The Long Tail

The end of the mass-market record store?

UPDATE (8/22): Tower Records has now filed for Chapter 11 bankruptcy.

From Digital Music News:

Tower Records Edging Closer to Disaster, Possible Liquidation 

The once-proud Tower Records is now edging closer to the rocks, according to continued reports. The chain has been struggling with mounting debt, and major labels were recently forced to freeze shipments following various non-payments. Last week, the dire financial situation failed to thaw, part of a quickly worsening situation. The beleaguered retailer is now headed by chief executive Joe D'Amico, recruited to manage the current crisis and possible bankruptcy. Other possibilities include a straight liquidation, depending largely on decision of chief banking lender CIT Financial. 

Labels want to get paid, but they are also disinterested in witnessing the fall of such an important retailer. Just recently, attendees at the annual NARM convention in Kissimmee, FL, were supportive of Tower, and crowned the retailer with a top award. But financial realities will probably spell a rough period ahead, despite the symbolic nod. If Tower Records folds, it would represent a critical loss for the dedicated, brick-n-mortar music retail segment. Other players in the landscape include big box retailers like Wal-Mart and Best Buy, which offer deeply discounted loss-leading CDs, and smaller niche outlets, which are also facing heavy financial pressures.

(Screencap taken from the Day of the Longtail video)

Mainstream Media Meltdown III

A couple times a year, I take a statistical look at mainstream entertainment and media in decline. All figures are year-on-year comparisons unless otherwise noted. (The last version of this, from November, is here).

Down:

• TV: network TV had its lowest ratings week ever in July.
• Music: weekly album sales set a 10-year low in July. For the year, CD album sales are down 4.2%; although digital single downloads (still less than 10% of the business) are up 77% and are nearly making up the difference in revenue terms. 
• Radio: the music radio listening audience is down 8.5% this year alone, continuing a multi-decade decline.
• DVDs: shipments are down 4% so far this year, more than 30 million units behind the same period last year.
• Newspapers: circulation, which peaked in 1987, is declining faster than ever and is down another 2.6% so far this year.

Mixed:

• Magazines: ad revenues are up 3.7% although the total number of ad pages is flat (they're charging more per page). Newsstand sales are at an all-time low, while total circulation was down 0.3% last year. 
• Books: up slightly so far this year (but still lagging behind overall retail growth).

Up:

• Box Office: is up by 5.8% so far this year (but still down 4.2% from 2004).
• Videogames: The long slump caused by the next-gen hardware transition (Xbox-to-Xbox 360 and PS2-to-forthcoming-PS3) seems to have finally ended. June sales were up 25%.
• Internet advertising: is on pace to grow by 21% this year. Google's revenues grew by 77% in the most recent quarter.

A couple times a year, I take a statistical look at mainstream entertainment and media in decline. All figures are year-on-year comparisons unless otherwise noted. (The last version of this, from November, is here).

Down:

• TV: network TV had its lowest ratings week ever in July.
• Music: weekly album sales set a 10-year low in July. For the year, CD album sales are down 4.2%; although digital single downloads (still less than 10% of the business) are up 77% and are nearly making up the difference in revenue terms. 
• Radio: the music radio listening audience is down 8.5% this year alone, continuing a multi-decade decline.
• DVDs: shipments are down 4% so far this year, more than 30 million units behind the same period last year.
• Newspapers: circulation, which peaked in 1987, is declining faster than ever and is down another 2.6% so far this year.

Mixed:

• Magazines: ad revenues are up 3.7% although the total number of ad pages is flat (they're charging more per page). Newsstand sales are at an all-time low, while total circulation was down 0.3% last year. 
• Books: up slightly so far this year (but still lagging behind overall retail growth).

Up:

• Box Office: is up by 5.8% so far this year (but still down 4.2% from 2004).
• Videogames: The long slump caused by the next-gen hardware transition (Xbox-to-Xbox 360 and PS2-to-forthcoming-PS3) seems to have finally ended. June sales were up 25%.
• Internet advertising: is on pace to grow by 21% this year. Google's revenues grew by 77% in the most recent quarter.

Gladwell responds to the "derivative myth"

A few weeks ago, I cheekily quoted my favorite author, Malcolm Gladwell, saying "Without the New York Times, there is no blog community.  They'd have nothing to blog about." Acknowledging that Malcolm meant this at least partly tongue-in-cheek, I nevertheless argued that it echoed a notion oft-heard in media circles that blogs were simply derivative ("low-value-add chatter about our stories"). And then I supplied some data that showed that actually most blogs aren't talking about us in the mainstream media at all. They're mostly talking about themselves and the world around them, something they're more expert on than we are.

