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Tuesday, December 14, 2004

The Long Tail - Change This Series

Editor-in-Chief of Wired, CHRIS ANDERSON says that the future belongs to those that serve the millions of untapped niche markets as well as they serve the masses. Excerpts:

Forget squeezing millions from a few megahits at the top of the charts. The future of entertainment is in the millions of niche markets at the shallow end of the bitstream.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.Online services carry far more inventory than traditional retailers. Rhapsody, for example, offers 19 times as many songs as Wal-Mart’s stock of 39,000 tunes. The appetite for Rhapsody’s more obscure tunes (charted in red) makes up the so-called Long Tail. Meanwhile, even as consumers flock to mainstream books, music, and films (bottom),there is real demand for niche fare found only online.

But as egalitarian as Wal-Mart may seem, it is actually extraordinarily elitist. Wal-Mart must sell at least 100,000 copies of a CD to cover its retail overhead and makea sufficient profit; less than 1 percent of CDs do that kind of volume. What about
the 60,000 people who would like to buy the latest Fountains of Wayne or Crystal Method album, or any other nonmainstream fare? They have to go somewhere else
. Bookstores, the megaplex, radio, and network TV can be equally demanding. We equate mass market with quality and demand, when in fact it often just represents familiarity, savvy advertising, and broad, if somewhat shallow, appeal. What do we really want? We're only just discovering, but it clearly starts with more.

Just as lower prices can entice consumers down the Long Tail,recommendation engines drive them to obscure content they might not find otherwise.
#1010: PINK
#5153: NO DOUBT

Beyond bricks and mortar there are two main retail models — one that gets halfway down the Long Tail and another that goes all the way. The first is the familiar hybrid model of Amazon and Netflix, companies that sell physical goods online. Digital catalogs allow them to offer unlimited selection along with search, reviews, and recommendations, while the cost savings of massive warehouses and no walk-in customers greatly expands the number of products they can sell profitably. Pushing this even further are pure digital services, such as iTunes, which offer the additional online at virtually no marginal cost. Since an extra database entry and a few megabytes of storage on a server cost effectively nothing, these retailers have no economic reason not to carry everything available.

There is a difference between push and pull, between broadcast and personalized taste. Long Tail business can treat consumers as individuals, offering mass customization as an alternative to mass-market fare. The advantages are spread widely. For the entertainment industry itself, recommendations are a remarkably efficient form of marketing, allowing smaller films and lessmainstream music to find an audience. For consumers, the improved signal-to-noise ratio that comes from following a good recommendation encourages exploration and can reawaken a passion for music and film, potentially creating a far larger entertainment market overall. (The average Netflix customer rents seven DVDs a month, three times the rate at brick-and-mortar stores.) And the cultural benefit of all of this is much more diversity, reversing the blanding effects of a century of distribution scarcity and ending the tyranny of the hit. Such is the power of the Long Tail. Its time has come.
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"All views expressed are my personal views are not related in any way to my employer"