It must suck to be the middle-man today. Everywhere they turn, it’s bad news. Democratization this. Circumventing that. There was a point not that long ago that the middle-man provided great value. The record companies brought music to the masses. The media created channels for the news to get through. The Blockbusters of the world housed thousands of movies for people to rent. Telephone companies laid the lines for us to connect with one another around the world.
But now these middle-men are our modern villains – using every desperate trick in the book to hold onto customers while we find creative ways to go around them, go straight to the source and sometimes just do it ourselves. There is a mass disintermediation going on and every company that occupies the mediator position is at risk. Now it’s the media, the labels and the distributors of what has become digital content, but I doubt this will be the last frontier of democratization. I’m sorry to say it, but they are bringing it on themselves.
Why?
- They forgot that the point of being the middle-man is, well, to be the middle-man. They made it about themselves. The musicians and the audience were forgotten in the shuffle. The news and the readers stopped mattering. The fact that people just wanted to connect via phone ceased to be part of any business plan. Profits became bigger than the people they needed to connect.
- Convenience, which was once the advantage of using a middle-man, turned to inconvenience. Frustration set in when the middle-men became gatekeepers and ‘deciders’. They became greedy. Power hungry. And they reminded everyone that they were going to play by the rules that they set. Period.
- They misread the early signs of democratization as a threat rather than an opportunity. All could have been forgotten if they had just realized that their impetuous children were neither impetuous nor children, but instead were giving really great cues on how they wanted things to work.
- A false sense of scarcity is not a scarcity at all. Creating a business model on charging premiums for something in abundance (or potentially readily available) is bound to crater.
- They seriously underestimated the intelligence of the public. Maybe they believed their own lies or maybe they just thought we couldn’t think for ourselves. We may be lazy from time to time, but we aren’t stupid. And we don’t like being belittled.
And so the scare tactics have been amplified, the sob stories are rampant and the battle has turned to an all out war. People getting sued at $16,000 per song for illegal downloads and the Anti-Counterfeiting Trade Agreement (ACTA) are some of the obvious examples, but everytime I look at my phonebill and see the newly minted extra charges, I can’t help but feel like my phone company is punishing me. I don’t want to see journalists out of work. I don’t think it’s their doing that the media companies are in trouble. But the layoffs are breaking my heart.
And it’s only really beginning. We are at a turn. A shifting of an era. Entirely new business models were created during the Industrial era. These business models were created to help manage, distribute and promote to the masses. When everything was local, we did this through relationships. It was easy to manage on our own. But the internet allowed for inexpensive and simplified management, distribution and promotion for all. Farming these things out only makes sense if it truly brings value such as: convenience, money saving and peace of mind.
I can only imagine where it goes from here. What else is going to be disintermediated as we gain more tools of control and simplification? Banking? Law? Public services? We’ve pretty much lost the travel agencies. Authors are self-publishing and more tools are available for distribution. Amateur movies are cheaper and simpler to make and are getting more attention. People are finding ways to go direct to farmers for their food.
It’s nothing to be mourned, but it is something to be heeded. Eras come and go and change happens. I read somewhere that only 1 of the original Dow Jones companies still exists and I’ll bet it exists because it looks nothing like it did back when the Dow Jones was born. (That would be General Electric – thanks David Damore!)
There is new intermediation needed. It has to do with helping us cut through the noise and get to the signals and it needs to be individual-driven. Things like Project VRM should be at the top of everyone’s radar. Finding new business models to further democratize badly managed industries is also a good bet. Either way, I’m looking forward to the changes and I’m open and ready for them.
Thanks for the thoughtful and insightful post. I think I’ve made a career out of creatively bypassing the middle man!
- Matt H
The nature of “convenience” has changed.
Like you said, the problem used to be access… How do we discover new bands? Who wants to buy my old motorcycle? Which flight costs the lowest? Where can I find a refill for this pen I bought on vacation in Swaziland?
The Internet removed almost all of these obstacles.
The new middlemen help people manage all of this newfound access. Google is a perfect example if a middleman that works.
I can download just about any movie or song using peer-to-peer… but I use Netflix because tells me which movies I’ll like, and I use Pandora/TheSixtyOne because they find the bands I haven’t heard of, yet
I can find everything at Lowe’s for less online… but I go to the store so I can get advice from the guy in the plumbing section.
As with any major industry change, most companies do not make the shift.
If the music industry had taken all the money they’ve spent trying to protect copyrights (litigation, lobbying, whatever) and used it to create something like Pandora/LastFM instead… we’d all be better off.
I have to agree. I’ve been a middle man (industry analyst) for 20 years or so. I made a good living pulling together information, filtering and analyzing it then publishing summaries. It has been interesting and a lot of fun. Still is.
