The Long Tail, Part II

Back to our discussion of The Long Tail by Chris Anderson. The non-fiction book hit shelves on Tuesday. The Wall Street Journal (WSJ) reported on Saturday that, "Hyperion . . . is so excited about 'The Long Tail' that it has gone back to press three times prior to publication and now has 150,000 copies in print, a significant number for a business title."

Let's start by returning to the story I recounted yesterday. In a conversation with the CEO of a digital jukebox company a couple of years ago, Chris was astonished to learn that 98% of the exec's 10,000 digital albums sold at least one track per quarter.

This flies in the face of the conventional wisdom of the 80/20 Rule, which suggests that 20% of the albums would account for 80% of the sales. In this case, total sales of the less-popular items exceeded the sales for the most-popular items. And THAT is The Long Tail effect. Over the long haul, a less-popular product can outsell a more-popular product as long as the distribution network is large enough.

Chris' original article in Wired made the point that, "we live in the physical world and, until recently, most of our entertainment media did, too. But that world puts two dramatic limitations on our entertainment."

The first limiting factor is the need for a local audience. Chris says that your local theatre needs 1,500 bodies to buy tickets over two weeks to cover the cost of screening a film while the local music store needs to sell two copies of a CD to pay for the shelf space used by that artist. And the reality is that the vendors need to pull those dollars (signifying local interest) from perhaps a ten-mile radius. "In the tyranny of physical space, an audience too thinly spread is the same as no audience at all."

The second limiting factor is physics itself. The physical world has just so many hours in a day that a store or theatre can remain open, just so much radio spectrum for stations to broadcast over, etc. "Hit-driven economics is a creation of an age without enough room to carry everything for everybody. Not enough shelf space for all the CDs, DVDs, and games produced. Not enough screens to show all the available movies. Not enough channels to broadcast all the TV programs, not enough radio waves to play all the music created, and not enough hours in the day to squeeze everything out through either of those sets of slots."

Chris is essentially making the argument that the past has been controlled by a paradigm based on scarcity. "Now, with online distribution and retail, we are entering a world of abundance. And the differences are profound."

In the past, publishers and movie producers dreamed of finding the blockbuster book or movie that would sell millions. While that dynamic certainly continues today, the market itself is shifting. With digital files, POD technology and companies like Amazon to bring the publisher and buyer together, books never have to go out of print. The same is true of films. With companies like Netflix that have a huge distribution network, small obscure films can be made available to consumers indefinitely.

I referred readers back to my post for Monday which talked about another WSJ article entitled "Novel Ploy: Market Fiction to Niches." Huge distribution outlets like Amazon and Netflix are permitting generations of niche consumers to rediscover the same obscure works over and over again. "Technology has allowed such niche interests to thrive, finding steady customers and rising levels of interest." (WSJ)

The WSJ review of The Long Tail says, "niches now seem to have an economic logic they never would have had before . . . a wide palette of culture to choose from . . . In short, the shared experience of a 'mass' culture is fading with ever greater speed . . . In the executive suite, this shift is referred to as 'audience fragmentation,' and it is often a cause for worry . . . After all, touchstones like 'I Love Lucy' and top-40 radio once attracted half the country's consumers only because there was no real alternative. The new media, in contrast, offer nothing but alternatives."

Looked at another way, a store like Blockbuster caters to the mass culture. Blockbuster needs to keep 50 copies of the current best-selling film on hand to meet the local demand for the movie. This makes it impossible for them to surrender valuable shelf space in order to stock smaller, more obscure movies that are not in demand.

The flip side is that Netflix appeals to the niche market. A consumer wanting the most popular film out in release may have to wait in a queue at Netflix because the vendor cannot possibly meet the demand for that film across their huge network at one time. However, they can easily meet the demand for a smaller, less popular film.

Chris argues that we need to move away from our hit-driven mindset. We'll talk about that more in my next post on The Long Tail.