Now Gladwell has responded in his usual sharp way. Excerpt:

Has the level of self-regard in the blogosphere really reached such dizzying heights that it can’t acknowledge the work that traditional media does on behalf of the rest of us? Yes, the newspaper business isn’t as lucrative as it once was (although it’s still pretty lucrative). And it doesn’t seem as exciting and relevant as it once was. But newspapers continue to perform an incredibly important function as informational gatekeepers—a function, as far as I can tell, that grows more important with time, not less. Between them, for instance, the Times and the Post have literally hundreds of trained professionals whose only job it is to sift through the mountains of information that come out of the various levels of government and find what is of value and of importance to the rest of us. Where would we be without them? We’d be lost.

As I told him when we ran into each other at JFK the other day, when it comes to politics, I think he's right. Gladwell asks: Isn't that a fairly big exception? Well, not as big as we in the media biz might think. After all, a recent Pew Internet study found that by far the most common topic of blogger is "my life and experiences" (the focus of 37% of bloggers), with "politics and government" running a distant second at 11%. 

So my point is only this: it's a mistake to see the blogosphere only through the political lens. And outside of politics, bloggers tend to take far less of their lead from mainstream media.

The very smart Megan McArdle ("Jane Galt") nicely puts the debate in perspective, so I'll let her have the last word:

Bloggers and journalists have different strengths; when done right, they complement each other. Good bloggers have extensive local knowlege and excellent feedback mechanisms; by definition, some of my readers know more about any topic I write on (or blog on) than I do. Journalists have breadth, time, and reach. No blogger can spend the kind of time researching and writing a story that I do, because my paper relieves me of the burden of earning a living elsewhere. Nor can many bloggers afford to, say, pick up and leave Washington to report on Beirut for three years, thus combining in one person expertise on US politics and the Middle East. And a single blog, or even a group of blogs, has difficulty functioning as a one-stop shop for the major news of the day, because blogs are, by definition, idiosyncratic.

Meanwhile, network TV continues to fade

July 3-9 was the lowest recorded week in history for network TV viewership. I'm just saying....

Hits Aren't Dead. Hits Aren't Dead. Hits...

After doing a full day of press when everyone asked me the same question, I realize that I must say this as clearly as possible. Hits Aren't Dead.

I never said they were. What is dead is the monopoly of the hit. For too long hits or products intended to be hits have had the stage to themselves, because only hit-centric companies had access to the retail channel and the retail channel only had room for best-sellers. But now blockbusters must share the stage with a million niche products, and this will lead to a very different marketplace. Let me explain:

As I see it, there are essentially three kinds of hits, which we can call Type 1,2, and 3:

• "Top-down" hits created by the usual hit-making machine: major labels, major publishers, major studios, etc. Those fall into two categories:
  • Type 1: Authentic hits: products that are excellent and resonate with a broad audience (think anything from Coldplay to the World Cup). These start big and stay big.
    
  • Type 2: Synthetic hits: lame products that are marketed within an inch of their life, sucessfully getting lots of people to try them even though they're probably sorry they did. (think Garfield: A Tail of Two Kitties). These start big but quickly plummet.
• Type 3: "Bottoms-up" hits, that rise on word-of-mouth and grassroots support. (think Clap Your Hands Say Yeah or March of the Penguins). These start small and get big.

I think Type 1 hits will continue to do well. Type 3 hits will do even better, since the web is the greatest word-of-mouth amplifier ever created. But Type 2 hits will suffer, as the consumers spread the word of their suckitude faster than ever.

Bottom line: In a Long Tail world many top-down hits get smaller, but even more bottoms-up hits get bigger. It's not the end of the hit--it's the rise of a new kind of hit.

On media elitism and the "derivative" myth

I am, in full disclosure, a member of the Media Elite. I'm a Conde Nast editor, run a glossy mainstream magazine, spent much of my career at The Economist and consort with known journalists. But nothing annoys me more than the oft-heard assertion within media circles that without us blogs would be nothing.

This is so commonly held a belief in the industry that it is unfair to pick just one example. But I must do so anyway, so I will use a recent one from an otherwise unimpeachable source--my favorite writer in the world, Malcolm Gladwell, a man who is right on so many things (and is also a blogger) that I can only think that his comment was intentionally made to provoke posts like this one. Speaking at a panel on "Online Media and the Future of Journalism" in NYC two weeks ago, Gladwell said:

"Without the New York Times, there is no blog community.  They'd have nothing to blog about."

This is the Derivative Myth. It usually goes like this (and again, I don't mean to pick on Malcolm, who didn't say the following and no doubt meant his comment above to be at least partly tongue in cheek): Blogs, which are mostly written by amateurs, couldn't possibly do what We Do. Instead, they mostly just comment on what we do, supplying low-value-add chatter about our stories that must not be confused with Proper Journalism or other Quality Content from us Professionals.

Let's look at some numbers. Technorati shows that there are currently 555,000 posts linking to the New York Times. Nearly 800,000 posts mention the Times in one way or another. Sounds like a lot? Not if you pull back and look at the entire blogosphere. Technorati is currently tracking 2.7 billion links.

