The internet has greatly expanded the choice in music and books. Yet the ever-increasing supply of content tailored to every taste seems not to have dented the appeal of the blockbuster going by the amount of money Avatar amassed on the first day.
This is not what was predicted by one of the most influential business books of the past few years. In “The Long Tail”, Chris Anderson argued that demand for media was moving inexorably from the head of the distribution curve to the tail. That is, the few products that sell a lot were losing market share to the great many that sell modestly. By cutting storage and distribution costs, the internet was overturning the tyranny of the shop shelf, which had limited consumers’ choices. And, by developing software that analysed and predicted consumers’ tastes, companies like Amazon were encouraging people to buy the lesser-knowns. Such companies did not just supply niche markets—they helped create them.
Anderson’s insight resonated instantly with the digerati. It is said that Helen of Troy’s face launched a thousand ships; the Long Tail theory certainly launched more than a thousand startups, all with an obligatory Long Tail slide in their investor pitches. However, there has been a creeping suspicion that the data don’t support the theory; the backlash has been spearheaded, among others, by WSJ.
A new study by Prof Anita Elberse of Harvard Business School raised questions about the validity of Anderson’s theory.In her piece, Anita Elberse did a deep dive into the data and concludes that the Long Tail theory is flawed.
Anderson has posted a rebuttal on his blog, pointing out a problem with Elberse’s analysis: defining the head and tail in percentage terms. There is some truth to Anderson’s rebuttal. But the heart of Elberse’s criticism lies not in the definition of the head and the tail. It’s in using McPhee’s theory of exposure to conclude that positive feedback effects reinforce the popularity of hits, while dooming items in the tail to perpetual obscurity. She presents data from Quickflix, an Australian movie rentals service showing that movies in the tail are rated on average lower than movies in the head. Thus, movies in the tail are destined to remain in the tail. Elberse exhorts media executives to concentrate their resources on backing a small set of potential blockbusters, rather than fritter it away on niches.
The big problem with this argument is that it conflates cause and effect. Before the internet, distribution was expensive, and there was no way for consumers to provide instant feedback on products. Consumers then got little choice in the matter of what items were readily available and what items were hard to find. Thus, the hits were picked by a few studio executives, publishers, or record producers who “greenlighted” projects they thought had hit potential. But when distribution is cheap, and consumer feedback loops are in place, the items that a lot of consumers like become popular and move into the head. It’s not that items in the tail are inherently rated lower; items are in the tail precisely because they are rated lower.
It’s as if we’re comparing two systems of government, a hereditary aristocracy and a democracy, by comparing the sizes of the ruling elite in the two cases. That misses the point entirely. What matters is not the size of the ruling elite, it’s how they got there. So, the big change wrought by the internet is not so much to change the shape of the demand curve for media products, as Anderson claims; nor has there been no change whatsoever, as Elberse posits. The big change is not in what fraction of the demand is in the head, it’s in how the items that are in the head got there in the first place. Any change in the shape of the curve itself is incidental.
There’s another market where we are seeing this phenomenon play out: the market for Facebook and specifically mobile apps. In earlier years, it took a lot of capital to get a company off the ground. The companies that got funded were the ones with good business plans who could convince VCs to take the plunge based on the people, the plan, and potentially some intellectual property. But it doesn’t take much capital to write a mobile app, leading to a proliferation of them. This paves the way for the expected inversion. Facebook users don’t use the apps that VCs fund. Instead, Facebook users decide which apps they like, and VCs fund the ones that gain popularity.
In recent years, study after study has shown that the Net’s unique impact on distribution of entertainment and media products has led to the rise of the long tail and, therefore, niche content. But increasingly it is also evident that in a market flush with options, consumers tend to flock around the familiar. So, the bestselling book, the blockbuster film, the top shows now get the same or larger audiences than they did a decade ago. This is medium agnostic — consumers want popular content online and offline.
The real Long Tail created by the internet is not the long tail of consumption, but the long tail of influence. Earlier, the ability to influence the decisions on who the winners and losers were rested with a few media executives. Now every social network user has some potential influence, however small, on the result. The long tail of influence, combined with instant feedback loops, leads to a short tail of consumption.
The app market is a leading indicator of the path the entire media industry will take in years to come.
WSJ’s rebuttal to the long tail theory: http://online.wsj.com/public/article/SB115387606762117314-Inp5lUxHwVDwS_SJv5zaQShPXlE_20070726.html
Prof Elberse’s counter-argument to the long tail: http://hbr.org/2008/07/should-you-invest-in-the-long-tail/ar/1