The Napsterization of Legal Services

Two weeks ago I spoke on a panel at ILTA in a session entitled, Legal Technology Innovation - Bolstering AND Destroying the Legal Profession.  Interestingly, the original title was Bolstering and Destroying Legal Work, which didn't seem nearly as wimpy when we submitted it, as it did after the revised title was published.  We kept the new title.

The panel was a reunion of the Do Robot Lawyers Dream of Billable Seconds? panel I spoke with last year that included Joshua Lenon from Clio, Noah Waisberg from Kira Systems, Stuart Barr from HighQ, and Michael Mills from Neota Logic.

Rather than post the recording of the session as I did last year, I've asked my fellow panelists to submit their short talks in blog post format.  I've received a few of them and they will be published in turn over the next few weeks.

Today, I'll start with a synopsis of my own talk:

The Napsterization of Legal Services.

The record labels used to sell plastic discs with data on them.

Today they sell nearly that same data over the internet, without the plastic discs.

On it's face that seems like a relatively straight-forward, if not easy transition to make.  It's the kind of transition from one media type to another that you would expect a mature business or industry to be able to navigate with minimal disruption.  But as we know, that transition was anything but straight-forward.  In fact it wreaked havoc on the recording industry for more than a decade and they are just now beginning to get back on track.

Why was this such a difficult transition?

I suspect there are many reasons that the record labels found it difficult to move from plastic discs to no plastic discs, but I think one primary reason is that in the late 90s, they were in the business of selling plastic in pretty packaging, more than they were in the business of selling the content on that plastic.  They could charge premium prices for discs and packaging and they had to to cover the manufacturing and distribution costs of discs and packaging. They were certainly aware of the internet, and probably knew that digital distribution was the future, but they had no urgency to change a model that was still largely working.

And then Napster exploded on the scene. 

Napster wasn't a rival record label, or an upstart looking to upend the industry, in fact it wasn't even a company originally.  Napster was a kid in his dorm room using technology that was widely available at the time to do something that kids had been doing for decades: sharing their favorite music with their friends. In my day we used cassette tapes.  Napster was the ultimate mix tape, and in a very short time, that mix tape was available all over the world.

This highlighted a clear discrepancy between what the record labels were selling (discs and packaging) and what their customers actually wanted and cared about (the music). Whenever such a discrepancy exists, technology will step into that gap.

What this has to do with legal services?

I think law firms, in particular, are in much the same position today that the record labels were in the late 90s.  We even have our own version of the 'discs and packaging' problem.

We sell our lawyers time - and that is true whether we're talking about billable hours or fixed fees. We sell the time it takes our lawyers to manually perform various tasks, and produce outcomes for our clients.  When what the client actually cares about is the outcome, not the hours.

Historically, this discrepancy wasn't a problem because the best way to deliver those outcomes was to have our lawyers manually perform the work and then bill for their time.  But today that is not necessarily true.  With machine learning algorithms, reasoning tools, and automation software, we can begin to replicate the work that our lawyers have always done manually with technology.  We can deliver a better, faster, AND cheaper solution to our clients.

Our lawyers are still compensated, and our firms are still structured, around 'selling plastic discs and packaging' (lawyers hours).  And yet the technology to give our clients the outcomes they want, with minimal manual labor is becoming widespread.  We are ripe for our own version of Napster.

We have an ever-shrinking window of opportunity from today until the Legal Services Napster Event takes place, when we can begin to manage the transition from one media type to another.  If we actively and intelligently manage that change, then it will be a bumpy ride, but we'll come through it.  The alternative is to do nothing, keep selling our discs and packaging, and hope that nothing ever changes.

And thanks to the record labels, we have a good idea of how that will turn out.

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Anonymous said...

For the past 10 years, I've been hearing of the coming demise of the billable hour. Yet it's still with us. I really don't even see any significant cracks in the foundation. I have zero clients demanding flat fee billing for litigation matters. It's just too uncertain for both lawyer and client. Unlike the pre Napster record industry, most lawyers hate the status quo as much as clients do. But there is no good alternative to hourly billing. Napster gave us a new method of widespread distribution of music one track at a time. So tell me, what is the legal industry equivalent of Napster and Internet distribution? Free legal advice from Watson or Google? I don't see that happening anytime soon. And good luck getting Watson to handle your criminal or civil case for you in court. If someone can give me the alternative to the billable hour, I'm all ears. But I see no Shawn Fannings out there doing delivery of legal services better, cheaper, faster than we're doing it now on the billable hour model.

Lawrence said...

If you step back a little, the role of lawyers as OFFICERS of the court is to ensure fast and fair implementation of justice (or more broadly ADR). Leaving aside commercial work (contract drafting, compliance etc), then the significant gap between shortage of legal aid and caseload indicates a gap between the service needed and provided. Because service is not discrete, it is hard to unbundle the "package" unlike songlists. With a captive audience, there is no real competition much less incentive to change the billable hour mindset. However, I see outsourcing becoming more prevalent, already in IP domain I'm seeing India companies offering to do patent searches and even trademark management (with most developed countries highly automated). So I conjecture specialist services will lead the way with general legal work dragging feet, much like property agents in Australia wrestled the exclusive title search for property sales away from the lawyers once deeds were computerised.

Jason Plant said...

The driver here, and I suspect the only way Legal will change, came from the client (Shawn Fanning in this case) wanting cheap (free) and easy access to the service he was after. Wasn't a tech company, wasn't the record industry. Is the need of the consumers of Legal product for super low cost great enough for them to initiate the change??

p.s. kudos for the HMV record store picture, that's from my city! Slightly ironically it is now a bookshop, sometimes the old comes back!


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