The Long Tail, Part III

This is the third and last in a series of blogs about Chris Anderson's new book, The Long Tail.

When we left off yesterday, we were talking about today's society being obsessed with hits. According to Chris, "We're stuck in a hit-driven mindset - we think that if something isn't a hit, it won't make money and so won't return the cost of its production. We assume, in other words, that only hits deserve to exist. But . . . the 'misses' usually make money, too. And because there are so many more of them, that money can add up quickly to a huge new market."

Chris compares the hits to islands in the ocean: small bits of land protruding above the water like the tips of mountains. However, below the surface of the water, the bulk of the mountain remains out of sight. For every single hit, there are thousands of misses that will still bring in money over time.

Even a giant retailer like Wal-Mart is not taking advantage of The Long Tail. Wal-Mart stocks only 1% of the record albums actually available.

Chris says that companies like eBay, Amazon and Netflix escape the paradigm of scarcity. In order to succeed, such companies must follow three rules:

1) Make everything available. "Netflix has made a good business out of what's unprofitable fare in movie theaters and video rental shops because it can aggregate dispersed audiences. It doesn't matter if the several thousand people who rent Doctor Who episodes each month are in one city or spread, one per town, across the country - the economics are the same to Netflix. It has, in short, broken the tyranny of physical space. What matters is not where customers are, or even how many of them are seeking a particular title, but only that some number of them exist, anywhere.

As a result, almost anything is worth offering on the off chance it will find a buyer. This is the opposite of the way the entertainment industry now thinks."

2) Cut the price in half. Now lower it. Chris suggests that you can pull consumers further down The Long Tail by lowering prices the further down the tail they go. So that 99 cent download for a single music track may actually be too much for a really obscure track. With digital technology, the retailers' costs are cut. Chris suggests they can inflate their business by decreasing their prices.

3) Help me find it. The successful Long Tail business will include BOTH hits and misses. A company with just The Long Tail misses will not attract the mainstream business. A company with just the hits misses out on The Long Tail business. The success of Amazon and Netflix depends on offering both parts of the bell curve. "Their huge libraries of less-mainstream fare set them apart, but hits still matter in attracting consumers in the first place. Great Long Tail businesses can then guide consumers further afield by following the contours of their likes and dislikes, easing their exploration of the unknown."

Sixty percent of Netflix' business comes from recommendations while Amazon has increased its business enormously by the simple mechanism of "If you liked this, then you might want to look at _____." In each case, "the aim is the same: Use recommendations to drive demand down the Long Tail."

Chris suggests that the new markets will be based on a paradigm of abundance rather than scarcity. Why am I interested? As a writer, I begin thinking ahead. Books need never go out of print, and deals negotiated may last for a VERY long time.

It's a different way of thinking. Spend some time musing over what it could mean to you.