In the last post on disintermediation , I gave a deeper definition and current meaning to the term:
1. Disintermediation is the removal of the intermediary or entity
2. If the intermediary remains in place, it will be drained of any excess compensation
3. Industries that hold information hostage for financial gain will be disintermediated.
4. The Internet can be the agent of disintermediation of existing distribution channels.
We are living in a 50-60 year era of transformative change. Disintermediation is part of transformation, as it always is in such eras. The most powerful agent of disintermediation today is the Internet and it is having an effect on most industries. With the above definitions in mind, I want to take a look at some different industries that have, are or are about to undergo disintermediation.
Media
Media has been living in a world of transformation and disintermediation for years. The basic power shift over the past 30 years has been from the supplier (network, station, newspaper) to the customer (viewer, listener, reader)
TV
In the 1970s, the three networks controlled 90% of primetime viewing. There were three people that determined what America watched and when they watched it. These three people, usually middle-aged white men, were the heads of programming of ABC, CBS and NBC, and they all worked in midtown Manhattan within blocks of each other. Now, 30 years later, there are 100+ networks, with 100+ heads of proramming, of all ages and races, providing TV viewers with an incredibly diverse array of programming. That is just TV. Video on the Internet has exploded during the past two years with the rapid growth of broadband. So now there are literally thousands of videos being posted every day on the Internet, including an increasing amount coming from the TV networks. We have entered the era of ‘viewer-supplied’ entertainment, which is completely at the opposite end of the spectrum from three people in Manhattan offices calling the shots. That is why I used the word ‘video’ in the title of this post. Video used to be delivered solely by television networks, so video equaled television. Now, thanks to the Internet, video has been separated from the TV set; there has been disintermediation.
What were the transformative, disruptive and disintermediative technologies that changed and are continuing to change the video landscape? There was the remote control, which gave viewers perceived and actual control over what they watched. There was the Cable Television, which dramatically increased the number of channels and which created the concept of targeted programming for targeted audiences, not just mass programming for mass audiences. There are the VCR and DVR technologies which allow viewers to both watch when they want to watch and to fast forward through commercials. Finally, broadband Internet, which allows video and programming to be viewed and downloaded to a computer or other electronic device.
Radio
Radio has not be disintermediated as much as it has been overwhelmed by choice. Terrestrial radio has been joined by satellite radio, internet radio, and podcasts. In addition, with tens of millions of MP3 players in use in the US, there is a wealth of alternative ways to be entertained by audio.
Newspapers
Newspapers are being disintermediated by the Internet. A lot of classified advertising has gone to the web, readership has gone to the web, and the dead tree physical distribution system of newspapers is being supplanted every day by the free and environmentally friendly distribution of the Internet. I personally believe that there will be a few national newspapers, and that small town and small city newspapers will survive. The question is whether the mid to large size city dailies can operate with increasing efficiency, adapting to the new landscape to find ways to survive, be relevant and also be businesses worth keeping alive. Have you noticed how often blogs and bloggers are sourced in newspapers? The bloggers have become the new stringers of the newspaper business, supplanting all the reporters who have been corporately downsized out of jobs.
Magazines
Magazines are currently being threatened by special interest web sites and blogs. Magazines will undergo a market reorganization during a rough economic period in the next ten years. Cost structures and paper costs will have to be addressed if this media is to fend off disintermediation by the Internet. If people now read newspapers on-line, why would they not read magazines on-line? Fortunately for magazines and all print media, the advertisers will move on-line with them. Unfortunately, subscription and newsstand revenue will diminish.
As Marshall McLuhan,the patron saint of media said, “the medium is the message” The message of the Internet is always available, available anywhere, unlimited choice, and free. Go back to the top of this post and look again at the four definitions of disintermediation, they all apply to media.
Ok, give the reader feedback from last week that posts here at www.evolutionshift.com should be short not long, we will wait until tomorrow to discuss the real estate and insurance industries. See you then!
May 17th, 2006 at 1:18 pm
Dead trees will continue to compete with the screen even among digital natives because paper works better
in bed, on the toilet, in travel, in church, and perhaps as well with breakfast than the screen. It is also a nice courtesy on the hotel desk, in the waiting room, at your door. The ubquitous screen will one day
lead to classes in newspaper reading, book collecting, and library research.
May 17th, 2006 at 2:32 pm
Yes, there will always be newspapers. However, disintermediation takes out the excess. Newspaper circulation has been going down about 5% a year for a while now. A decade ago there wasn’t anyone receiving newspapers via the Internet, today there are millions.
David
May 17th, 2006 at 3:12 pm
I agree with George, but only to an extent.
Disposable, tablet-type computers have the potential to eliminate newspaper all together.
