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

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. 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. 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. Internet Innovation: 1999-2001
• Creation of Internet-based legal service
companies funded by venture capital in this
period, before the dot.com crash.
• Attempt to serve this “latent” consumer
demand.
• Examples are USLaw.com,
Americounsel.com., thelaw.com. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. Winners in the U.S. for Now
• Legal information companies such as
MyLawyer.com and Legalzoom.com.
• 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. More Winners
• Virtual law firms that operate on the Net
• Law Firms that develop “packaged”
legal solutions at a fixed price

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.