Each Friday, I publish Tweets of the Week. I pick them individually, not considering how they fit together. My picks today (below) tell a nice story, one that needs more than 140 characters…

Toby Brown wrote this week in The Profession is Doomed that the bar is so hidebound (my word) that he sees no hope for rule changes that would allow lawyers to adapt to the changing market. He concludes

“For a long time I have held out hope that the legal profession would step up and address the needs of the market: for both lawyers and clients… That is not going to happen… If the medical profession is any indicator, we should fully expect insurance companies and or perhaps banks to become our future legal service providers.”

Former in-house counsel Kenneth Grady seconded Toby’s views in Saving a Doomed Profession.

Static bar regulations and magical thinking notwithstanding, the legal market evolves. A few years of data show that top-firm profitability has pulled away from the rest. Confirming this trend was Citi Report: M&A Work Boosts Firm Profitability in 2014 (Am Law Daily, 11 Feb 2015):

“the top 15 most profitable continued to distance themselves from the rest of the industry.”

The rich getting richer, explains Mark Hermann, in-house counsel columnist for Above the Law, has unpleasant implications:

“I’m predicting the imminent capitulation — not bankruptcy or closing up shop; just “capitulation” — of many big firms: Firms won’t concede publicly that they’ve been beaten, but, in private, they’ll give up. They’ll pay less than the “going rate” to new associates (at least in cities in which they can get away with it); they’ll compress the pay scale for associates after the first year; they’ll increase financial demands made of partners; they’ll stop trying to match the bonuses paid by the super-rich; and they’ll otherwise leave the field. We’ll be left with a very small group of super-rich firms competing at the top and the rest of the pack watching, exhausted, from the sidelines.” (The Imminent Capitulation Of Many Big Firms)

On Thursday, the story wraps-up with a Forbes article. Legal-Services Firm’s $73 Million Deal Strips The Mystery From Derivatives Trading reports that Axiom Law has closed a $73M deal with an un-named bank to bring

“a combination of software and outsourced legal talent to the business of complex financial transactions. The firm recently signed a $73 million contract with a big global bank it won’t name (‘one of the world’s largest,’ it says) to process the bank’s ‘master trading agreements,’ such as the standardized contracts governing swaps”

Axiom Law is an alternative or NewLaw provider. See George Beaton‘s excellent January 15th blog post, Fresh thinking on the evolving BigLaw–NewLaw taxonomy for more on NewLaw.

Super-rich firms with mainly price-insensitive matters need not worry about the Axiom deal. The rest may not worry – but they should. More high-volume, price insensitive work can easily move to NewLaw, as this deal aptly illustrates. That leaves a gap for law firms stuck in the middle (neither “brain surgeons” nor “value players”).

To recap the story, US bar regulations limit what law firms can do. In our regulated sector, a handful of law firms prosper while many face challenges. One challenge comes from law-firm alternatives, which provide legal services the way clients want to consume them: at lower cost and more conveniently.

I close with a parting question. In five years, will the Axiom deal or the Dentons Dacheng merger seem more important? The merger carries multiple superlatives but may be seen as just another global platform merger. The Axiom deal, however, may be seen as a turning point for market structure and for whom clients pick for legal services.