Hi to everyone.
Thank you for joining the first session
of the Verbit Virtual Summit.
This session is a status update on
the court reporting market and existing gaps.
We're actually very excited to hear from
Strategy& the division of PwC.
I'm sure that everyone knows it,
and they're going to share their analysis and
overview of the court reporting
market and current processes.
You can submit your questions
live through the Q&A feature
here within Zoom in the bottom down.
We will be taking questions and
addressing them during
the last 10 minutes of the session.
It will really depend on when do we finish,
how many questions we will take.
With that, I would like to begin
this session that we have with us
Tal Fisch for Strategy& from PwC,
as well as Amit,
two of the smartest people probably in the market,
and they did a very smart analysis on
the court reporting markets.
Tal, would you like to introduce
yourself and the team and then take it from there?
Yes, sure. Thank you Jacques, and hello everyone.
I'm very excited to be here and
take part in our virtual summit.
As Jacques mentioned, my name is Tal Fisch.
I'm a director in Strategy&.
Together with me here is Amit Zaidenberg,
a consult in our team.
For those of you who maybe are
not familiar with Strategy&,
Strategy& is a leading global consulting firm.
It's actually the strategic arm of PwC.
Together, PwC and Strategy& are
one of the leading professional
services firm in the world.
More than 220,000 consultants,
professionals across over 160 states.
As for myself, just to give some more introduction,
I'm a strategy director in Strategy& located in Israel.
I'm leading the local deals and M&A practice and
specialize in commercial due diligence, market studies,
I'm also supporting companies in
growth strategy and go to market strategy.
Maybe before we start going over the market analysis,
I was invited today to speak about the overall market.
We will see in a second how the market looks like.
I just want to give everyone
some context about our starting point in this study.
PwC actually conducted a very comprehensive market study
which was focused on the court reporting market in the US.
PwC globally, and specifically in the US,
was actually highly
involved in many M&A transactions,
where we actually supported both bidders
and target companies within the court reporting market.
We were able to gain
very significant knowledge of the industry,
very intimate knowledge of the different bidders,
the different players in the market.
We know the customers,
we know their needs, we know their pain points,
and all of this really help
us to lay out a very solid market view.
You know it's quite funny because when you speak
about the court reporting market,
when we entered this exercise,
we tried to use some public available data,
and it was like if you ask
10 different research companies how
the market looks like and what the market size is,
then you get 10 different complete answers
with a massive range.
I hope that this overview will make
sense to everyone and I hope
you will find it very useful.
Let me share my screen.
Jacques, can everyone see my screen?
Yes, we can.
Great, let's get into the details.
Like I said before, the baseline for
this study was based
mostly about our experience in the market,
supporting all kinds of
agencies in their consolidation and roll out strategy.
This is actually one of the
trends that we see in the market.
What you can see here is actually
our interview type, our interviews list.
I need to see who we spoke with.
We spoke with large,
the national, the regional CRAs.
We spoke with the small ones,
we spoke with transcription vendors,
stenographers, legal transcriptionists, law firms,
corporate legal departments, including
insurance departments, court administrators,
and all kinds of associations and
people on the board of those organizations,
and many other suppliers,
whether it's from stenographers or
any other digital suppliers in the market.
All of this really helps us to shape our market view
and come out with a great view on
the market. Let's start.
Before we speak about the market,
we need really to define how the market looks like,
and I think this is already very
different between all kind of public data,
which is available out there.
But here you can see our methodology to
define the total addressable markets attempt.
The court reporting market,
from our point of view,
is built based on three key use cases.
The first one is what we call the depositions.
This is court admissible transcript of
witnesses testimony outside of court.
I'm sure you're all familiar very well with this.
The second use case is the court.
Everything that's going on in the courts,
whether it's on federal,
or state, or local level within courts in the US.
The third use case is what we call the EUOs,
the examinations under oath, specifically for insurance.
Now, I need one caveat on this one.
When we spoke to the market,
many companies sometimes call depositions EUOs.
Here we try to do the split and not do double counting,
the regular EUOs, which you're probably
familiar with are part of the deposition.
When we say EUOs in these presentations,
we mean EUOs coming from insurance companies only.
Then there are other very small use cases
which related to documentation of legal works.
This is also part of the market,
but you will see in a second,
this is a very small part of it.
In the second way, we can also see
the end-users of those use cases.
In depositions eventually, who's
acquiring or purchasing the service
are mostly the law firms.
