uslegalservices2008
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Personal Legal Services in the U.S.
Winners and Losers:Lessons from the U.S. Legal Services Market
Richard S. GranatCo-Chair, E-Lawyering Task Force
American Bar Association
Size of U.S. Consumer Legal Market
• 50% of middle income households in the U.S. have atleast one legal problem per year.
• Only 20% seek legal assistance from attorneys.
• 26% do nothing at all.
• An increasing percentage of consumers seekalternatives to lawyers such as self-help, e.g., Nolo.
• Potentially huge market waiting to be tapped in theU.S. for personal consumer legal services.
U.S. Market for Legal Services
Reasons people give for staying away from lawyers:
1. Doubts that it would help;
2. A sense that the problem is notserious enough;
3. A desire to handle matters on theirown;
4. Biggest reason is affordability.
Internet Innovation: 1999-2001
• Creation of Internet-based legal servicecompanies funded by venture capital in thisperiod, before the dot.com crash.
• Attempt to serve this “latent” consumerdemand.
• Examples are USLaw.com,Americounsel.com., thelaw.com. All of thesecompanies failed.
• Why? Delivered traditional legal services inthe typical way - mostly referral sites toexisting law firms. There was no innovation.
What the U.S. Consumer Wants
• A different value proposition
• A much lower price for legal services
• A system where legal services are not billedby the hour
• More convenient, faster, and trustworthyservices
• Internet-based legal service
• Systems which take the risk out of buyinglegal service
Consumer Drivers
• Better educated & willing to try self-help
• Willing to explore alternative to traditional law firms
• Willing to sub-optimize
• Coming ubiquity of broadband net access in theU.S.
• Consumers want solutions without the
complications of a traditional law firm experience.
The Potential of the Web
• Lower cost
• Convenient
• Faster and better client experience
• Consistent with evolving consumer behaviors
• Digitally-based legal services that can scaleand have wide distribution
Need for Disruptive Innovation
• Innovation that changes market structure –not innovation that increases the efficiency ofexisting law firms.
• Google is a convenient example. The majorTV networks book revenue from 300 to 400customers. Google has more than 600,000customers. They have fundamentallyrestructured that part of the advertisingindustry.
Barriers to Innovation in the U.S.
• Over-regulation in the U.S. market protectslaw firms from competition.
• Examples:– Rules Against Unauthorized Practice of Law
– Marketing restrictions
– Inadequate capitalization and antiquatedownership structure
– No research and development to create newinnovative delivery systems
• Law firm cultural constraints
U.S. Law Firm Technology Trends
• Research from the ABA LegalTechnology Center
• E-Lawyering is stagnant:– Only 10% use client intake questionnaires
– Only 5% use online form preparation
– Only 2% do real-time consultations
– Only 1% do online dispute resolution
– Only 1% use legal expert systems
What if the Barriers are Removed?
• Web-enabled legal services thatcombine traditional legal services with adigital component
• Pure play digital solutions to legalproblems evolve, e.g., web-enableddocument automation
• Information technology leverage in thedelivery of legal services
Let’s Remove the Shackles!!
• New Players enter the Market
• Entrepreneurial individuals are attractedto innovate because of the size of themarket.
• Capital flows into the industry
• New methods of marketing andmanagement are adopted.
Disruptive Change and Elasticity
• Elasticity kicks in as costs go down.
• As costs go down, the market greatlyexpands converting “latent demand”into “effective demand”.
• This is not going to happen quickly inthe U.S., but it will happen.
Losers: Solos & Small Law Firms
• Highly fragmented
• Under-capitalized
• Low level use of technology
– Mainly word processing and billing
• Not truly web-enabled
• One-to-one relationship model
– Limited “reach”
– Limited “information technology leverage”
Winners in the U.S. for Now
• Legal information companies such asMyLawyer.com and Legalzoom.com.
• New, non-lawyer retail operations suchas We the People USA, Inc.
• Financial institutions that figure out away to get around U.S. regulatoryconstraints and add personal legalservices to their portfolio of services.
More Winners
• Virtual law firms that operate on the Net
• Law Firms that develop “packaged”legal solutions at a fixed price
Tomorrow in the U.S.
• Regulatory barriers will come down.
• Pre-paid legal insurance programs willexpand because insurance carriers areexempt from some regulatory constraints.
• New players will come into the market.
• The U.S. will copy innovations in the U.K. ifthey happen.
• Huge, new opportunities will emerge to servethe broad middle class.
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