Disintermediated. Again.

    Electronic Arts provides fresh evidence of technology's ability to change everything–maybe.

    by Adam Lashinsky

    Remember that awful, overused, ill understood word from the tech bubble? Disintermediation. It was what was going to happen to all "old" businesses, like retailers and newspapers and brokerage houses. The theory went that any company that wasn't serving its customers on the Internet would watch the Internet step between it and them. It was going to spell doom for all sorts of "brick-and-mortar" concerns, ink-stained publications and trusted but dated advisory firms.

    The funny thing about disintermediation is that it didn't happen. Then it did. The old-line companies survived the tech bubble as they waved goodbye to Webvan and Pets.com and DLJdirect.com and so on. Then, after most industries got back to normal the destruction continued. Online concerns really did inflict damage on the old guard, and the damage is visible today in publishing, music, retailing, television and financial services.

    The funny thing is that even the disintermediators seem to have a hard time resisting the next wave.

    The upenders, upended.

    Yahoo (YHOO) became one of the world's most important publishers, before getting clobbered by Google (GOOG). Napster was stillborn and Pandora today is far cooler than Real Networks. (RNWK) E*Trade (which owns the remnants of DLJdirect.com) is a shell of its former self.

    And then there is the sad case of digital gaming pioneer Electronic Arts (ERTS), which dramatically lowered its fiscal 2010 guidance Monday, sending its shares plummeting.

    Electronic Arts faces two obvious problems, a weak economy and a dearth of hit titles. But perhaps its biggest challenge is the rise of so-called social gaming. This simply didn't exist a few years ago. Now, why buy a disc from EA when you can play games for free on Facebook from the likes of Zynga or on Apple's (AAPL) iPhone from the startups like Tapulous? EA has gotten into the game, paying more than $200 million for a similar company called Playfish. But EA is a giant. Quarterly sales, even at depressed levels, exceed $1 billion. Snapping up a provider of free games is like slapping a Band-Aid on EA's rapidly declining business.

    This disintermediation thing. Sound awful. Because it is.