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April 09, 2005

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Comments

twdanny

It just occured to me that maybe a better question is not about slicing the existing market vs. increasing the demand, but rather which comes first between the increased demand and the long tail phenomenon, i.e. which causes the other to happen? and just like your answer, it seems like it depends.

Sometimes, LT slices the market in percentage only "because it's growing", meaning LT doesn't really slice a static market. In other words, there's already a growing demand for the entire market and LT happens to be seen in much of it, essentially "slicing it". In this case, LT is only a natural consequence of the growth. On the other hand, we've seen many cases where LT is actually the driving force of the demand expansion, in the area of media and multimedia contents, in particular.

Most of the time, though, I feel like it's more of a chicken-and-egg problem: there's a demand growth which works in favor of LT and because of LT, more users/consumers like it and the business naturally tries to catch up with the trend, only increasing the demand even more.

Ben Hyde

Another way to frame this question: As the curve's shape changes does how does the volume under the curve change. What's the volume a measure of? Attention, revenue?

One way the curve changes is that the 'industry' begins to reach further to the right. That the definition of the industry changes. So that things that previously were out of scope come into scope and people start putting them onto their balance sheets. One hypothesis is that previously unmonitized attention becomes revenue. Very similar to the advice given disruptive businesses to competing with "non-consumption." The hours of attention captured by your white ear'd new yorkers are an example of this.

One way the curve shifts is that it moves up, everybody wins; and as it moves up segments to the right become viable places for business models. This can create a situation where the elite vendors feel they are losing, even if their revenue is still rising, because their market share is falling. And it's certainly true that as market shares shifts out onto the long tail the structure of the market changes. Particularly in how innovation emerges. And that makes the elite vendors position risky, until they figure out how to capture that innovation.

If the curve has constant volume under it, and technology enables a reach further into the long tail, they clearly the volume captured by the elite vendors will fall; but I think the scenarios above are more plausible.

Chris Anderson

Ben,

Two quick responses:

1) In general the Y axis and by extension the area under the curve represents sales (revenue) but in the case of flat-fee subscription services it's plays/watches/reads.

2) You wrote "One hypothesis is that previously monitized attention becomes revenue." I presume you meant *un*monitized attention, yes?

Alex Rowland

I think the area under the curve is clearly attention, or total time dedicated to consumption (whether passive or active). As Chris alluded, attention is a more fungible commodity than revenue. The fact is a company like Netflix provided a mechanism for gaining access to the long tail without requiring substantial additional investment by the consumer (if anything, it reduced the real and “psychic costs” of the transaction - as described by Kevin Laws over at www.Ventureblog.com). I think this is essential to driving early adoption of niche content. LT content must be highly relevant, easy to find and consume, and inexpensive to acquire (likely free). Due to consumer inertia, the long tail must minimize consumer investment, both monetary and non-monetary, in order to claw attention away from other activities (including the consumption of more popular content.)

Over time I believe the financial metrics can change such that providers of LT content will eventually be able to charge a premium for this content, but that’s a ways in the future. Unfortunately the audience will have to be aggregated long before the real revenue starts to flow (although permission-based advertising can bridge the gap to a certain extent.)

However, I do also feel that the total volume under the curve will grow quite dramatically over the next decade to accommodate this new content before settling down to a more moderate level. We are not only going to consume more content because it will be more relevant; we are also going to consume it in more places. I don’t know about you guys, but a far greater percentage of my life is now spent in front of a screen (both fixed and mobile) than 5 or 10 years ago. I’m pretty sure I’m not the exception.

Ben Hyde

Chris, thanks.
1 - i guess then it's revenue in one case and more like hours of attention in the other; though once your on an unlimited subscription - well you may not read all those books you bring home from the library.

2. Right, feel free to fix it if you want.

Grant Henninger

Indeed, it does put a kink my my business model. However, I'm early enough in the game where I can look at it and think through the problem to a solution before locking myself in to my current model. Thanks for pointing it out.

Patrick

I bookmarked your blog when I saw your article "The Grokster Case's Silent Majority" in the LA Times. I had just written about the same subject and wanted to offer comment on your argument. I finally visited today and though I haven't found the LA Times article, I have found a number of other posts, including this one, that surprised and intrigued me with the parallels in our work: you on the way to writing a book, me on the way to building a company. Perhaps what is most fascinating is the semantic convergence: "niche", "economics of abundance", "scarcity of attention". Obviously, I believe that these ideas provide a business opportunity, but after a recent lecture I gave at MIT I'm more confident that these trends in the music industry/information economy are indicative of a larger political/economic shift in the making.

Oh, the comment I wished to make on your LA Times article:

There are many better ways to support "the new creative" class than a technology that is primarily a forum for consuming material from "the old creative class". The legal merits of P2P are solid but any moral/ethical defense is dubious. For now, the court should uphold the MGM vs. Betamax precedent. However as recently developed technologies like the GarageBand.com/RSS/iPodder stack and Snocap mature, the court will be faced with a novel twist to the precedent: competing (perhaps superior) technology that supports the legitimate uses without enabling the illegitimate ones.

Patrick

correction to previous comment: "MGM vs. Betamax precedent" should have been "Movies vs. Betamax precedent". I would make an awful judicial clerk.

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Tidbits

The Long Tail by Chris Anderson

Notes and sources for the book

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