Evolution Shift
A Future Look at Today
May 17th, 2006

Disintermediation #3 Watching Video, Selling a Home, Buying Insurance

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!

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