Is “free” a potentially workable business model for legal services?

By Kristopher A. Nelson
in June 2009

1100 words / 5 min.
Tweet Share Lawyers are safer than musicians in that distribution of legal knowledge is harder - but nonetheless technology will revolutionize legal services, and law firms that adapt to the ideas behind “free” as a business model will survive and prosper - those that fail to adapt will not.

Please note that this post is from 2009. Evaluate with care and in light of later events.

Chris Anderson wrote last year in Wired:

It’s now clear that practically everything Web technology touches starts down the path to gratis, at least as far as we consumers are concerned. Storage now joins bandwidth (YouTube: free) and processing power (Google: free) in the race to the bottom. Basic economics tells us that in a competitive market, price falls to the marginal cost. There’s never been a more competitive market than the Internet, and every day the marginal cost of digital information comes closer to nothing.

via Free! Why $0.00 Is the Future of Business.

Jason Plant takes this idea and extends it to law firms: could a law firm really offer services for nothing?

Could we every get to the point that the knowledge systems in law firms become so good that a simple search could trawl thousands of precedents and cases in a firms KM (Knowledge Management) and DM (Document Management) systems and bring you back the agreements that could be used with virtually no partner/associate billable time. Meaning very low costs that could be covered elsewhere (e.g. by adverts)?

via Free! Why £0.00 Is the Future of Business.

A little more background on the concept provides more context. So, first Chris Anderson notes the powerful difference from the consumer perspective between free and cheap:

From the consumer’s perspective, though, there is a huge difference between cheap and free. Give a product away and it can go viral. Charge a single cent for it and you’re in an entirely different business, one of clawing and scratching for every customer. The psychology of “free” is powerful indeed, as any marketer will tell you.

Chris also points out that “free” does not mean that someone, somewhere isn’t making money – advertiser-support Web sites are a key example of this:

Traditionalists wring their hands about the “vaporization of value” and “demonetization” of entire industries. . . . But free is not quite as simple – or as stupid – as it sounds. Just because products are free doesn’t mean that someone, somewhere, isn’t making huge gobs of money. Google is the prime example of this. The monetary benefits of craigslist are enormous as well, but they’re distributed among its tens of thousands of users rather than funneled straight to Craig Newmark Inc. To follow the money, you have to shift from a basic view of a market as a matching of two parties – buyers and sellers – to a broader sense of an ecosystem with many parties, only some of which exchange cash.

I do not believe that the lengthening economic recession has not proven any of this wrong, although more and more businesses are struggling to find ways to fund the very real costs that exist. Even if marginal costs per user are still dropping towards zero, servers, bandwidth, and storage still cost the provider real money. Yet, consumers appear even more price conscious today, and paying anything at all can seem like too much. The short-term challenge for many companies is to survive when third-party funders are harder to find, and customers are shy about paying for anything. Perhaps as consumers see companies with services they value go out of business, the massive gap between “free” and “cheap, but nor free” will lessen – but I wouldn’t count on it.

Back in the legal world, however, it is more of a stretch to me to imagine how this would work. Certainly it is possible that Jason’s Knowledge Management services may well make simple legal queries cheaper. Even now, self-help legal Web sites have grown beyond what was ever available previously, and open-access legal search makes case law increasingly accessible to everyone (in a technical sense, anyway). Technology will increasingly make routine legal matters – wills, real estate conveyances, simple contracts – possible to handle without a lawyer, or without paying a lawyer a great deal of money.

But while I suspect these services might extend legal access (“access to justice,” as it’s termed), I am not convinced that it will undercut the legal market as a whole, at least not in the short-to-medium term – not until human intelligence is significantly replaceable by artificial means. Thus, services based on human input, creativity, and analysis will be the last outpost of replaceability. For example, musicians have not been replaced. Humans still need to create original music. It is the distribution model that has changed.

Distribution, as the music industry has found, is subject to technological replacement. Similarly, distribution of legal services is already undergoing changes, as “virtual law offices” emerge, and some services are even outsourced to other countries. Barriers – bar membership requirements for example – might make this challenging, but those are, in a sense, artificial barriers, as are copyright laws.

This, musicians can still earn money for in-person concerts, where it is impossible to replicate the human element. The same will continue to be true for attorneys. But distribution of legal analysis, as with music, will change.

There are key differences, though: music does not require modification based on context, while legal analysis is incredibly fact and jurisdiction specific. So distribution will get cheaper, but marginal costs – due to modifications and application – will not drop as much in law as in music. Still, “freemium” business models, or models where third parties pay, may well be extensible to legal services. For example, firms perhaps could provide simple wills and contracts for free, and charge for customization. Legal analysis in a broad sense could also be free – but you need to pay us to apply it to your facts (is this not what legal blogs are doing now?).

So lawyers are safer than musicians in this sense – but nonetheless technology will revolutionize legal services, and law firms that adapt to the ideas behind “free” as a business model will survive and prosper – those that fail to adapt will not.

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