But, you are so right! Middle men are dying out. People can go directly to the sources, filter the information and do their own analysis. A lot do exactly that and they get pretty good results a lot of the time. Some people still come to us industry analysts because we are dispassionate and experienced at cutting through marketing noise.
Going forward, people will have and use new tools for filtering and analyzing information come on line. And, there is a lot more information for them to use.
Those huge volumes of information raise the question that you mentioned: What’s going to happen with A LOT more information out there?
My personal favorite guess centers around iTunes, iPhone and the Apple App Store. iTunes is a huge collection of information: music, podcasts, news feeds and such. The iPhone is a capable information access device. The App Store is a nifty channel for creative folks who want to make things from the iPhone and Apple’s amazing pile of information.
Why not do the same thing for other piles of information? Say,
health information, not just vetted information like DrKoop or WebMD, but piles of research data, clinical trials, anecdotal information from patients, insurance rates, and who knows what else. Pulling all that together will take some persistence, talent and technical ability.
Once the information is in a place and accessible, why not set up an App Store so that analysts, hobbyists, developers, students can build their own ways to filter, slice and dice the info for their own purposes and maybe for sale.
Anyway, enough rambling. Thanks for a provocative post.
Dave
As much as I find intermediaries obsolete, I’m very worried about this trend. While it’s easier to publish and produce content, it’s not like the aggregate demand has grown that much. There are many, many more book authors, but people are not reading correspondingly more books.
I fear thus means that content production will become increasingly winner-take-all, with only the mega-known players able to capture enough mindshare to make the professions attractive. After a while, producing free or almost free content gets tiring. It may be an ego boost to have ten thousand fans, but unless they are spending money with you, it’s not a business.
I spend a day a week producing free content. Happy to do that for now, but eventually I’ll stop unless I can turn it into a sustainable income. I’m fortunate in that I have a large enough audience to have attracted a book deal, and I hope to be able to use that to attract a large-enough audience for actual online products. I’m not sure I’ll be able to do it, and even if I can, I don’t know if the model will work for enough others to really preserve a thriving industry of content creators rather than a patchwork of occasional amateurs.
@stever
You don’t believe in the power of the Long Tail then?
@Tara
Nope. It’s a wonderful, nice theory. I just don’t see much evidence that it corresponds to reality. I’ve been talking to content producers and publishers in content-creation industries and, well, the long-tail just isn’t there. As I said in my first post, if you flood a market with content producers and don’t increase demand commensurately, the average income per producer goes down, it’s basic math.
While certain specific content may have good long tails, in aggregate, I just don’t see it. People have so much more content flooding at them that they spend less time on any one piece. Book sales are down because people spend more time reading blogs. So authors make less. But blog owners, in general, don’t make much at all (with a vanishingly few high-profile exceptions–the winners in winner-take-all). The aggregate dollars flowing to written content producers from written content consumers is shrinking, even though some specific content producers may be quite profitable.
Throughout history, we’ve seen instances in which old regimes have been swept away – only to see new, more oppressive regimes take their place. Based on history, I believe that there’s a good chance that the new middlemen that are emerging today will be as bad, or worse, as the old middlemen who are withering away. While I live in a cocoon of people who understand how to navigate today, there are billions of people who do not – and the SEO-optimizing so-called social media experts have to be making money from someone…
I see what you mean. I read a great post years ago by Keith Teare about the Foothills of money taking over the Mountains. Even though all of this content creation is leading to smaller numbers in book sales, album sales, box office tickets, etc, there is still a fairly sustainable living to be made by a wider number of people. I’m one of them, I think, so I tend to have faith in it.
Great post, there is new intermediation needed. Do we really need or want to rely on what the doctor remembers in his head to make a diagnosis? Or rely on one teacher standing in front of a classroom of 30 students to meet the needs of each student? Technology can deliver individualized curriculum to each student, with the teacher as mentor and facilitator in the classroom. We can “google with our doctor” to diagnose and to find the best care for our particular needs. The new middle men facilitate knowledge using technology. This is individual-driven medicine and education.
What are your thoughts about intellectual property and patents? Just recently Microsoft patented Edward Tufte’s invention of “Sparklines.” How can anyone fight a big corporation like Microsoft and prove that Microsoft clearly stole this “free” idea. That has been their modus operandi from the get-go. Similarly, Apple stole from Xerox PARC. I believe creative people want to practice, however when these thieves capitalize on free information, it discourages any innovation.
These links were recommended by Sean Salmon [http://twitter.com/seanaes]:
Tufte on Microsoft’s claim: http://bit.ly/1OJR4h Microsoft on sparklines “invented by Tufte” in Excel, http://bit.ly/4veA91
Anne,
I didn’t get into patents and IP here, but I feel the very same way that you do. They are predatory, at best.