In some cases, it could be also
the corporate legal departments of many organizations.
In courts is obviously the court,
but it can be also public defenders of the law firms,
in insurance it's obviously the insurance companies,
and in the other use cases,
you can see below who's relevant.
What's also important to note when we speak about
the market is what's the solution
type that there is out there in the market so that for
deposition we have
real-time solutions and post-production.
Same goes to court.
In EUOs, we see
mostly post-production, although real-time,
it's kind of a new pilot going out there,
and in others can be also
both real-time and post-production.
Also important to note,
and you can see it at the bottom of my screen,
that we're not speaking about
other verticals like law enforcement
sometimes they get mixed within the legal space.
From our point of view, we're speaking solely about
the court reporting market and
about those use cases that you see here.
Now that we define the market,
let's see the size of it.
PwC estimates the inclusive court
reporting market to be between $4-5 billion.
This is the black column here you see on the left.
When we separate the different elements,
we see two key buckets.
One is the supplementary added value services.
These are services that
usually court reporting agencies provide,
such as scheduling, videography,
and other functionalities that are provided.
The second part, which you see on the right column,
is what we call the court reporting itself.
This includes all the court reporting work,
and we estimate this to be between $2.8-3.5 billion.
This is the market of the court reporting in the US.
Now, let's look on the market from different angles.
The first angle is split
the market by key players in the market.
As you can see on the big pie chart on the left,
the court reporting agencies,
they make roughly 90 percent of the market between 85-95.
This means that most of
the money in this industry flow through the CRA.
What else you can see is that there are also
transcription vendors and digital recording providers,
some of them get directly paid by others.
Now, the pie chart that you see on
the right side shows you how the money that
comes to those agencies split
between the agencies themselves and others.
As you can see that the CRAs are
left with $1-1.4 billion,
which makes between 35-55 percent,
and the court reporters themselves,
they get the bigger chunk of this one.
They get between 45-65 percent of the market.
Overall, you see it's a $2.8-3.5 billion market.
With the CRAs, they left with $2.6-2.9 billion.
This is the market when we speak
about key players in this one.
Moving on to the next one,
now we can see the market from different use cases.
We spoke about the three key use cases as you can see.
Depositions are the biggest use case
out there in the market.
It's almost 85 percent
of the market goes to depositions.
The other big part of it is
the court between $0.4-0.7 billion,
and then the EUOs, like I said before,
the EUOs that's relevant only
for those insurance cases,
which are mostly shorter, smaller,
priced also different from
the usual depositions that makes
the small part of this industry
between 3-7 percent of the total market.
Then another look on the market,
this time from solution types.
Here you can see that and surprisingly,
stenography actually makes it
the biggest solution type out there
between 75-85 percent of
the total addressable market
goes to stenography solutions.
Then a smaller part of
the market goes to digital reporting,
and we also see
some voice writing also in this industry.
This makes a very small part of the market,
between 3-7 percent of the market.
So like we said before,
CRA is the court reporting agencies.
They are the biggest part of this market and
most of the money in the industry flow through them.
So in a way they are like a middleman in
most cases and specifically in depositions.
You can see unsurprisingly the depositions makes
between 75-85 percent of the work in legal.
Then you see the courts in EUO.
This is quite similar to how
the market looks like so it's not really surprising.
Then on the right side, you can
see that like I said before,
this market is quite fragmented.
More than 4,000 players across the US.
They had a great relationship both with the clients,
also with the freelancers.
So they worked with both sides
and they are doing a good job at it.
What's also very noticing in this market about
the CRAs is that they had
a dependency on the freelancers.
So many CRAs use stenographers mostly,
or in some cases could be digital transcribers.
In most cases, these are not
employees of the CRA of the agency,
and then this is why they have
strong connections with those freelancers.
Let's also speak about the different types
of players and their key pain points because that's also
part of the market and very important to understand
because the market dynamics
really flows from those pain points.
So we see the different type of
players that we listed on the left side.
Let's start with the law firms, and like we said,
this is the end customer,
mostly in the use cases like depositions.
So law firms actually became
quite price sensitive over the years.
So one of the key pain points for them is high pricing of
the transcript or maybe the deposition itself.
Since the crisis in 2008,
we see that more and more law firms,
both small and big.
So also like law firms from New York,
which used to be less price sensitive,
now they are more price
sensitive and sometimes they don't
purchase extra features that
are provided by the agencies.
So pricing is also very important to them.