In the future, you may pick up a computer the size of a magazine for less than $1. Inside, each page is its own internet site, fully configurable to the content you desire. Page one may be your local news, page two may be national news, page three may be the latest issue of BusinessWeek, etc. You’ll flip through it just like a magazine. This computer will update at midnight every night, will be light enough to carry anywhere, and you could roll it up and shove it in a suitcase. They may be designed to physically last a week and you throw it in the recycle bin that you used to use for newspaper. Oh, and you can have your grocery delivery man deliver you a new one when he brings you your groceries (by the way, you wrote your grocery list on the last page of your disposable e-magazine and clicked an icon to forward your list to the grocery distribution center…)
This technology is already here, and growing fast!
-Grant
http://www.TheCornerOfficeBlog.com
May 17th, 2006 at 6:27 pm
Yes, to some degree you will be right Grant. One must remember however, that new media never completely eliminates old media. Most of us read newspapers and magazines, listen to the radio, watch TV and go on the Internet. Why do you think we all multitask?
With the ever increasing cost of energy, one of the key benefits of the Internet is that it is frictionless. Frictionless commerce, frictionless education, frictionless entertainment. What burns more fuel, driving to Blockbuster or getting Netflix in the mail?
David
May 18th, 2006 at 7:14 am
You’re right, David. I guess my point is that the news will not disappear, but the medium to which it is delivered to you will change. My electronic, disposable magazine/computer idea will replace the newspaper as we know it. In theory.
This will force news publication companies to charge a subscription purely for content (which they do already), and not delivery (notice that it’s more expensive to take a hardcopy than to just sign up for online content). In a way, this new technology will eliminate the delivery boy. (Disintermediation?)
The problem behind this is that it will force local newspapers to use the same medium as every other news source out there. So in effect, your local news paper will compete on a global level, forcing your local news service to provide you content that you can’t find anywhere else on the ‘net. If you level the playing field by removing the printing press and delivery boy, anyone with a computer could become a local news service provider. (It’s already starting to happen with blogs!)
So when you say that “…most of us read newspapers and magazines, listen to the radio, watch TV and go on the internet”, you’re right. But in the future you’ll be able to find all of this same content in one device that’s just as convenient and user friendly as a radio, TV, magazine or newspaper. We’re seeing this with cell phone PDA’s already.
Even Netflix will have to adapt. What’s stopping them from emailing you your videos rather than mailing you a CD?
In the future, CD and DVD players will be a thing of the past, and you’ll watch your movies on page 32 of your disposable electronic magazine!
-Grant
May 18th, 2006 at 7:37 am
David – Thank you for this insightful synopsis. It’s really eye-opening. Disintermediation is driving freedom of choice and diversity, which is a wonderful thing, truly giving power to the people. It would be great to see our legal and political systems disintermediated at a faster pace – online voting, juries, objective case analysis and arbitration, etc.
On another note, I have witnessed significant disintermediation within the Internet itself, when it comes to online advertising. Certain companies used to dominate it and command ad dollars with less accountability; that is changing dramatically with Cost Per Click and other creative business models that work for companies/advertisers of ALL sizes. As part of the EVOLUTION SHIFT that you poignantly illustrate, it’s great to see more people having opportunities to “get in the game”!
Mando
May 18th, 2006 at 7:49 am
There is one thing to note here and that is habits and behavior. As someone who has always had lots of books around, I will always appreciate the tactile experience of turning the pages of a book as I read. As someone who likes to handle the newspaper while drinking my morning cup of coffee I will continue to do that. However as the ‘digital natives’, children who have always known the net, grow up they enter adulthood without those developed habits and patterns. That is when things will truly change.
What is the difference between someone like me who grew up reading books and watching limited TV and someone, like my 19 year old son who grew up with unlimited TV, Internet and video games and only limited time with newspapers. The adult behavior will simply be different.
David
May 18th, 2006 at 7:54 am
I have to put in a plug for someone who not only noticed this trend in media, but wrote a book about how to profit from it.
“Money for Content and your Clicks for Free” is a book about the disintermediation of media, and how those who look ahead (Futurists?) will be able to profit.
It’s very specific and gives clear examples by an average Joe who already battled against the Comic syndicates and survived.
But it’s also general enough to be relevant to film producers, Article writers and others who survive by their “Content”
November 22nd, 2006 at 5:54 pm
I’m late to this conversation — it came up in a Google search for “disintermediation of media” which is the subject of this flash animation I produced:
http://mymindshare.com/b/secure/disintermediation.php
January 24th, 2007 at 4:35 pm
Nice Post.
That was well said. Always appreciate your indepth views. Keep up the great work!
John
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