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Retailers are ruthless organisations. They set demanding revenue and profit targets for the goods they are prepared to display on their shelves; as a consequence big brands dominate their offering. Small firms, with limited ranges find it difficult to break the stranglehold of the major manufacturers. However, many industrial commentators expect the Web to revolutionise our culture and wildly expand our choices. Online stores are able to take a distinctly different approach to the products they offer, with digital technology lowering the costs of buying and selling.
Chris Anderson in a seminal article published in 2004 in Wired Magazine, proposed the concept of the ‘The Long Tail’. In his 2006 book, The Long Tail: Why the Future of Businesses is Selling Less of More, Anderson predicted that the bulk of revenue in future markets will be driven by small volume sales of thousands of niche products. Anderson wrote of an end to the era of bland, one-size fits all culture. In a typical mass-market, the ‘demand curve’ for products slopes from left to right, graphing the fall-off in popularity from the megahits in the ‘head’ to the less trendy ‘tail’, which represents the many products with a relatively small target market. However, Anderson predicted that the Web would empower consumers to reach beyond the high-volume head of the curve to the long and ever-expanding tail, where consumers could find products better suited to their personal tastes. Anderson, believes that the Internet makes it easier than ever to produce, distribute, and buy products, and that this freedom will transform customer behaviour:
As the costs of production and distribution fall, especially online, there is now less need to lump products and consumers into one-size-fits-all containers. In an era without the constraints of physical shelf space and other bottlenecks of distribution, narrowly-targeted goods and services can be as economically attractive as mainstream fare.
You can find everything out there on the Long Tail. There’s the back catalogue, older albums still fondly remembered by long-time fans or rediscovered by new ones. There are live tracks, B-sides, remixes, even (gasp) covers. There are niches by the thousands, genre within genre within genre.
Anderson’s book ‘The Long Tail’ became a blockbuster, and his theory became a key framework for understanding the impact of technology on the traditional marketplace. However, Anderson’s theory is not without its critics. Anita Elberse, a professor at Harvard Business School, has spent a decade studying the entertainment industry and how it’s changing in the online economy. In her book Blockbusters, she argues that for entertainment companies at least, the digital shift has only amplified the ‘star’ system already in place. Movie studios now succeed by sinking extra resources into a handful of super-hits, and the public responds by flocking to them. Blockbusters shows that this strategy has also worked for book publishers, music labels, TV networks, and video game companies. One of her central findings is that Chris Anderson’s long tail theory, hasn’t quite worked out as promised. Instead of producing a ‘long tail’ of modest successes, consumers respond to an overwhelming mass of products by drifting back to the biggest brands.
Blockbusters will become more – not less – relevant in the future. We may think we’ll use the Internet as a gateway to marvellous and obscure new music, books, movies, and so on – but to a significant extent, we’re really using it for a mass discussion of Miley Cyrus’s new number one hit. A blockbuster economy, it seems, is what happens when people get what they really want.
The internet gives consumers many more choices; just compare your local bookstore’s selection to Amazon’s. Nonetheless, when it comes to what most consumers actually buy and read, there’s little evidence that they are taking advantage of the immense variety out in that tail.
Music downloads provide a perfect example. From 2007 to 2011, the number of unique songs that sold at least one copy, largely through iTunes, grew rapidly from 3.9 million to 8 million. However, in 2011, nearly a third of those songs sold only one copy – a percentage that is increasing every year. In fact, 94% of the songs sold fewer than 100 copies. In 2007, 36 songs sold at least a million copies, but by 2011, more than a hundred songs sold that many. In other words, a mere 0.001 percent of the available songs was responsible for 15% of all sales. Spotify has 20 million tracks available, but one fifth (four million) have never been played.
Films and videos follow a similar trend. In 2010, for example, Warner Bros. put a third of its production budget and nearly a quarter of its marketing budget into just three of its 22 movies: “Harry Potter and the Deathly Hallows, Part 1”; “Inception”; and “Clash of the Titans.” It worked as these three generated more than 50% of the studio’s worldwide box-office. Do big movies succeed because they’re what we want, or because the studios invest lots of money in pushing them on us? Elberse found both factors at work, “success is a combination of supply and demand forces,” she says.
In summary, Elberse believes that economies of scale still brings marketing advantages. Producers and companies seeking spokespeople are better off betting on the A-list stars. Pepsi paying Beyonce $50 million for a multi-year “partnership” is, in fact, a safer bet than recruiting a less expensive B-level star. The tail is actually getting thinner and thinner. We’re now looking at more concentrated markets, where the winner takes all.
Reflection
To what extent does viewing activity on YouTube support the long-tail view of the entertainment industry or that proposed by Elberse?
Activity
Prepare a 1000 to 1500 word report, for submission to your teacher, on the impact of digital downloads on the entertainment industry.
