Mead Data Central, Inc. Business Information, Profile, and History

History of Mead Data Central, Inc.

Mead Data Central, Inc. is a leading database service headquartered near Dayton, Ohio, with 50 sales offices in the United States and overseas. The company's primary services, LEXIS and NEXIS, serve over 650,000 active subscribers through nearly 5,000 databases. LEXIS, a legal research service, and NEXIS, a full text news and business information service, rank among the world's top computer-assisted resources. Mead Data Central also offers legal publishing through its Michie Company subsidiary; infobase management software through the Folio Corporation subsidiary; legal software through the Jurisoft division; and manual searching, filing, and retrieval services through its LEXIS Document Services division. A LEXIS twentieth anniversary publication noted that "if someone were to read all the information online, reading 24 hours a day at average speed, it would take approximately 360 years to read today's [February 1993] LEXIS/NEXIS library. For each year of reading, new data being added would cause the person to fall behind by another 30 years."

Mead Data Central began as the Data Corporation in the 1960s, when the concept of computer-assisted legal research (CALR) was being developed through projects in Pennsylvania, New York, and Ohio. In 1967, Data Corp. was contracted by the Ohio State Bar Association to provide a "free-text" search and retrieval system. As a result, the Ohio Bar Automated Research (OBAR) system was developed, through which Ohio attorneys could pay a fee for printouts of Ohio statutes, which they received within hours. Improvements to the system eventually allowed lawyers to access OBAR directly from their offices.

During this time, Data Corp.'s pioneering activities in the fields of digitized scanning and printing attracted the attention of forest products manufacturer Mead Corporation, which acquired Data Corp. for $6 million in 1968. Two years later, Mead Data Central was spun off as a subsidiary of Mead. In 1971, the company established its own phone communications network linking New York and Washington, D.C. The network tripled the speed of phone communications and evolved into MEADNET, which grew to serve over 75 cities by the early 1990s.

LEXIS, the world's first commercial online legal research service, was launched in April 1973. The new service offered electronic, full-text copies of federal statutes, case reviews, and other legal information. Initially, the LEXIS database contained general information on cases from the U.S. Code and Supreme Court, the U.S. Court of Appeals, and District courts, as well as a federal tax library, specialized information on cases specific to Ohio and New York, and a service known as the National Automated Accounting Research Service (NAARS). By the early 1990s, however, LEXIS had grown to incorporate major archives of codes and regulations, annotations, professional journals and directories, public records, corporate filings and financial statements, analyst reports, and patents. Moreover, it offered material from 45 libraries specializing in tax, securities, banking, labor, environmental, and insurance law.

In 1975, Mead Data Central launched an innovative marketing strategy that would ensure a future generation of subscribers. By offering LEXIS usage free to law schools, the company promoted CALR as an essential part of many curricula, and the interns or associates who had utilized the system in school helped push law firm usage to unequaled heights each succeeding year. Consequently, the use of traditional research sources--large, expensive law books--became less popular, and LEXIS emerged as the new standard. LEXIS allowed attorneys to narrow their searches to strictly relevant and manageable material, providing a substantial savings of time and expense.

NEXIS general news service was launched in 1979 as a complement to LEXIS. Initially, NEXIS offered the full text of articles from four news publications and two wire services. Eventually, however, the service incorporated over 450 business and general publications, including Business Week, Fortune, and The Washington Post, as well as Tass, the Soviet press agency. NEXIS also became the exclusive electronic carrier of complete articles from The New York Times. By 1993, NEXIS ranked as the world's leading news and business service with more than 1,000 full-text sources and 2,000 sources of abstracts. The appeal of both LEXIS' and NEXIS' speedy, thorough searches quickly became clear to those who had used manual periodical indexes.

By the end of the 1970s, Mead Data Central was bringing in $23 million in annual revenues, and once case law for all 50 states was completed in 1980, the venture experienced even more rapid growth. Mead Data Central's proceeds reached $47 million in 1981 and increased by more than 20 percent annually from 1983 through the end of the decade. LEXIS accounted for the vast majority of the company's income, representing $215 million of its $307.6 million total revenues in 1988, for example.

Much of the company's swift growth during the 1980s was overseen by Jack W. Simpson, a former executive at IBM who became president of Mead Data Central in 1982. Under Simpson, the company made several acquisitions. In 1985, the company purchased Micromedex, Inc. a vendor of information on poisons and emergency medicines, which it marketed on compact disks. Two years later, Mead Data Central gained increased exposure in the Canadian market by purchasing one of that country's largest financial online services, Dataline, Inc. Dataline offered brokerage firms such computer systems as Canquote, Teledat, Knight-Ridder's MoneyCenter, and Insider Trading Monitor. The Illinois Code Company was acquired in 1988 and became the LEXIS Document Services division, providing manual searching, filing, and retrieval services for Uniform Commercial Code (UCC) liens, corporation records, and tax liens filed throughout the United States.

The Michie Co., a small legal publisher with annual revenues of $34 million, was also acquired in 1988. This addition, which sold printed statutes from 23 states to law firms, courts, corporate legal departments, and electronic publishers, was the company's first attempt to diversify beyond electronic publishing. Although some observers, including Simpson, found the $226.5 million price tag prohibitive, parent Mead Corporation considered the acquisition important in helping to broaden the scope of Mead Data Central. In 1989, the company acquired Jurisoft, a leading developer of legal software based in Cambridge, Massachusetts. The company became a division of Mead Data Central, offering such products as CiteRite II, FullAuthority, CompareRite, and CheckCite, which allowed users to verify citations and establish definitive source lists quickly.

