The Long Tail
There is a new economic model for the media and entertainment industries. Unlimited selection is revealing truths about what consumers want and how they want to get it in service after service, from DVDs at Netflix to music videos on Yahoo! Launch to songs in the iTunes Music Store and Rhapsody. People are going deep into the catalog, down the long list of available titles, far past what’s available at Blockbuster Video, Tower Records, and Barnes & Noble.
For too long we’ve been suffering the tyranny of lowest-common-denominator fare, subjected to brain-dead summer blockbusters and manufactured pop. Why? Economics. Many of our assumptions about popular taste are actually artifacts of poor supply-and-demand matching — a market response to inefficient distribution.
The main problem, if that’s the word, is 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 is the need to find local audiences. An average movie theater will not show a film unless it can attract at least 1,500 people over a two-week run; that’s essentially the rent for a screen. An average record store needs to sell at least two copies of a CD per year to make it worth carrying; that’s the rent for a half inch of shelf space.
The other constraint of the physical world is physics itself. The radio spectrum can carry only so many stations, and a coaxial cable so many TV channels. And there are only 24 hours a day of programming.
Now, with online distribution and retail, we are entering a world of abundance.
Robbie Vann-Adib, the CEO of Ecast, a digital jukebox company whose barroom players offer more than 150,000 tracks — asks visitors a question that they invariably get wrong: “What percentage of the top 10,000 titles in any online media store (Netflix, iTunes, Amazon, or any other) will rent or sell at least once a month?”
Most people guess 20 percent. Only 20 percent of major studio films will be hits. Same for TV shows, games, and mass-market books. The odds are even worse for major label CDs, where fewer than 10% are profitable. But the right answer, says Vann-Adib, is 99 percent.
With no shelf space to pay for and, in the case of purely digital services like iTunes, no manufacturing costs and hardly any distribution fees, a miss sold is just another sale, with the same margins as a hit.
To get a sense of our true taste, unfiltered by the economics of scarcity, look at Rhapsody, a subscription-based streaming music service that currently offers more than 735,000 tracks.
Chart Rhapsody’s monthly statistics and you get a “power law” demand curve that looks much like any record store’s, with huge appeal for the top tracks, tailing off quickly for less popular ones. But an interesting thing happens once you dig below the top 40,000 tracks, which is about the amount of the fluid inventory (the albums carried that will eventually be sold) of the average real-world record store. Here, the Wal-Marts of the world go to zero.
The Rhapsody demand, however, keeps going. Not only is every one of Rhapsody’s top 100,000 tracks streamed at least once each month, the same is true for its top 200,000, top 300,000, and top 400,000.
This is the Long Tail.
The average Barnes & Noble carries 130,000 titles. Yet more than half of Amazon’s book sales come from outside its top 130,000 titles.
Google makes most of its money off small advertisers (the long tail of advertising), and eBay is mostly tail as well — niche and one-off products.
We’re seeing a blurring of the line between in and out of print. Amazon and other networks of used booksellers have made it almost as easy to find and buy a second-hand book as it is a new one. Combine that with the rapidly dropping costs of print-on-demand technologies and it’s clear why any book should always be available.
“The Long Tail,” by Chris Anderson