They are also in many times are concerned with
the quality or with the lack
of Live/rough draft availability.
As we know in digital today,
there's still not a good solid solution for
Live/rough draft and this is why
law firms actually prefer the traditional stenographers,
the agency that work with stenography,
and this is currently the preferred solution.
Let's move on to the insurance legal departments.
Like we said in EUOs,
they are the end customer.
So similar to the law firms,
they are very price sensitive.
They work in large-scale
contracts and this is why they want to
get it right with the contract connected to scale.
They're also suffering from lack of reliability.
One typical thing that you can say about
the markets specifically in EUOs is the no-shows.
This happens from time to time,
and those insurance legal departments
really want to know that they
get the comfort that they need in EUOs.
In courts, so we see mostly vendors not meeting [inaudible] ,
so this is one pain point that courts suffer from,
which sometimes we see in the market
led to a 1-strike rule.
So if you didn't meet the SLA in your contracts,
sometimes the court can even
take you off of his approved list.
So this is also something that you need to
be aware of and keep in mind.
Let's finish with the CRAs again.
So with CRAs, we see decreasing margins actually.
So CRAs have decreased
margin following the stenographer's shortage,
which we will discuss more deeply in a second,
and increasing costs for the agency itself,
and also quality control difficulty.
So they have also some difficulty of quality control
when they work with freelancers in some cases,
and they really cherry pick
the ones that they want to work with.
So this is an overview
of the key pain points of the market which
are very relevant to the market and
really set the tone for the market dynamics.
So we covered the overview of the market.
We discussed the size and
the different types of players and their key pain points.
Now what I want to speak to you is what we call the
digital adoption within the court reporting market.
So what we see in the market is that
digital recording is actually on the rise.
You can see that across
the different use cases, whether it's depositions,
courts or EUOs, we see a trend of going into digital.
Let me explain the chart that you see here in some words.
So what you see here is
a total market and the different use cases,
split by the solution type.
So steno, you can see it in red,
digital in pink, and voice writing in black.
What you see here is
the current volume estimate of
each of the solutions across the different use cases.
So for example, in depositions you can see
that almost 95 percent of
the market works with stenography.
So digital makes only between 5-10 percent.
On the other hand, you can see that in court,
there is already a big penetration of digital.
It makes between 65-75 percent of
the volume and actually steno
is the smaller part of the market.
In EUOs, we see kind of a mixed picture here.
We see the stenography makes between 50-70 percent
and actually digital makes 30-50 percent.
What's also important to note that
this chart is in terms of volume.
As you probably know,
the pricing of digital recording and
digital transcription is less expensive than stenography.
So if we would have done
the exercise and switch this chart into value,
so of course, the part of digital would be smaller.
So this is in terms of
volume that we see in the industry.
As you can see below,
we see the digital trend, it's all green.
So we see more and more penetration of digital as we go.
I want to double-click on court
specifically where it said
that digital actually has a much higher penetration rate.
What you can see here that out of
the 100 percent court volume on the left,
this is the black column on the left.
You can see that 10 percent of
it is not digitally recorded at all.
This is served by
traditional stenographers and not
by any digital solution.
There we are left with the 90 percent
that is digitally recorded.
As you can see, out of it,
between 30-45 percent is
recorded but not being transcribed.
Then another chunk is 10-20 percent that is recorded
but still using stenography
as the preferred solution for transcription.
Then eventually, we get to the part that is recorded
and digitally using digital transcription.
This is only a smaller part of the market,
it's only between 25-35 percent.
So if I'm going to go back for a second for this slide.
So you can see the court,
we said digital is between 65-75 percent,
but the part that is digitally
transcribed is much smaller,
and it's actually only between 25-35 percent.
Now let's speak about the pace of change,
which we see three key factors that will ultimately
change the world of
court reporting and the pace
of change going into digital.
You can see the three red boxes on the left,
the stenography shortage, the price sensitivity,
and the technology availability.
Let me go one by one.
Stenography is still considered
today no doubt the higher quality service,
but at the same time,
it costs more than digital solutions.
This is because they are able to produce
higher accuracy and a faster turnaround time.
For example, they can provide
Live and rough draft in seconds,
which digital is still not there today.
But despite the high demand,
we see obviously decline in the workforce.
We see retiring workforce,
we estimate it to be between
10-15 percent in the next three years.
There are many actually public data about this one,
and if you ask other people in
the industry they might say it's a bit higher,
it's a bit maybe even two times higher or
less but we view those claims from year to year,
and we feel quite strong with our estimates here.
