The Long Tail is a fabulous Wired Magazine article that proves the business opportunity beyond the mass market hit-based model.
Amazon and Netflix are fundamently different from Walmart and Sony. People are trained by the mass market model to assume that sales follow the 80-20 rule — the top few titles will garner the lion’s share of sails. But more than half of Amazon’s book sales come from outside its top 130,000 titles.
Wired editor-in-chief Chris Anderson explains the secrets to success at the tail of the curve:
The first secret to making money at the tail is discovery. “Long Tail” businesses aggregate a vast and diverse inventory, and use collaborative filtering algorithms, recommendations, group-forming tools to help people discover things.
The second secret is lower prices. Anserson analyzes the premium in current pricing, which is calibrated to preserve the margin required to advertise in mass media and to stock shelves, even for products that have no shelf rent and are sold by peer recommendation. Anderson suggests that conventional hits distributed electronically are overpriced by 25%. There are opportunities to charge much lower prices for inventory that never incurs mass production and distribution costs.
Long Tail and Peer Production
The article talks exclusively about commercial production. The long tail creates profit from the vast virtual warehouse of obscure, backlist, minor-label, and out-of-print works. The tail extends further with peer production — blogs, wikis, photo galleries, open source software.
The value model of the long tail applies even more strongly to peer production.
* Low starting price. With peer production, the base price of content falls to $0.
* Discovery. Services like Technorati, Feedster, Freshmeat and CPAN help people discover what’s new and what’s interesting in the long tail.
The peer production model suggests two more principles that apply back up through the middle of the curve:
* Groupforming. Flickr is great because it lets you invite friends to share photos. One of the secrets of Wikipedia success is how it supports micro-communities around obscure topics like obfuscated programming languages.
* Creation tools. Apple, Blogger, 6Apart and now O’Reilly sell tools that help people make and mix their own content.
The Power Law Red Herring
The Long Tail article reveals the limitations of the Clay Shirky power law model. Several years ago, Shirky explained how the top of the peer production curve segues into the mass market. The aggregation of interest raises popular bloggers like Andrew Sullivan, and popular open source software projects like Linux far above the tail, to join the ranks of mass market mainstream hits.
The Power Law essay amputates the long tail, and translates the head of the peer production curve into familiar mass market terms — the creation and packaging of celebrities. By focusing at the top of the curve, where peer production segues into the mass market, the Power Law obscures the the economic and social principles that create profit and value from the Long Tail.
The Power Law essay implied that A-list bloggers were the big winners in the peer ecosystem. This incited resentment of A-list bloggers by community bloggers, who are influential in local groups, but who don’t reach a mass audience. Anderson’s essay suggests that the relationship between the head and the tail is symbiotic instead.
The head’s connected to the tail
In suggesting that the tail will wag, Joi Ito is both right and wrong. He’s right that companies and organizations that take advantage of the tail will be the next-generation powers, and the hit machine will itself become a niche.
The Long Tail shows how it’s profitable for emerging powers like Amazon and Netflix to cultivate the deep backlist. It shows what the mass market content kings are losing by cutting off the tail.
But Joi is wrong with the implication that the tail can succeed without the head. Anderson suggests that earlier experiments like MP3.com failed because they couldn’t get licenses from major labels to distribute hits, so they only offered obscure bands. Anderson contrasts MP3.com with Rhapsody, which lets a music fan traverse a recommendation path from Britney Spears to an obscure 80s ska band in 3 clicks.
Popular content gathers audiences and interest; groupforming and discovery tools help people branch out into niches. This insight suggests that with the right ecosystem, the popular and the obscure can support each other, rather than competing.
Longterm win for Creative Commons
The Long Tail suggests opportunities for Creative Commons and copyright reform. The problem we’ve got in copyright policy is that the Mass Media content kings have purchased the law to try and protect their moribund hit-based business model. Fortunately, the opposing forces aren’t just David fighting Goliath.
The good news is that money and power will accumulate over time to the businesses making money from the tail. The Wired article suggests that NetFlix should hire lots of lawyers to clear copyrights on old, obscure works. Netflix and its peers will also have an interest in freeing the back list by making it easier for old material to re-enter the public domain.
Businesses at the tail are getting involved in production too, very differently from their hit-based A&R predecessors. Labels send scouts looking for the next Brittany, who will sell millions of records. NetFlix saw a award-winning PBS documentary and put up the money to get it produced to DVD, because they make money on items that sell tens and hundreds of thousands. NetFlix and it’s peers using the Long Tail business model will have an interest and leverage at the front of the the production process to use more flexible copyright terms, because recombination will result in a richer database.
Ecology, not ideology
This feels like the right conversation. It’s mildly interesting to see how internet distribution and peer production fits into existing ideological models. It’s a lot more interesting and fun to look at what’s working, understand the principles and effective practices that make it work, and see opportunities to build further.
“The Long Tail article reveals the limitations of the Clay Shirky power law model.”
I don’t see this at all. Far from revealing the limitations it’s just the flip side of it. It’s totally implicit in a power-law view of the distribution of attention that there’ll be a long tail of many things which have a little attention.
Now there may have been people who thought that you could only commercialize the head. But I don’t remember Shirky ever said that.
In the power law distribution (P[X=x] = x ^ (-a)) Head is symmetric to Tail. (x ^ (-a)) ^ (-a) = x
Oh – that was so obviously wrong (for a <> 1).
(x ^ (-a))^(-a) = x ^ (a ^ 2). But anyway it means that the Head of one distribution is the Tail of another.
Shirky’s power law article wasn’t about the math. It was about inequality. It focused on the extreme numerical superiority of the few nodes at top of the curve.
The conversation surrounding the article amplified that theme. The few A-listers are winners, the rest are losers.
Clay’s article talked about the power law, but it focused attention and associated value with the top of the curve. This focus blurred the difference between the familiar mass media economy and the network ecology. In a mass media economy, only a few stars are economically viable. In a network ecology, many more participants create economic value, and an even larger number of participants create social value.
The Long Tail, part 2
One important exception to the dearth of commentary on Anderson’s piece comes from Adina Levin, who builds on and speculates about the essay in important ways. She writes, The Long Tail article reveals the limitations of the Clay Shirky power law model…