Wednesday, March 11, 2009

Lexis and West are Losing Money? Oh My!

Weird. I just looked up Reed Elsevier’s and Thomson Reuters’ stock quotes for the recent past. In the case of Thomson, Yahoo! Finance’s charts only go back a couple of years, and in the case of Reed Elsivier they go back much further. If stock is any indication of anything at all, it’s the company’s profitability. And over the long haul, both companies are not doing well at all. The charts show a general decline. In the case of Reed Elsevier, it's about at the same place it was ten or fifteen years ago. Surprising? I think so. How in the world can companies with such great, vital products be loosing money?

Lack of foresight. They failed to create the next generation of information product when they had the means. They’ve stayed loyal to what they know: sell what you’ve got, and keep it that way! Instead of innovating and using the tools at their disposal and distributing their product with the greatest of ease, they have priced themselves and their products out of existence.

As Carl Malmud and others advocate for thorough and free distribution of all public information, and as technology and technologists rise to meet the challenge with elegance and facility, the Big Two (three, if you count Volters Kluwer) are marketing themselves out of existence despite a veritable intellectual gold mine in hand, the main things that make their products special: secondary titles, digests and indexes and compilations of all sorts.

The free public information movement will surely supplant the Big Two/Three’s ability to publish primary materials. But they can’t supplant their ability to publish the secondary materials that help us make sense of it all.

If the Big Two/Three go out of business because of poor business practices, bad judgement and lack of vision, God help us. I’m serious. If scholarship fails, (which is what secondary materials are, after all) then culture fails. When culture fails, so do civilizations.

Not to put too fine a point on it, but I think that our legal system is mighty important for maintaining order, and even if I think that it can stand with a tweak or two here of there; it’s worth saving and maintaining.

Somehow, the news that Lexis and West (and CCH) were loosing money sent a chill up my spine....

7 comments:

GrantS said...

i like the way of presentation

Anonymous said...

If you're going to make such a public comment about these two companies, you may want to check your spelling beforehand. I believe you meant to say that they are 'losing' money, not 'loosing'.

Additionally, you're reading the stock quotes for the entire corporation not just West or Lexis - there are many different elements that make up these two giants. What is quoted at the stock level may not reflect the individual businesses' profitability. Indeed, sales of print may be declining but doubtful that online revenues have fallen.

Richard Leiter said...

Thanks for the tip about spelling!

You're right to some extent about the companies' income. But as I understand it, their online services are very significant sources of revenue for both companies. Initially, for example, Mead created Mead Data Central when Lexis ended up dominating the balance shortly after they bought it.

The point I'm trying to make is that they are raising profits by increasing prices, not necessarily because they're selling more information. And I think that free services like Govtrack.us will eventually significantly eat into their revenue from the sale of primary material. At that point, they're going to need to hang on to what they truly own that's valuable: secondary materials.

At present, they think of these as print products. One problem that we libraries are facing is figuring out how to afford secondary collections, and we're canceling them left and right in order to be able to afford what little we still collect: primarily monographs and online services.

They've got to change their concept of what it is that they're selling - otherwise, sales of secondary materials will disappear and they'll be left with nothing: distribution of primary materials is soon not going to be a viable commercial endeavor.

Anonymous said...

The statement that the big two/three are losing money is untrue--all three are quite profitable.

You may be saying that their revenues are trending down. That doesn't appear to be true either.

If you mean that they are making more money by charging more per product or service, then say so.

Richard Leiter said...

First off, they are profitable, but not "quite profitable." At least not as I read their stock performance.

Second, I mention in the post that I was basing my opinions on their stock performance, which is flat, and even trending down.

Third, yes, they are making money by charging more per product. But that's only half the story. They are also selling half as many print products as before, and are desperately trying to retain customers through a variety of means in an attempt to show a profit.

Anonymous said...

I can tell you are not well versed in finace, which is fine. But please try to get it right. The big three publishers are "quite profitable," in fact most industries would love to have their bottom lines.

"Profitability" is not based on the stock price--as you seem to think. It is based on the percentage of profit or loss.

The stock prices are flat because the market for legal publishing is either flat or shrinking.

Print is largely irrelevant for Reed and Thomson.

Richard Leiter said...

OK, I admit it, I don't understand finances and apologize for not recognizing the success of Thomson a Reed. I'm focusing on West and Lexis, both companies that should be profitable, but seem to be struggling - at least they're acting desperate.....

They're not selling widgets, here. They're selling very valuable tools that help researchers find cases, rules and commentary that they need to conduct research. They are effectively pricing their materials out of most lawyer's reach. Simple as that. And it doesn't matter what format it's in.

If lawyers and libraries can only afford access to cases, statutes and KeyCite/Shepard's, they're hosed. Our academic contracts neatly fold many secondary materials into our subscriptions that are not available to the public or commercial users without a premium.

Indeed, this is good news to publishers who wish to sell it all on a subscription, pay as you go basis, but it is a travesty for ordinary citizens who have to rely on libraries to get information that explains the nuances of primary law. And, the jury is still out on whether online access to treatises will actually be as useful as their print versions. But that's another issue.