If Mr. McGuire, half in the bag and feeling magnanimous, wanted to say one word to Ben today, what would it be?
“Disintermediation.”
Great word, isn’t it? It has lots of syllables, it sounds intellectual. It must be important. It’s a consultant’s word, meant to make what you’re saying sound scientific and impressive. (If you aren’t a consultant, you say something like “taking out the middle man.”) Whatever you call it, though, it’s the key to all of the various business and social revolutions that have come about because of the Internet. Consider:
Blogging. It’s hard to remember — and even harder to believe — but not terribly many years ago, the only sources of news were the major networks and major newspapers, along with a few special-audience magazines like The Nation and National Review.
In the late 1990s, people realized this new thing the World Wide Web could be used to create your own web pages and put them onto the internet for everyone; then web search, and especially Google, made those web pages easy to find.
Suddenly, everyone was a publisher. You didn’t need to go through a printing press and ship four pounds of pulp paper to have thousands or even millions of people read what you wrote.
The Web and blogging removed all the many layers of middlemen — printers, shippers, distributors, newsstands — because you could deliver text for fractions of a penny when the physical pulp bricks cost dollars.
Newspapers and networks hated it. We were derided as just a bunch of people in their basements in their pajamas. But it didn’t matter; people liked being able to write — and read — freely and across the whole spectrum of opinion.
Music Publishing. At roughly the same time, iTunes and the iPod became available; you could buy music online, have it delivered essentially instantly. Music publishing had, since the ’20s, been arcane, byzantine, and basically crooked. iTunes took out many layers of middlemen — publishers, distributors, record stores — because it could deliver bits for fractions of a penny, where physical recordings cost dollars.
Music publishers hated it. They said that musicians would starve and piracy would bankrupt everyone. But that didn’t matter either, and in fact now there are musicians like Lindsey Stirling who have become stars using nothing but YouTube — and talent.
Retail. Starting with Amazon, online retailing took off. As with the others, book publishing was byzantine, complicated, expensive. At first, Amazon took out some of the layers of middlemen: they kept their own warehouses, did their own fulfillment, shipped directly to customers, and so were able to exploit economies of scale by eliminating layers of distribution and square miles of bookstore space. Once again, the Internet meant you could buy retail for fractions of the cost of traditional methods.
Bookstores and distributors, of course, hated it. Then Amazon came out with the Kindle, and made the Kindle platform available for anyone, putting them on an even footing with the biggest publishers in terms of costs and ease of delivery to the end customer. So then the publishers hated it too; we’ve been documenting the results of the ebook revolution and the ensuing revolution in independent publishing here in Book Plug Friday.
Advertising. This is one that goes a little bit under the radar. But consider: the business of advertising is to get people to know of your product, get them to want to buy your product, and then connect them with a way to buy your product. Whatever your approach to ads is, it costs you some amount to do this — whether you’re buying pages in a newspaper or magazine, or buying TV time, or advertising on the Web, each “impression” costs some amount of money. So, you want to identify the people who are most likely to be receptive, which is called “targeting” — that way, you spend as little as possible for as many sales as possible.
When advertising was done in newspapers and magazines, then, all you could do is see who read these newspapers and magazines; to deliver a more cost-effective product, these periodicals started putting out different editions. If I still got the New York Times at home in Colorado, I’d be getting a different newspaper from the one delivered to my friend who lives in Hell’s Kitchen.
On the Internet, though, you can potentially target to individuals. That’s how Google makes money: they can identify an individual’s interests, and place ads targeted to those specific interests. What’s more, the actual delivery of the ad itself is immensely much cheaper per impression — literally hundreds of million to billions of times cheaper.
Newspapers and magazines hated it, of course, and rightly so — newspaper ad revenue is plummeting. That’s what happens when someone can deliver a better product at a ridiculously much lower price.
In all these cases, there were people in the business of taking things from one company’s hands, and transferring them to someone else, taking a cut in the process. And in all these cases, the Internet has taken out the middle man: books go directly from an Amazon warehouse — or, increasingly, from an Amazon storage farm — to the consumer. Music the same. News and opinions are coming from millions of people, with no intermediaries deciding what is and isn’t news at all.
All of these intermediaries hate it: publishers, newspapers, magazines, bookstores, music stores, and so on. Frankly, I don’t blame them — I miss browsing in a record store and I haven’t been in a physical bookstore in at least a couple years. This is putting newspapers, and bookstores, and music stores out of business.
A hundred-odd years ago, buggy makers and farriers were being put out of business by Karl Benz and Henry Ford. They had to find other lines of work.
But what it means to the rest of us is that we are getting a wider variety of things we want, when and where we want them, for better prices than we ever did before.
