The legal publishing market has traditionally been very quick to adopt new technology. Computers and the internet have brought the general public unprecedented access to large volumes of information and transformed the legal publishing business. There has been a tremendous rush, especially by the United States government, to place legal and national information online, thereby giving access to all citizens.73 Unfortunately, the massive amount of data is located across a complex worldwide network of computers and accessed via billions of individual websites.74 Computers have been harnessed to quickly query this bulk of information and deliver results useful to individuals, and legal publishers are masters at delivering these results.
In 1953, the first information retrieval system on a general-purpose computer was announced.75 Just eleven years later, in 1964, the legal field began to use these systems to store case citations, statutes, administrative decisions, and city ordinances.76 By 1975, there were 300 public access databases.77 Forty years after the first forays into online full-text information retrieval, the market is dominated by the three major players: the West Group, owned by the Thompson Corp., LexisNexis, owned by Reed Elsevier, and CCH, owned by Wolters Kluwer.78 In 1998, of the estimated $5.2 billion market for legal research materials, these three companies controlled over $4 billion in annual sales.79 In 2004 the “big three” posted $5.9 billion in sales.80 Online sales represent nearly 46% of this $6 billion-plus market.81 The “big three” legal publishers enjoy unusually large profit margins on their legal publications as compared to the other divisions in their companies,82 and as compared to traditional publishers.83 Because online sales represent nearly half of the revenue for these “publishers,” it is unfair to compare them to other traditional print publishers. Instead, it may be more apt to compare the margins of these companies with other “information dealers.” The profit margins of companies in the software and programming industry average 24.845%, close to the 25.265% average margins of the legal publishing divisions.84 When considering that less than half of their revenue comes from online endeavors, though, the comparison is weaker. An average of the traditional publishing and software industries’ margins would be more expected. An average of the margin from the software and programming industry85 with publishing’s 5% margin,86 or 14.925%, presents a reasonable facsimile of the revenue streams for legal publishers. This calculation produces an estimated profit margin significantly lower than legal publishing’s 25%-plus margin. Regardless of their sector classification, the legal publishing divisions’ profit margins are in or near the top quartile of the S&P 500 companies, quite high by overall corporate standards.87 With such massive profit margins, it is hard to see how the legal publishers can argue that they are in danger.88 Quite to the contrary, the big three’s sales have increased 40% since 1998.89
