I’ve been reading a lot about our economy lately, as depressed as it makes me, and I’ve reached a bit of a conclusion: we have a desperate need to kill off more entrenched middlemen. In my general line of work, publishing, it’s the publishers themselves who are the middlemen. They are the bridge between authors and readers. In the NBA, with its self-destructive lockout still ongoing, the owners are the middlemen. They are the bridge between the game on the court and the fans in the stands. In the health care industry, the insurance companies are the middlemen. They are the bridge between care providers and patients. What do all three of these situations have in common? The entrenched middlemen are getting fatter while bleeding both sides they were initially meant to serve.
Before I go too far, let me clarify a point. Middleman isn’t always a dirty word. Often, just their very existence creates benefits for both ends that otherwise wouldn’t be possible. The problem lies with how middleman relationships develop over time.
At first, the middleman usually brings value to both sides, that’s how they get in the door in the first place, after all. Not all authors can afford to publish and market their own books, so publishers spring up to allow more writers more opportunities to bring their wares to potential customers. Readers benefit from increased variety and options, writers benefit from increased opportunities to make money, and the publisher middlemen get a nice cut for expediting that arrangement.
Same with health insurance. Health care can be expensive, so insurance springs up giving doctors more opportunities to sell their services, patients get more access to care providers and insurers get a nice cut for expediting that arrangement.
In the NBA, the best players in the world don’t have the resources to bring their talents before paying customers in a critical mass, so the league and teams developed to create a framework for players to show off their skills, and create access for larger numbers of fans to see those skills. Team owners get a nice cut for expediting that arrangement.
All three of these situations illustrate positives that middlemen bring to the table, initially expanding opportunities for all involved. But over time, these relationships change. As the middlemen become more entrenched in the relationship, they slowly bleed both sides, getting fatter all the while. In that respect, they’re much like ticks.
We see it in publishing. Legacy publishers are currently struggling because the emergence of digital books and new technologies are exposing their ever-fattening middleman position. Readers, over time, see costs go up more and more, while value stagnates or declines. But writers on the other side don’t see their returns go up, even with higher prices on customers. Readers pay more, writers royalties stagnate or decline, and all that extra value from both ends only serves to fatten the entrenched tick in between.
Same thing with health insurance. We see premiums skyrocketing every year, far beyond any reasonable, market driven cause. At the same time, insurers are squeezing providers, declining claims or cutting back on payments. Patients are paying more and more for less value and yet the providers aren’t seeing those increases reflected in their payouts. All the while, the entrenched tick in the middle gets fatter and fatter.
In the NBA, we see the same process at work right now. The league presents a watered down product by having too many franchises, yet ticket prices, merchandising prices, etc, keep going up. The fans pay more and more for less value. On the other end, the league is squeezing the players to cover their bad business decisions. The fans pay more for a declining product, yet the players aren’t receiving the benefits of that, in fact, their pay is about to take a giant leap backwards. Both ends squeezed, and the entrenched tick in the middle gets fatter and fatter.
Now some people would argue that the NBA isn’t a middleman, but its no different than any of the other industries I’ve talked about here. There’s clearly a market for performances of high level basketball, the NBA simply creates a framework to service that market, nothing more. Players aren’t employees any more than authors are employees of publishers.
And consider what noted conservative George Will had to say about Major League Baseball in a segment of Ken Burns’ ten-part documentary on the subject:
“Baseball is enormously popular, 55 or 60 million people buy tickets to games every year, and not one of those people bought a ticket to see an owner. The players create all of that value and they deserve the lion’s share of the rewards.”
The problem with our economy right now is that we’ve become slaves to entrenched middlemen in almost all walks of life. And as the middlemen get fatter on the resources they bleed from both ends, they use those resources to get government protection to defend their entrenched positions. The NBA, and pro sports in general, are defacto monopolies who willfully and blatantly disregard antitrust laws with the tacit approval of the government. What’s worse is that they use that monopoly on franchises to extort cities into spending hundreds of millions of taxpayer dollars to build new facilities in order to further enrich themselves. And those stadium related monies frequently are kept out of player compensation pools altogether.
The recent health care reform does nothing to rein in insurers’ excess. In fact, the individual mandate only serves to further entrench insurers into the patient-provider relationship, costs will inevitably continue to go up, and now taxpayers will be kicking in too, to cover the shortages.
Media companies have essentially purchased legislation to defend their entrenched positions, such as the Digital Millenium Copyright Act, and the Mickey Mouse copyright extensions that have absurdly extended copyright for close to 130 years. Now, they have their sights set on taking down net neutrality, and the new Protect IP act designed to stifle competition and fair use and gives all media companies the ability to shut down entire domains with little more than an unproven accusation of infringement.
These aren’t legitimate measures to protect copyrighted works or their creators. These are middlemen using the vast resources they’ve bled from the artist-customer relationship to defend and further entrench themselves in what has become an exploitative position to parties on both ends.
So how do we change this? We have to disconnect ourselves from these entrenched, increasingly parasitic middlemen. Artists, now more than ever, can forego publishers and media companies and develop more direct and beneficial relationships with customers. After all, readers aren’t buying the publishers, they’re buying the writers. NBA players can find backing and found an entirely new league. After all, in basketball perhaps more than any other sport, the fans pay to see the players, not the NBA logo. We need to break the notion that health care and health insurance are synonymous. They’re not. And we should come down hard on any politician who votes to further entrench insurance company interests over the interests of patients and providers.
Every step we take to break the stranglehold these embedded ticks have on us can only be positive. Even if a new basketball league fails, the attempt alone can force a more equitable deal for players and fans alike. Even if self publishing fails to become the norm, if enough people engage in it, it can force a more equitable deal for authors and readers alike. Efforts to break the stranglehold of insurers on health care may not ultimately succeed, but it can force a more equitable deal for patients and providers alike.
What we can’t continue to do is just accept that this is the way it is. Any of these attempts will be costly in the short term. Some self published authors would likely be leaving some money on the table from entrenched publishers. Some NBA players would be leaving some money on the table if they split with the league to go a new way. Some care providers would likely be leaving money on the table by breaking from the insurance monopoly. But make no mistake, you might lose in the immediate sense in these efforts, but to do nothing, we will all lose much more over time.
Entrenched middlemen get fatter and fatter and fatter if left unchecked, eventually reaching the point where their excess exceeds the value they brought to the relationship in the first place. I would argue we’ve already passed that point in health care. NBA players are rapidly heading toward that point as hardline owners become more and more aggressive in pursuing unfair and punitive system changes. And we are likely much closer to that point in publishing than many authors care to admit.
The key problem with entrenched middlemen is that, as the relationship matures, they ultimately serve to drive up costs for everyone while reaping rewards only for themselves. Now, as our economy is in shambles and more and more people are coming to the long-overdue realization that the system has been rigged against us and legitimate opportunities that we always believed existed are proven to be illusory, we have a chance to right the ship.
The government won’t do it for us, in fact, I’d expect it to be an obstacle because of the undue influence of entrenched interests. Corporations won’t go along willingly, and I expect they’ll become increasingly punitive to anyone who steps out of line. The only power we truly have is the power of our own individual choices. We can either continue to submit, continue to be bled until there’s not a drop left in any of us, or we can break the cycle.
It won’t be easy, and it may not work as we hope, but one thing is for certain, the path we’re on right now is a dead end. And we’re rapidly approaching the cliff at the end. Don’t be yet another lemming.