What are most people actually talking about? Mostly themselves, their friends, their family and things that are more interesting to them and their daily lives than whatever we in the media choose to focus on with our limited resources and space. To use a proper head-to-head comparison with the searches above, Technorati currently shows more than 152,000,000 posts that use the word "I". So that's roughly 300 times more people talking about themselves (and the world around them) than talking about what the New York Times has written about.

Here are the top ten most blogged-about mainstream media sites, with the percentage of total posts that incoming links to their stories comprise (I've used a very conservative estimate of 200 million total posts in the current Technorati search window, which is based on the 152 million result from the common word "I" above):

      Media Site                   Blog links (percentage of total)

1. BBC:                         681,000 (0.3%)
2. Yahoo News:            605,000 (0.3%)
3. New York Times:      555,000 (0.3%)
4. Washington Post:       434,000 (0.2%)
5. CNN:                        428,000 (0.2%)
6. Guardian Unlimited:    252,000 (0.1%)
7. USA Today:              141,000 (0.1%)
8. Yomiuri Online:         127,000 (0.1%)
9. SF Gate:                   117,340 (<0.1%)
10. LA Times:                 116,000 (<0.1%)

I think the only reasonable conclusion to draw from the above is that we in the mainstream media need to get over ourselves. What we do has great value, but we no longer have a monopoly on leading the public conversation (not that we ever did, of course, but it was easier to delude ourselves before). The blogosphere doesn't need us to give them something to talk about. When we do what we do well and add new ideas, information and analysis, blogs can be our best friend, amplifying our reach many-fold. But when we don't, the former audience is very happy to talk amongst itself.

Music sales falling in the Head, rising in the Tail

Larry Lessig pointed me to an interesting bit of research on filesharing and the decline of music sales in Denmark, which shows that the fall in sales has been felt far more in the hits than in the niches. The work, by Claus Pedersen, uses data from the Nordic Copyright Bureau. That means the data are not just estimates of sales declines, but actual sales. I've charted one aspect of the research, which looks at the change in sales in four sales categories, from bestsellers to the long tail:

A summary of the paper was translated by Marie Elisabeth Pade Andersen. You can read it here.

The end of the hit (inflation corrected!)

Australian actuary Dermot Baslan kindly corrected my The End of the Hit data for inflation (actuaries are great at this stuff). Then, while I was revisiting the data, I went back and re-ran my queries on the RIAA database to eliminate singles, music DVDs and other non-album fare. Finally, I updated the figures to get the final 2005 numbers.

The revised numbers, with a nice six-degree polynomial regression line to highlight the trend in the lower chart, look like this:

The point? When you express hits as a ratio of total industry sales and then correct for inflation, it's not quite as dramatic--total music sales have been falling along with the hits. But it still ain't pretty. At all.

The updated spreadsheet is here.

Music Industry: Is digital making up the difference?

On Friday, the RIAA released the official sales figures for 2005. You've seen the press accounts ("Music Sales Post Their Sixth Year of Decline"), but when you look closely at the numbers it doesn't look quite as bleak as that.

I've charted it all out below. A few points to note:

• Although CD sales have fallen off a cliff, digital sales appear to be making up most of the difference. However, there are a few statistical nuances...
• In 2005, the RIAA started tracking ringtone ("mobile") and subscription (Rhapsody, et al) digital sales. In 2004, it started tracking digital download sales (iTunes, et al). Obviously there were sales in all three categories in previous years, but they just don't show up in these numbers. So 2005 looks slightly better than it really is.
• Nevertheless, those distortions aren't huge. In revenue terms the industry did about as well last year as it did before, and it's worth noting that the margins on digital distribution are considerably higher because there are no physical goods to manufacture and ship. So 2005 may have been more profitable than 2004 (it certainly was for Warner Music Group). Who knew?
   

You can read the RIAA's press release explaining its methodology a bit more here.

The decline of hit albums, in context

Stats junkies: here's more data on the end of the hit-driven music economy.

A few weeks ago I posted this chart on the number of Gold (over 500,000 sold), Platinum (1-2 million), Multi-Platinum (2-10 million) and Diamond (10 million and up) albums since 1958:

Many of you asked to see these numbers as a proportion of total music sales, to eliminate the distorting effect of the overall growth of the music industry over that period. I finally got good sales data for the pre-Soundscan (1993) period, so here you go, with a nice polynomial curve fit to highlight the trends [UPDATE: I've clarified the Y axis units; it's hits/total $s]:

Here's the underlying data, in spreadsheet form. The RIAA database this is drawn from is fascinating, and if I had more time I'd be running more queries on trends in genre, sales velocity, and the changing breakdowns between gold, platinum and multiplatinum. But I don't, so I'll leave that as an exercise, as they say. If you do it and find something interesting, ping me and I'll link to it.