The banking industry was the first...

...to name this creeping displacement of intermediaries. They noticed, quite rightly, that as information technology infiltrated the banking industry, and as the industry was deregulated, nobody seemed to need banks anymore--at least not banks as bureaucratic intermediaries. You could get easier loans at Sears, higher interest from a mutual fund, and better service at an ATM. Banking functions were being "disintermediated" the bankers cried! For the typical neighborhood bank this was especially true. The disintermediation of the financial systems continues unabated; every week another bank branch shuts down.

As more commercial activities shift toward knowledge and information, the economy seems ripe for fatal disintermediation. Why should such digital age products as music CDs and news reports travel any other route except the short one that proceeds directly from the artist or author to you, the listener? Recent success stories, such as the case of Matt Drudge, give credence to a network's inclination to bypass the middle guys. Drudge, a no-name Hollywood gossip reporter, dispatched his insider scoops directly from a bedroom computer to a growing list of web readers until he had a national readership and a national brand. Some bands, both famous and unknown, are attempting the same thing in music. The laborious tasks of stamping out disks, storing them, trucking them across country, warehousing on pallets, and then fighting for display space in a music store all seem to evaporate as network technologies make the transmission of music to fans direct and short. Big net, no middlemen, no fuss.

The potential of disintermediation, however, looms larger than the actuality at the moment, and casts a large and frightening shadow. Retailers, especially, are in a panic. If anyone can log on to the web and comparison shop for the lowest-priced refrigerator directly from the manufacturer, what's in it for the mall stores? If anyone can order up a video from the studio, what's in it for the local video shop? If anyone can get 5,000 sitcoms on demand, who needs NBC? The wholesalers are worried silly, but artists and creators are euphoric. The web promised (finally!) a way to beat the system of limited shelf space that stymied the debut of new novels, new albums, and new products in every type of store. With the web, there was unlimited shelf space. There was success in store for everyone!



Archives - This site operates under a Creative Commons License.

This is a blog version of a book of mine first published in 1998. I am re-issuing it (two posts per week) unaltered on its 10th anniversary. Comments welcomed. More details here.
-- KK