Ink, Paper and Diesel Fuel

Once upon a time, print media empires were built on a platform of ink, paper and diesel fuel. The most important prerequisite for a publisher was the ability to afford the cost of distribution.  On top of that platform, an editorial voice or service was built, along with an ecosystem of advertisers, and an audience of readers. Record companies added the cost of vinyl to the mix, and broadcasters added access to a government-licensed monopoly of the public airwaves.

Because the publishers controlled the means of production, they were the gatekeepers of media and, to some extent, of modern culture. They became the intermediaries between the creators and the public at large. Publishers built success by curating a voice or a point of view, leveraging their distribution abilities to make a coherent body of work. Few creators could afford to front the cost of distribution, even if they could manage to do the production themselves.

The high cost of distribution helped to create a controlled ecosystem for publishing. The value proposition for any media could be calculated using some factor of the cost of distribution. For many years, photographers charged on the basis of image size and print run – fees were tied directly to the cost of ink, paper and diesel fuel.  This set a valuation that people could understand and created a relatively stable market.

Disintermediation describes the what happens when the intermediary players are no longer needed. Amazon, iTunes, YouTube, Hulu, Google and a few more have taken the middleman out of media and retail businesses. Disintermediation is clearly happening, and it’s measurable. You can compare audience size, money paid, number of paid performers, profit sharing of the technical partners and more. If you have some good information to work from, it’s possible to form a good picture of the actual progress in getting rid of the middleman.

ZenithOptimedia recently came out with a list of the 30 largest media companies, and Google is at the top of the list with media revenue of $37.9 Billion. And the vast majority of Google’s revenue in this space is tied to a model of Disintermediation, where the gatekeeper simply opens the door, and lets anyone walk through.  Of course, there are still a number of companies that remain on the list that do function in a more traditional manner, but they all are working to adapt to the new environment.

The gatekeepers have lost their oligarchy, and, yes, the barbarians are at the gate. Electronic distribution has taken the hard value factor out of the compensation equation for creators, leaving a zero in place in some instances. In other instances, the multiplier remains, but it is so much smaller than the cost of physical distribution, that it amounts to nearly zero.

Crowd-sourcing is not the only model, thankfully. There is still room for a voice or a point of view that is curated. Yes, you can listen to a computer-generated playlist on Pandora, but I still prefer the surprise and delight of listening to great DJs like Mark Wheat at the Current (a real over-the airwaves station, in addition to an internet station.) I don’t think we’re anywhere near the end of curation. Rather, we are in a new world of curation where it’s possible become an editorial voice, despite your inability to pay the cost of ink, paper and diesel fuel.

Leora Kornfeld is doing some really interesting reporting on this subject.  She’s a Reasearch Associate at Harvard, studying disintermediation. Her blog De-mass’d reports on the phenomenon, providing good research into the specifics of the media reach, money earned, and implications of the demassing of mass media.  If you want to really get a handle on Disintermediation, and how it is actually taking place, put her blog on your reading list.