What else? We also figures of limited new entrants.
As you know, the training is very long,
it's around three years training
and the attrition is very high,
so the shortage is getting deeper and deeper.
The second factor that will
affect the pace of change
is obviously the price sensitivity.
I touched it before with the law firms,
but also what we see in the US,
the government budget cuts which led
actually many courts to seek alternative solutions.
We see them switching from stenography
to cheaper solutions like digital recording.
Of course, law firms are
becoming increasingly price sensitive.
This one we discussed before.
This is also affecting the market and affecting
their choice for transcription.
The third factor that really changed
the market is the availability of technology.
As quality of digital recording is improving,
and we see more and more ASR solutions
or any other digital or technical solutions,
this product is becoming more common in the industry and
more and more agencies and customers prefer to use it.
A deeper look on the first one,
which is a stenographer shortage,
you can see here very clearly that the demand for
court reporting stays quite stable in the US market.
On the other hand, you can see the charge,
you can see the trend of the supply of stenographers.
We estimate that the number of
stenographers in the US is around 30K.
Again, there are different numbers
out there in the market.
This is an average.
You can see the shortage,
and you can see the gap between the supply and demand.
This gap is exactly the place where
we believe that digital recording can take place,
and can take over,
and can take some places.
Now we say that
digital solutions are growing, but how fast?
Based on our estimations when we analyze the market,
you can see that we split
the market into the three use cases.
In depositions where, if you remember,
the penetration of digital was the lowest one,
we see actually the fastest pace of change.
From a volume of
around 5-10 percent of the entire deposition market,
we see it growing actually to 15-20 percent.
This is more than two times,
almost triple the market.
Then on courts where we
see higher digital penetration today,
so the pace of change will be a bit slower,
from 65 to around 70-80 percent.
In EUOs we go from 30-50 percent to 50-70 percent.
If I had to summarize,
you can see that deposition is the one that
is growing the fastest and
obviously is starting from a lower starting point unlike
courts which starts already
from a higher digital penetration rate,
and obviously the pace of change will be a bit slower.
When we say digital deposition solutions,
now we can say who
can find it very relevant in the market.
We spoke with the different players
in the market and asked them,
"How can you use digital deposition products?"
When we spoke with national and medium regional series,
what we see is the following.
First, they suffer from
stenography shortage and last-minute cancellations.
This is one of the pinpoints that we mentioned before.
Secondly, Live and Rough are highly relevant to them .
Due to increased presence of
the complex litigation cases,
digital solutions, as they get
more real and more advancing technology,
they can be very,
very relevant to them.
On the other hand, we see that
some CRAs are actually developing their own solutions,
whether it's in-house or remote stenography,
and those can be alternative solution
to digital recording.
Then let's go to the small CRAs.
The small CRAs, they care most
about scaling and flexibility.
Providing them with digital solution really
can create great benefit to them where they
can use proofed digital transcripts and
gain more scale and have better flexibility.
It can also enable them to add
more products to their arsenal.
They can provide both steno and
both digital solution and can
have their choice whenever they need.
On the other hand, we see
some resistance in the market from many CRAs.
Many CRAs are still steno or stenography based.
They resist the change,
some of them resist to use
digital products across many different states.
Actually many of them are,
from our discussion, are willing
to use digital solutions.
Another point where digital products can be useful
is actually serving the
digital or the electronic court reporters.
Those DCR/ECR, they're out there,
they're working together with the agencies, in
some cases they get the mandate
also from the agency to do the transcript.
Enabling them to have
digital transcript can be a great benefit to them.
On the other hand, in many cases like we said,
they're not the decision maker
and this will fall within CRA.
Like I said before, we see different agencies are
switching slowly into digital solutions.
We see CRAs of all sizes or whether the big,
national regional players, or
small ones using other solutions.
We can see that CRAs are
providing both recording and transcription services.
We can see also that agencies are recruiting actually
new workforce to support this revolution.
Lastly, what I want to discuss is the different types
of products that are out
there and how can they change over time.
What you can see here are
the three different products that we
see both on stenography
and some of them are also relevant to digital.
We have the Live product,
we have the rough draft,
and we have the proofed and signed transcript.
Today, as you know,
there is very limited demand for
a digital Live or digital rough drafts,
mostly because the technology is still not there.
As we said before,
only between 5-10 percent of
the digital transcription for deposition are out there.