Joint ventures during the 1980s included a partnership with a Ford Motor Co. subsidiary, BDM, to create the Electronic Data Gathering Analysis and Retrieval System (EDGAR), a public online database of Securities & Exchange Commission filings. Although Mead Data Central expected only moderate success from the system, it hoped that the diversification of services would draw more financial and corporate subscribers to its LEXIS Financial Information Service. Known as "Exchange" until 1988, this offspring of LEXIS received mixed reviews; a reviewer in Business Week called the system a "sputtering spinoff," while the Wall Street Computer Review regarded it as a "successful online financial information service."

In 1988, Mead Data Central sued Toyota for trademark infringement over the latter's use of the name Lexus for its new line of luxury cars. A U.S. district judge in New York ruled that the automaker's use of the brand would dilute the effect of Mead Data Central's trademark, and Toyota was restricted from advertising its Lexus nationally, although it was allowed to feature the name at auto shows in Los Angeles, Detroit, and Chicago. However, in 1989, the U.S. Second Circuit Court of Appeals overturned the ruling, and the car was launched in showrooms that fall. Since that time, some analysts have suggested that the situation was of mutual benefit to Mead Data Central and Toyota; the Lexus name achieved a reputation for high quality and prestige in both arenas.

After a decade of dramatic revenue and profit increases, Mead Data Central experienced a slower growth rate in the late 1980s and early 1990s, which it attributed to economic factors and increased competition. The economic recession that began in 1989 hit the legal profession especially hard; for the first time in recent memory, partners were being laid off and law firms were restricting hiring. Moreover, competition intensified dramatically in the late 1980s. From 1985 to 1990, the number of computerized services available increased from about 300 to 800. Encouraged by industry-wide annual revenue increases of 18 percent, major competitors included Knight-Ridder, Inc.'s Dialog subsidiary; Reuters Holdings, PLC; Thomson International; Reed Elsevier; and Dow Jones & Company, Inc.

However, the strongest competition came from West Publishing Co. and its Westlaw electronic retrieval service for legal documents. West was already a dominant player in the field of legal texts and research volumes, and its Westlaw service was credited with cutting LEXIS's share of that market from an early 1980s high of 95 percent to 60 percent by 1993. Westlaw achieved this by introducing time-based fees as an alternative to the fixed per-search charges imposed by LEXIS. Furthermore, West began offering Knight-Ridder's Dialog general news retrieval service to compete with NEXIS.

Perhaps the greatest challenge offered by West was its September 1992 introduction of a more user-friendly search system that offered associative retrieval technology, or natural language searches, rather than the Boolean searches required by LEXIS. A January 1993 article in Forbes provided a comparison of the two technologies: "to search West's database for cases involving travel agents' liability, a lawyer might type in Can a travel agency or book publisher be held liable for injuries sustained by a tourist while visiting a recommended place? But to give the same instructions to LEXIS, a lawyer must type in the following Boolean sequence: (travel w/15 agen! or guide or brochure or literature) w/25 (injur! or accident or death) w/25 (tourist or traveler)." Through associative retrieval technology, the West system was able to parse sentences, rank and give weight to various words, and chose synonyms to search as well. As a result, many industry experts regarded LEXIS as outdated. The expense of catching up coincided with the economic downturn and heightened competitive environment, putting Mead Data Central at a disadvantage.

In 1992, a new CEO at Mead Corporation, Steven Mason, effected fundamental changes at Mead Data Central. The parent had previously run its debt to capital ratio up to 46 percent, counting on Mead Data Central to be the "cash cow" that would help pay that debt down to more normal 30 percent to 40 percent levels. But this practice became hazardous when growth at Mead Data Central slowed from 30 percent annually in the 1980s to less than ten percent per year in the 1990s. Under Mason, LEXIS president David Berger was fired, and shortly thereafter Jack Simpson left the company. According to the Wall Street Journal, Simpson left due to "a disagreement with executives about how to proceed with the business operations of the unit." Simpson was succeeded in April 1993 by Rodney L. Everhart, who had served Mead Data Central as vice-president of finance and administration and corporate controller.

Everhart brought a new corporate focus on customer service to Mead Data Central, calling himself a "change agent" in an interview for Online magazine. Rather than simply increasing the amount of information provided by its databases, Everhart emphasized the process of making that information easier to use. Furthermore, in response to customer demands and Westlaw's initiative, Mead Data Central revised its pricing structure to include transaction pricing, hourly pricing, zero connect pricing, subscriptions, and modified subscriptions in the early 1990s.

Another plan that the company hoped would generate sales involved modifying its databases to allow subscribers to import LEXIS and NEXIS files into their own work space as manipulable information. A cooperative alliance with Microsoft Corp. to coordinate LEXIS/NEXIS and the popular Windows interface was a primary step toward this goal. Mead Data Central's December 1992 acquisition of Folio Corporation--a pioneer and market leader in the development of information management software products located in Provo, Utah--was another key step toward this goal. Everhart planned to continue Folio's retail sales of such applications as Folio VIEWS and simultaneously integrate its programming proficiencies into the LEXIS/NEXIS online systems.

The company also planned to add an e-mail system and expand its international operations. In addition to developing products specifically for the international market, Mead Data Central set up a remote processing facility in London to make closer connections with licensers in Europe and thereby get data online more quickly. The company also established sales offices in London, Germany, Hong Kong, Latin America, and Toronto.

In the fall of 1993, Mead Data Central announced the elimination of 400 headquarters employees, or 9.5 percent of the company's total staff. During this time, rumors began to circulate that the subsidiary was for sale. Patricia Lane, of Information Today, speculated in September 1993 that the firings were part of an appeal to Wall Street, "the theory being eliminate jobs--your stock goes up."

Principal Subsidiaries: Mead Data Central International, Inc.; The Michie Company; Folio Corporation.