electronic Information Percentage of Total Information Budget

57. West Group price increases: 2002-2003 (initial prices)

58. West Group price increases: 2002-2003 (initial prices)

59. West Group supplementation costs: 1998-2002

60. Matthew Bender supplementation costs: 1998-2003

61. Impact of price increases on collection development Pricing policies of major publishers will have serious implications for the future structure of law library collections. Libraries unable to keep pace with rising costs will be forced to re-examine collection development policies if they have not already done so. Libraries will reach the point at which “fat” has been eliminated and cuts will have a greater impact upon collection quality. Initial cuts will include: Duplicative subscriptions Print citators Non-essential digests

62. Impact of price increases on collection development (cont.) Non-essential state codes “Convenience” publications, e.g. Federal Rules Service Federal Rules Digest Bankruptcy Digest UCC Reporting Service Other publications for which content exists elsewhere in collection, albeit in multiple locations. Publications available online on a per use basis.

63. Cost-saving tips for law libraries 1. In an age of double digit increases in supplementation costs, wise initial selection is critical. Evaluate all available options for appropriate depth of coverage, scholarly attributes, cost, and projected supplementation cost. 2. When entering a subscription to a print product, be sure to determine exactly what add-ons may be accompany the subscription (e.g. advance annotation service, session law bound volume, law finder, tax volumes, deskbook, tables of cases and statutes), or if related volumes may be shipped. 3. Consider alternatives to complete sets, including abridged editions, selected volumes, statutory subject compilations.

64. Continue to monitor usage and cost of even some of your long-standing library subscriptions. With advances in technology and online access, some publications may no longer receive the usage they once did to justify the cost. Re-purchase complete sets at periodic intervals in lieu of maintaining standing orders for supplementation. Buy used sets for even greater savings. Calculate the appropriate re-purchase interval by considering such factors as re-purchase cost, cost of supplementation, and utility to your library’s users. Evaluate all shipments before accessioning and stamping. If unsolicited, request return label from publisher or keep as gift under terms of U.S. Postal Law (39 U.S.C. § 3009). 7. Take advantage of all the useful features on the CRIVPage, including CRIV Tools, to reduce the amount of administrative time devoted to acquisitions-related issues. Go to: www.aallnet.org/committee/criv

65. Supplementation issues Complex issue, but one which offers tremendous potential for cost savings. Supplementation for secondary sources is heavily profit-driven, although it obviously has substantive justifications as well. Secondary sources are used chiefly for introductory analysis and framing of issues. Updating must be performed using online and print tools regardless of currency of print supplement.

66. Supplementation issues Depending upon the editorial cut-off of the supplement, this updating may involve 6-8 months of new developments. A lapsed treatise will supply the vast majority of the useful material for which it is consulted, provided there have been no major changes in the underlying law. Even “current” supplements may miss relevant cases. Case in point: Matthew Bender experience. Would you rather have 3,000 legal treatises, each of which is supplemented every three years, or 1,000 titles on standing order?

67. Supplementation issues Use availability of online subscriptions to allow periodic re-purchase (or cancellation) of print equivalents. Even when online equivalent is not available, institute program of cyclically re-ordering print treatises (e.g. every 3 years), or buying cumulative pocket parts every 2-3 years (or less often, based on usage). Use inter-library loan and other forms of resource sharing. Conduct periodic re-evaluation of collections in light of usage patterns.

68. Am. Jur. 2d cost-saving strategy #1

69. Am. Jur. 2d cost-saving strategy #2 Add-on to Westlaw subscription

70. AALL Guide to Fair Business Practices for Legal Publishers (Approved November, 2002)