Wednesday, July 19, 2006

The Long Tail - selling less of more

There's an excellent article in today's Toronto Star about Chris Anderson's book, “The Long Tail: Why the Future of Business is Selling Less of More.” I guess I haven't been paying enough attention to the best-sellers list. I'm motivated to rush out and buy this one. Here's a (rather long) excerpt from the article:

"In the worlds of entertainment and information, we've already lost the capacity constraints of shelf space and channels, along with their one-size-fits-all demands," writes Anderson. "Soon," he continues — and this is the killer app in his narrative — "we may lose the capacity constraints of mass production, too.

The explosion of variety we've seen in our culture thanks to digital efficiencies will extend to every other part of our lives." If that sounds a little like Economics 101, Anderson easily pushes readers past such barriers by describing a statistical curve in which "the tail of the curve is very long relative to the head." Example: Anderson graphed music downloads from Rhapsody, an online music company. Predictably, a few mega-hits — Anderson does not say which — were downloaded in the mega-thousands. The graph then falls off steeply into the territory of less popular tunes. "But the interesting thing," writes Anderson, "was that it never fell to zero. I'd go to the 100,000th track, zoom in, and the downloads per month were still in the thousands."
The curve, like the battery, just keeps on going, fuelled by demand that, as Anderson says, was previously dismissed as beneath the economic radar.

Even though the long tail does, eventually, run out — Rhapsody's inventory sits at about 1.5 million tracks — the old notion of supply and demand has been upended. The new shape of demand in our culture can be seen, writes Anderson, "unfiltered by the economics of scarcity."

Flipping for a moment from music to books, we see how fully one-quarter of the sales at Amazon, the online book retailer, comes from books not on the list of top 100,000 titles, causing Anderson to quote venture capitalist Kevin Laws: "The biggest money is in the smallest sales." Hence the book's subtitle.

What this all means is a great deal. We are witnessing a new economic model — one that we see now in media and entertainment industries but which, if Anderson is right, will become widespread.

The benefit to consumers is an abundant marketplace. "You can find everything out there in the Long Tail," writes Anderson. (Well, not quite everything. WKRP in Cincinnati is unavailable on DVD due to the prohibitive costs of licensing the show's classic rock music. Thus there exists a real scarcity where Fred Willard retrospectives are concerned.)

Freed from what Anderson calls the "tyranny of lowest-common-denominator fare," consumers thus roam a market that has become fragmented into a long tail of a million niches.

There are other examples — the self-publishing success of is another cited by Anderson — to make the point the Long Tail equates to infinite choice. Our interests, says a media analyst quoted in the book, have always been fragmented. But those scattered desires have not, in the past, been met. We have been told what we like.

The trick in Long Tail lies in making the convincing argument that this new economic
paradigm applies outside of the realm of iTunes and Internet book ordering.

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