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July 07, 2005

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Comments

aplumb

Apologies for slipping into math-geek mode. A Rayleigh Distribution may be a better match than a bell curve, as it has a zero-point.

Tim

Actually, he also talks about conversion of film to many formats, but if Internet-based distribution is used, formats might not matter so much. Most of us are still watching content on TVs which are at _best_ VGA-quality (640 x 480) . And for those of us looking for "niche" content, just _finding_ the content available is amazing enough!

Simit Patel

Another point to consider is that the long tail allows for a single venue to distribute all the content but does NOT require that same venue to bear all the costs of distribution. Example: I can buy millions of books through Amazon, but not all of them are stored or shipped by Amazon; they offer many books through their network of book sellers. Hence Amazon can expand its catalog without the vast majority of associated distribution/inventory costs (which in turn naturally incentivizes them to have as large of an inventory as possible).

Gary

I question the $15,000 figure he uses. Economies of scale will come into play when content owners convert their large back-catalogs. Furthermore, in the future, the mechanisms (and associated costs) necessary to prepare new content for the Long Tail will be built-in and streamlined when the content is created. The extra step, necessary now to prepare old content, will disappear.

David Palmer

I agree, Palmer (no relation to me) takes a kind of extreme example in terms of costs involved, and uses that as the basis of his argument. As Simit mentions above, Amazon is a great illustration of a business freed from the constraints of shelf space. Much as I love browsing at the local book or record store, if I'm looking for a specific book or CD, I consider myself lucky if I actually find it. On the other hand, I know I can always get it on Amazon. Nothing special has to be done to those products to make them available online, beyond just creating an entry in the database and having access to the product if it's ordered.

Zon

Costs will drop ... benefits of the long tail will be seen ... and one day Wal-Mart will have a kiosk where you can download any piece of music ever recorded. Is that a good thing, or a bad thing?

kevin Kelly

IP owners don't even have to do the digitazation themselves. The irony of it all, is that the FANS will digitize all material themselves, on their own nickles. All a studio has to do is publish their tech requirments. (And these can evolve to higher standards over time). The fans will do the rest if you give them permission. And they will probably do it as well as the pros, if not the first time, than eventually.

Matthew Gertner

The issue of marginal cost is something that I touched on in this blog post immediately after reading the original "Long Tail" article. Palmer sets up a straw man (and promptly knocks him down) by using the example of existing movies to illustrate a supposed weakness in the long tail theory. This is because the new focus on niches is gaining traction as a result not just of digital discovery and distribution of content, but also digital production. A more appropriate example would be a talented film student with a Mac and a mid-range digital video camera, who could doubtless produce a film for a few hundred bucks (and most of that invested in lattes from Starbucks). Would it have the production values of a Hollywood blockbuster? Of course not. Might it have enough inherent value to make money from a specific niche of specialist film enthusiasts? I can't see why not.

Karmakin

15,000? To do all that processing? hahahahah. That's funny. There are consumer gadgets that will convert from any format you like into digital. (Look in the back of any computer mag. You'll be shocked what you find). Color Correction HAS ALREADY BEEN DONE. You don't correct again for a digital environemtn, unless you want to. There are GPL re-encoders to take care of that. DRM might be a little expensive, but I'm sure there are scalable plans where you pay a fraction of your sales.

In any case, satisfying the Long Tail can be the result of as little, or much investment as you like.

Jake

Whil it probably will get worked out eventually, I think there may be something to the issues raised. Throwing up an mp3 on the web with no DRM or anything is cheap.

But making paid digital downloads work really well is going to be more expensive. When people are getting something for free, they accept little problems like faulty ID3 tags, and stuff like that. When people start paying for it, they are less tolerant of this stuff. They also may want more of it.

Even for a small record label, encoding product with DRM and other relevant metadata is going to cost something. It may be cheaper per unit than making CDs, but I suspect it will turn out to be more expensive than some of the assumptions people are making here. And and over the long run, this may conspire to make the tail shorter than some are assuming.

I guess we'll just have to see.

JL

chris

The fact that the Bell curve and the Pareto curve can look very different is a bit of a red herring. A lognormal distribution can be drawn as a bell curve in lognormal space, but give you a pareto curve in normal space. And the two graphs you show can be returned by the same function, with a different input. See http://en.wikipedia.org/wiki/Log-normal_distribution.

Darrell

Although the term "Long Tail" has a certain marketing cachet, I question the newness of your epiphany to describe market behavior. You have not unearthed anything new that hasn't already been covered by the basics of Revenue Management (aka Yield Management).

Using the Rhapsody example from the Wired article, it was observed that different price points elicited different purchase rates. Um...yeah....that is what is supposed to happen. There is a recognizable demand curve (the Long Tail). Raising or lowering the price on the demand curve creates a fluctuation in consumption.

A couple of decades ago, a fellow by the name of Bob Crandall used to lead American Airlines. After hanging out in his Operations Research department, he discovered that altering the price to take advantage in fluctuations in demand which yield higher overall revenue. "Revenue Management" is now the reason you paid more (or less) for your ticket than the traveler sitting next to you. Southwest and AirTran also demonstrated that reducing your fixed costs and selling to the masses enables more Long Tail.

What is somewhat interesting is that we have now entered an age where we can see the effects of global consumption of product categories with low costs of production/distribution (music, movies, & books). However...would NetFlix' Long Tail grow longer or shorter if their cost of distribution increase (the USPS is rattling its saber about postage increases)?

Another subtle nuance that differentiates these Long Tail product categories is that they don't have the perishability factor that is found in time-sensitive categories like air tickets, cruises, or hotel rooms (e.g. you forever lose the right to sell the July 15th flight from DFW to ATL once July 15th has passed).

Aside from the small differences in the product categories, there is nothing new that you present that hasn't already been covered by very smart people running around with PhDs in Ops Research and Decision Sciences.

Tony

Very cognitive.

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Tidbits

The Long Tail by Chris Anderson

Notes and sources for the book

FREE was available in all digital forms--ebook, web book, and audiobook--for free shortly after the hardcover was published on July 7th. The ebook and web book were free for a limited time and limited to certain geographic regions as determined by each national publisher; the unabridged MP3 audiobook (get zip file here) will remain free forever, available in all regions.

Order the hardcover now!