Is Disintermediation Finally Here?

Back in the early 90′s one of the things about the web that got pundits all hot under the collar was the idea of disintermediation. This is a fancy word for “cutting out middle-men”. With recent events in the music industry, and other long-tail success stories, could it be we are finally there?

Why Disintermediation?

The proposed benefit of disintermediation is the consumer and provider of a product interact directly, no inflated pricing and supposedly better service because there are no confused or missed messages being passed along the chain. Obviously there have always been services that work this way, but the issue has always been the challenge of scale. The Internet brings about the opportunity for direct service to huge numbers.

For a time it seemed we had gone backwards a few steps. Early hopes for disintermediation were holidays, insurance, loans. But what quickly happened were a new type of middle man appeared, the “price comparison” service. People booked holidays through Expedia and the like. Signed up to loans through online supermarkets. These companies were just brokers in a flashy new suits.

The Google Effect

The first signs of the true dream came with the power of Google and their Adwords program. For the first time vendors had the ability to respond to big numbers of customer searches with the exact product they were looking for.

While this all sounds well and good, customer-side advocates of disintermediation as well as lusting after lower prices often just like “sticking it to the man”. With this in mind you can quickly understand why the music industry is worried about it. If ever there was a poster child for “the man”, the RIAA is it!

Rock the Man

With the ever-tightening grip of record labels “rock” on one side, and the ever-growing piracy “hard place” on another, you can understand why the squeezed bands and artists were looking for a way out, and the internet was the solution. It took a brave (and desperate?) band to lead the way.

First there was Marillion. I’m a big fan but I am guessing I am in the minority. Many bands today are releasing the grip of labels but Marillion took the brave step of completely opening up to the fans mercy. They were the pioneer, or at least best known of the time. Fan pre-orders funded their 1999 album Marillion.com and they have not looked back since. You can imagine the creative freedom and financial control this affords them.

Fast forward to today. Prince released his album on the front of a newspaper. Most recently there has been Radiohead, with their website-crashing release, and Nine Inch Nails. Bigger names, bigger loss to the major labels.

A Blip or the Future?

Will this trend continue into other markets? What will the world look like with no brokers, arbiters, resellers and middle-men? Is that just a pipe dream?

Who knows, but it will be interesting to find out!

Posted on October 9, 2007 by Chris Garrett 
Filed Under Web 2.0

Comments

4 Responses to “Is Disintermediation Finally Here?”

  1. Jack @ The Tech Teapot on October 9th, 2007 3:16 pm

    There has been some disintermediation, no doubt about it. Though, channels do still exist, just not necessarily the same as they used to be. The Prince album is being disseminated through newspapers like the Daily Mail. So, whilst the channel isn’t the traditional one, there is nevertheless a channel.

    The channels are the people who hold the audience. No point in having something if nobody knows about it. So, you do deals with people who “own” the audience you want to contact.

  2. Tomas Forsman on October 9th, 2007 7:44 pm

    I’ve talked about this as well but related to another internet platform, Second Life. Music in Second Life works mainly as the industry worked before the record labels came along. There are musicians, club owners and in rare cases an agent in between. The musicians play on different clubs, several nights every week. Some of them sell CDs from their webpage, some let you download their music as mp3s. And even though there are no record lables pulling the strings….music in Second Life works. In fact it’s one of the better sources of income (not counting b2b companies). This proves that we don’t need record companies…atleast not in the way they work today.

  3. Chris Garrett on October 9th, 2007 10:02 pm

    @Jack – Yes I think the people with the traffic hold the power, but as more people become savvy with gaining attention (and rock stars are experts at that offline) this will be more and more commoditized

    @Tomas – Oh nice, I didn’t realize that was going on. I’m happy to hear there is a “live” music scene on second life. One of these days I am going to have to give SL a proper go, so far I haven’t really put in the effort.

  4. Jack @ The Tech Teapot on October 10th, 2007 12:24 pm

    Agree very much with Tomas. Intermediaries are going to change, but they aren’t going away. Record companies existed because they could get your record into a record shop. New intermediaries will exist to plug artists into an audience…myspace being a very good example. Interesting that the same nasty corporation who own the record companies just happen to own the audience in the form of sites like myspace. :)

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