In the future, if we take three years time from now,
and if assuming that the technology will be available,
then we see a higher increase in
the use of Live digital solutions.
We also see that across rough draft as well.
Below, you can see the key prerequisites for this change.
Did our direct prerequisite that had to be
there in order to have a solid digital product?
So for Live product we see,
obviously had to have
less than one second turnaround time.
You need to have around 97 percent accuracy
and of course all the formatting requirements.
For rough draft ,so it's a similar picture,
you need to have a very quick turnaround time,
usually it's less than two hours.
You need to have high accuracy,
around 97 percent and of course,
again, you need to have
the right formatting and editing requirements.
Then for the proofed and signed transcript,
you need to have plus 99 percent accuracy,
fully proofed transcript,
including all the administrative pages and everything.
So this has to be sealed and complete.
That's it from my side,
I hope it was very benefit from you and I
will open now to discussion for some Q&A.
Thank you Tal. As always,
it was a great session.
We'll be taking some questions from the audience now.
I have two questions already that were sent.
So first of all, you are getting
a very good feedback from everyone.
Everyone is saying some fantastic presentation,
etc. So it's very good.
The first question that I saw
that they asked and I think it's important is,
what is the effect of
COVID-19 for digital court reporting market?
Do you think it will push it forward?
What do you guys have found about it?
So actually a great question and
obviously something that everyone
is talking about right now.
Just to be clear,
our market research was conducted before the COVID-19,
but we did get back to the market,
spoke again with the agencies,
with different transcriptionists that
work in this industry.
What we see actually, first of all,
we see there is obviously a decrease in volume.
Obviously less depositions, less court transcripts, etc.
Then we see also actually a switch from
stenography to remote stenography.
This is also something we see
and what we hear from the customers is that
they're starting to realize that you
can also have a deposition without
the stenographer in the room and they're
becoming more openly to have
digital solutions in the room
and therefore work with digital transcription.
Obviously I would say that this switch to the new normal,
the new COVID-19 reality,
which probably going to last a while as we all know,
this actually could be
a positive trend on digital transcription.
Another question is, you
mentioned a little bit about the ASR pushing
the market so someone here is asking,
how is artificial intelligence
going to change the markets?
AI. It's a good question.
I think just go back to
my point about the availability of technology.
So if you remember,
we discussed three factors that
will actually affect the pace of change going digital,
I think AI and also other technologies that will
help creating real time digital solutions,
but also post-production digital solutions
that are better in quality have faster turnaround time.
This will obviously can change the picture and provide
better and more tight and solid solutions
for the agencies to use.
Great. Following that, there was
a question which you will answer better than me.
But will the stenographer profession disappear?
No, no way. Again, I know who raised this question,
but stenography is obviously still
the most common solution in the market and it's
still preferred by most of the customers.
So when we look into the future,
we see digital goes side-by-side with stenography.
Still in the short-term,
we see stenography being the most common solution.
Although we think that digital will
gain some momentum over time.
So definitely stenography is here to stay.
Okay. Last question,
because we don't have a lot of times,
there were a couple of questions
about some of the lobbies in the market,
usually steno-oriented, to try to
block non-steno depositions.
Do you see that as a blocker
or I know that you guys
did a lot of interviews according to that.
Do you see that will delay?
What is your opinion on that?
Well, we do see it in the market.
I think I also mentioned that when we spoke to agencies,
specifically with the smaller agencies in the market,
we saw some resistance to digital solutions.
I think this will remain in the market.
There will always be different opinions and
different parties and lobbies
and guilds out there in the market.
But I think if you asked for my personal opinion,
then I think that over
time when technology is going to be
better and digital solutions would be
almost as good as
stenography or even as good as stenography,
this would be a trend that would be hard to
stop since it brings also other benefits.
I think eventually like I answered in
the previous questions,
stenography and digital solutions will live
side-by-side whether they like it or not.
So I think with that I know there are a lot of
questions but we will answer to it.
Tal will probably send you some of the questions.
We can answer it offline.
We are going to finish the session here.
We have another session,
super interesting session that
follows what Tal has been explaining.
We're releasing a technology that what Tal is saying in
three years we broadly are taking the markets for now.
Hopefully that will help the legal market go forward.
So I invite you to assist
it in a couple of minutes from now.
Tal, thank you so much.
Broadly, I love the presentations that you guys do,
and it was an amazing pleasure
to hear your findings on the market,
so thank you so much. Nothing else.
Thank you. Thank you for having me.