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Analysis of the US legal services industry as it affects the broad middle class.

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  1. 1. Personal Legal Services in the U.S. Winners and Losers: Lessons from the U.S. Legal Services Market Richard S. Granat Co-Chair, E-Lawyering Task Force American Bar Association
  2. 2. Size of U.S. Consumer Legal Market • 50% of middle income households in the U.S. have at least one legal problem per year. • Only 20% seek legal assistance from attorneys. • 26% do nothing at all. • An increasing percentage of consumers seek alternatives to lawyers such as self-help, e.g., Nolo. • Potentially huge market waiting to be tapped in the U.S. for personal consumer legal services.
  3. 3. 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 not serious enough; 3. A desire to handle matters on their own; 4. Biggest reason is affordability.
  4. 4. Internet Innovation: 1999-2001 • Creation of Internet-based legal service companies funded by venture capital in this period, before the crash. • Attempt to serve this “latent” consumer demand. • Examples are,, All of these companies failed. • Why? Delivered traditional legal services in the typical way - mostly referral sites to existing law firms. There was no innovation.
  5. 5. What the U.S. Consumer Wants • A different value proposition • A much lower price for legal services • A system where legal services are not billed by the hour • More convenient, faster, and trustworthy services • Internet-based legal service • Systems which take the risk out of buying legal service
  6. 6. 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 the U.S. • Consumers want solutions without the complications of a traditional law firm experience.
  7. 7. The Potential of the Web • Lower cost • Convenient • Faster and better client experience • Consistent with evolving consumer behaviors • Digitally-based legal services that can scale and have wide distribution
  8. 8. Need for Disruptive Innovation • Innovation that changes market structure – not innovation that increases the efficiency of existing law firms. • Google is a convenient example. The major TV networks book revenue from 300 to 400 customers. Google has more than 600,000 customers. They have fundamentally restructured that part of the advertising industry.
  9. 9. Barriers to Innovation in the U.S. • Over-regulation in the U.S. market protects law firms from competition. • Examples: – Rules Against Unauthorized Practice of Law – Marketing restrictions – Inadequate capitalization and antiquated ownership structure – No research and development to create new innovative delivery systems • Law firm cultural constraints
  10. 10. U.S. Law Firm Technology Trends • Research from the ABA Legal Technology 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
  11. 11. What if the Barriers are Removed? • Web-enabled legal services that combine traditional legal services with a digital component • Pure play digital solutions to legal problems evolve, e.g., web-enabled document automation • Information technology leverage in the delivery of legal services
  12. 12. Let’s Remove the Shackles!! • New Players enter the Market • Entrepreneurial individuals are attracted to innovate because of the size of the market. • Capital flows into the industry • New methods of marketing and management are adopted.
  13. 13. Disruptive Change and Elasticity • Elasticity kicks in as costs go down. • As costs go down, the market greatly expands converting “latent demand” into “effective demand”. • This is not going to happen quickly in the U.S., but it will happen.
  14. 14. 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”
  15. 15. Winners in the U.S. for Now • Legal information companies such as and • New, non-lawyer retail operations such as We the People USA, Inc. • Financial institutions that figure out a way to get around U.S. regulatory constraints and add personal legal services to their portfolio of services.
  16. 16. More Winners • Virtual law firms that operate on the Net • Law Firms that develop “packaged” legal solutions at a fixed price
  17. 17. Tomorrow in the U.S. • Regulatory barriers will come down. • Pre-paid legal insurance programs will expand because insurance carriers are exempt from some regulatory constraints. • New players will come into the market. • The U.S. will copy innovations in the U.K. if they happen. • Huge, new opportunities will emerge to serve the broad middle class.