Free and Law Firms

free the future of a radical price by Chris Anderson

I just finished reading Chris Anderson’s new book: Free: The Future of a Radical Price. Given that I am a lawyer, I kept thinking about how his concepts apply to law firms.

Let me say a few things up front.

First, this is an excellent book that will make you think about how these concepts apply to your business. For my prior employer, a large law firm I saw lots of trends in the book.

Second, I am part of an example that Chris uses to defend his hypothesis: GeekDad. Chris started GeekDad as the parenting blog for Wired magazine. The blog is led by Ken Denmead as editor who gets a nominal retainer. The rest of the contributors are unpaid volunteers writing for a magazine conglomerate that makes good money selling ads on GeekDad. I am one of those volunteer contributors. (You can see my name in the list of core contributors in right-hand column.)

Third, Chris does not take the position that everything should be free. He merely points out that more things now can be, thanks to the reduced costs of computer power, storage and networking.

Fourth, I paid for the book out of my own pocket. Free, the book is not free. Free, an abridged audio version is free online.

The Long Tail

Free is an extension of his previous book: The Long Tail. In that book he showed how the sale of large quantity of less popular titles can collectively sell as much as the few popular titles. You can make this work when you have cheap storage. Free takes the next step of what happens when your marginal production costs get close to zero.

There are many studies that show there is a big difference between something costing very little and something costing zero. Therefore you will attract a bigger audience if you round down. With electronic distribution, the marginal cost for adding the next customer is close to zero. So Chris says round down.

How Do You Make Money?

Chris outlines 50 different ways that you can make money even when you are giving away some of your product. Chris does not advocate giving away everything, just some of the things when the marginal cost is close to zero. One of the big distinctions is whether your product is atoms or bits. Atoms are expensive to produce and distribute. Bits are not.

He divides the idea of Free into four categories: cross-subsidies (give away the razor, sell the blade); advertising-supported services (from radio and television to websites); freemium (a small subset of users pay for a premium version of something, supporting a free version for the rest); and non-monetary markets (in which participants motivated by non-financial considerations develop things like Wikipedia and GeekDad).

Freemium is the model that Chris seems most in favor of. You give away a limited version of the product, but charge for the full version, add-ons and enhancements. SocialText just adopted that model for their wiki product: Free for 50. You can use a limited version of the product with up to fifty people at no charge. That freemium model got me using it.

Information is Expensive but Wants to be Free

Chris quotes Stewart Brand:

On the one hand information wants to be expensive, because it’s so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other.

What about law firms?

Let’s look at the most extreme examples, Orrick, Herrington and Sutcliffe‘s free business formation contracts and Wilson Sonsini’s Term Sheet Generator. There’s no cost to use the forms and no registration required to download them. Businesses can use them free. Other lawyers can use the forms as if they were their own and use them to serve their own clients. But the free product may help capture business. There are big segments of the legal market that can’t afford to hire these firms. Now, a business using these may be more likely to use the firm because some of the work has already been done. The firms could charge far less to review a completed form than if the firm were to begin the incorporation from scratch. It may offer them a competitive advantage if opposing counsel presents them with one of their own forms.

But those examples are new and few.

There is an incredibly common freemium model adopted by almost every law firm: Client Alerts.

When you had to mail these alerts there was a dollar cost associated with that distribution. To better phrase that, there was a stamp cost associated with distribution. Now distribution are costs are minimal. The costs are the same whether you email it to 500 people or 50,000 people. The same is true with viewing it on the law firm’s website.

I think it is quaint that some law firms still use the “client alert” label. I get more alerts from firms that do not represent me, than I do from the firms that do represent me.

Lawyers and their firms are giving away this valuable legal insight in the hopes that you will hire them to represent you in a matter related to the information in their publication. They use the publications to showcase their expertise, but in the process give away some of their substantive knowledge.

The book is worth reading. You should start thinking about how free may affect your business.

References:

He divides the idea of Free into four categories: cross-subsidies (give away the razor, sell the blade); advertising-supported services (from radio and television to websites); freemium (a small subset of users pay for a premium version of something, supporting a free version for the rest); and non-monetary markets (in which participants motivated by non-financial considerations develop things like Wikipedia and <a href=”http://www.wired.com/geekdad”>GeekDad</a>).
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