Disintermediation and Disaggregation

Some technical book publishers  are selling individual chapters of their books directly from their website. In doing this they are both disintermediating and disaggregating the normal book supply chain. The normal chain is as follows.

Disintermediation is the process of removing intermediaries from a supply chain. By selling their books directly to readers these publishers are cutting the bookseller out of the supply chain.

Disaggregation is the process of separating an aggregate body into its component parts. Books are usually sold as a bundle of chapters. In many cases this is what the customer wants. There would be little point in disaggregating a novel. However, customers may wish to buy just some chapters of a travel guide or a technical manual if they do not require the complete book.

Both disintermediation and disaggregation can disrupt existing business models. Book publishers have become accustomed to obliging customers to buy chapters they do not need to get the chapters they do need. In effect their business models required customers to pay for stuff they don't want to get the stuff they do want.  This is called the detritus model of retailing.

Music publishers are also in the business of bundling detritus with the ‘good stuff’ when they sell albums. Rarely are all the tunes in a album of equal quality or desirability. Apple et al are disaggregating when they allows customers to buy individual tunes, rather than obliging them to buy a complete album. They are not disintermediating because iTunes is simply an online version of a High Street retailer.

Incidentally, in their main book selling business Amazon are neither disintermediating nor disaggregating.  They are just substituting an online shop for a bricks and mortar one.  Perhaps they would like to disaggregate, but they cannot because they do not own the copyright in the books they sell.

When they started publishing themselves and allowing self publishing they started disintermediating the book publisher from the supply chain.

The music industry’s business model is threatened by the musicians who have set up web sites to sell individual tunes directly to customers. They are not only disaggregating the album, but disintermediating two complete stages from the normal music distribution change.

Copyright is the key weapon in the armoury of the detritus sellers. As long as publishers control the copyright in tunes or writings they have some say in the disintermediation and disaggregation decisions; though not a complete veto as Apple has demonstrated with iTunes.

RSS provides a more subtle example of disaggregation and disintermediation. Readers can use RSS feeds to choose which parts of newspapers they want to read. They can assemble their own 'newspaper' from multiple sources. They no longer need to buy the sports pages [detritus to me] to get the political and economic news. RSS readers also disintermediate the local newsagent from the news distribution chain when news can be read on screen instead of on paper.

Disintermediation can be taken further. If a writer chooses to be a self employed blogger instead of a salaried journalist the newspaper publisher can also be removed from the distribution chain.

Digitization has made disintermediation and disaggregation easier but both processes were possible before. Singles were sold as well as albums, and  Sir Arthur Conan Doyle sold some of his Sherlock Holmes stories in serial form.

No comments: