The Long Tail Summary by Chris Anderson covers Why the Future of Business is Selling Less of More - and why you should accept that. by Chris Anderson .. non-hits on the Long Tail and youʼve got a market potentially as big as the hits. Take .. Check the “Display PDF in. PDF | Anderson () argues that e-commerce and other new technologies improve efficiency by encouraging the entry of new producers and.
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CHRIS ANDERSON Bob also edited the original Long Tail article, helping me re- vard Business School, Anita Elberse's work on the Long Tail of Netflix. Chris Anderson is the editor in chief of Wired magazine, for which he was Long Tail: Why the Future of Business Is Selling Less of More (Hyperion, ). The Long Tail. Slide 1. The Long Tail. The Long Tail, Chris Anderson, Wired , October Database Management, Spring The Long Tail. Slide 2.
The tail gets longer and longer because everyone can now produce content. The tail gets fatter and fatter because everyone can also distribute their content. If you want to save this summary for later, download the free PDF and read it whenever you want. A very fat, short head, which carries most of the revenue of a business in just a few products, for example, followed by a loooong, flat tail of mildly selling niche products. What Chris found out is that if you can offer a sufficiently large number of niche products, they can compete with the bestsellers.
Rule 1: Make everything available If you love documentaries, Blockbuster is not for you. Nor is any other video store—there are too many documentaries, and they sell too poorly to justify stocking more than a few dozen of them on physical shelves.
Instead, you'll want to join Netflix, which offers more than a thousand documentaries—because it can. Such profligacy is giving a boost to the documentary business; last year, Netflix accounted for half of all US rental revenue for Capturing the Friedmans, a documentary about a family destroyed by allegations of pedophilia. Hastings offered to handle the manufacturing and distribution if PBS would make it available as a Netflix exclusive.
Now Daughter From Danang consistently ranks in the top 15 on Netflix documentary charts. That amounts to a market of tens of thousands of documentary renters that did not otherwise exist. There are any number of equally attractive genres and subgenres neglected by the traditional DVD channels: foreign films, anime, independent movies, British television dramas, old American TV sitcoms. These underserved markets make up a big chunk of Netflix rentals.
Bollywood alone accounts for nearly , rentals each month. The availability of offbeat content drives new customers to Netflix—and anything that cuts the cost of customer acquisition is gold for a subscription business. Thus the company's first lesson: Embrace niches. Netflix has made a good business out of what's unprofitable fare in movie theaters and video rental shops because it can aggregate dispersed audiences. It doesn't matter if the several thousand people who rent Doctor Who episodes each month are in one city or spread, one per town, across the country—the economics are the same to Netflix.
It has, in short, broken the tyranny of physical space. What matters is not where customers are, or even how many of them are seeking a particular title, but only that some number of them exist, anywhere. As a result, almost anything is worth offering on the off chance it will find a downloader. This is the opposite of the way the entertainment industry now thinks.
Today, the decision about whether or when to release an old film on DVD is based on estimates of demand, availability of extras such as commentary and additional material, and marketing opportunities such as anniversaries, awards, and generational windows Disney briefly rereleases its classics every 10 years or so as a new wave of kids come of age.
It's a high bar, which is why only a fraction of movies ever made are available on DVD. That model may make sense for the true classics, but it's way too much fuss for everything else. The Long Tail approach, by contrast, is to simply dump huge chunks of the archive onto bare-bones DVDs, without any extras or marketing. Call it the Silver Series and charge half the price.
Same for independent films. This year, nearly 6, movies were submitted to the Sundance Film Festival. Of those, were accepted, and just two dozen have been picked up for distribution; to see the others, you had to be there. In a Long Tail economy, it's more expensive to evaluate than to release.
Just do it! The same is true for the music industry. It should be securing the rights to release all the titles in all the back catalogs as quickly as it can—thoughtlessly, automatically, and at industrial scale. This is one of those rare moments where the world needs more lawyers, not fewer.
So too for videogames. Retro gaming, including simulators of classic game consoles that run on modern PCs, is a growing phenomenon driven by the nostalgia of the first joystick generation.
Game publishers could release every title as a cent download three years after its release—no support, no guarantees, no packaging.
All this, of course, applies equally to books. Already, we're seeing a blurring of the line between in and out of print. site and other networks of used booksellers have made it almost as easy to find and download a second-hand book as it is a new one. By divorcing bookselling from geography, these networks create a liquid market at low volume, dramatically increasing both their own business and the overall demand for used books.
Combine that with the rapidly dropping costs of print-on-demand technologies and it's clear why any book should always be available. Indeed, it is a fair bet that children today will grow up never knowing the meaning of out of print. Rule 2: Cut the price in half. Now lower it. Thanks to the success of Apple's iTunes, we now have a standard price for a downloaded track: 99 cents.
But is it the right one? Ask the labels and they'll tell you it's too low: Even though 99 cents per track works out to about the same price as a CD, most consumers just download a track or two from an album online, rather than the full CD.
In effect, online music has seen a return to the singles-driven business of the s. Ask consumers, on the other hand, and they'll tell you that 99 cents is too high.
It is, for starters, 99 cents more than Kazaa. But piracy aside, 99 cents violates our innate sense of economic justice: If it clearly costs less for a record label to deliver a song online, with no packaging, manufacturing, distribution, or shelf space overheads, why shouldn't the price be less, too? Surprisingly enough, there's been little good economic analysis on what the right price for online music should be.
The main reason for this is that pricing isn't set by the market today but by the record label demi-cartel. Record companies charge a wholesale price of around 65 cents per track, leaving little room for price experimentation by the retailers.
That wholesale price is set to roughly match the price of CDs, to avoid dreaded "channel conflict. In either case, it would be a serious disruption of the status quo, which terrifies the already spooked record companies. No wonder they're doing price calculations with an eye on the downsides in their traditional CD business rather than the upside in their new online business.
But what if the record labels stopped playing defense? A brave new look at the economics of music would calculate what it really costs to simply put a song on an iTunes server and adjust pricing accordingly. The results are surprising. Take away the unnecessary costs of the retail channel—CD manufacturing, distribution, and retail overheads.
That leaves the costs of finding, making, and marketing music. Keep them as they are, to ensure that the people on the creative and label side of the business make as much as they currently do.
Add to that the actual cost of delivering music online, which is mostly the cost of building and maintaining the online service rather than the negligible storage and bandwidth costs. Current price tag: around 17 cents a track. By this calculation, hit music is overpriced by 25 percent online—it should cost just 79 cents a track, reflecting the savings of digital delivery.
Putting channel conflict aside for the moment, if the incremental cost of making content that was originally produced for physical distribution available online is low, the price should be, too.
Price according to digital costs, not physical ones. All this good news for consumers doesn't have to hurt the industry. When you lower prices, people tend to download more. Last year, Rhapsody did an experiment in elastic demand that suggested it could be a lot more. For a brief period, the service offered tracks at 99 cents, 79 cents, and 49 cents.
Although the cent tracks were only half the price of the cent tracks, Rhapsody sold three times as many of them. Since the record companies still charged 65 cents a track—and Rhapsody paid another 8 cents per track to the copyright-holding publishers—Rhapsody lost money on that experiment but, as the old joke goes, made it up in volume. Yet much of the content on the Long Tail is older material that has already made back its money or been written off for failing to do so : music from bands that had little record company investment and was thus cheap to make, or live recordings, remixes, and other material that came at low cost.
Such "misses" cost less to make available than hits, so why not charge even less for them? Imagine if prices declined the further you went down the Tail, with popularity the market effectively dictating pricing. All it would take is for the labels to lower the wholesale price for the vast majority of their content not in heavy rotation; even a two- or three-tiered pricing structure could work wonders.
And because so much of that content is not available in record stores, the risk of channel conflict is greatly diminished. The lesson: Pull consumers down the tail with lower prices. How low should the labels go? The answer comes by examining the psychology of the music consumer.
The choice facing fans is not how many songs to download from iTunes and Rhapsody, but how many songs to download rather than download for free from Kazaa and other peer-to-peer networks. Intuitively, consumers know that free music is not really free: Aside from any legal risks, it's a time-consuming hassle to build a collection that way.
Labeling is inconsistent, quality varies, and an estimated 30 percent of tracks are defective in one way or another. As Steve Jobs put it at the iTunes Music Store launch, you may save a little money downloading from Kazaa, but "you're working for under minimum wage. So free has a cost: the psychological value of convenience. This is the "not worth it" moment where the wallet opens. The exact amount is an impossible calculus involving the bank balance of the average college student multiplied by their available free time.
But imagine that for music, at least, it's around 20 cents a track. That, in effect, is the dividing line between the commercial world of the Long Tail and the underground. Both worlds will continue to exist in parallel, but it's crucial for Long Tail thinkers to exploit the opportunities between 20 and 99 cents to maximize their share. By offering fair pricing, ease of use, and consistent quality, you can compete with free.
Perhaps the best way to do that is to stop charging for individual tracks at all. Danny Stein, whose private equity firm owns eMusic, thinks the future of the business is to move away from the ownership model entirely. With ubiquitous broadband, both wired and wireless, more consumers will turn to the celestial jukebox of music services that offer every track ever made, playable on demand.
Some of those tracks will be free to listeners and advertising-supported, like radio. Others, like eMusic and Rhapsody, will be subscription services. Today, digital music economics are dominated by the iPod, with its notion of a paid-up library of personal tracks. And drive another nail in the coffin of the retail music model.
Rule 3: Help me find it In , an entrepreneur named Michael Robertson started what looked like a classic Long Tail business. Called MP3. The idea was the service would bypass the record labels, allowing artists to connect directly to listeners. The tyranny of the labels would be broken, and a thousand flowers would bloom. Putting aside the fact that many people actually used the service to illegally upload and share commercial tracks, leading the labels to sue MP3.
Struggling bands did not, as a rule, find new audiences, and independent music was not transformed. Indeed, MP3. The problem with MP3. It didn't have license agreements with the labels to offer mainstream fare or much popular commercial music at all.
Therefore, there was no familiar point of entry for consumers, no known quantity from which further exploring could begin. Offering only hits is no better. Think of the struggling video-on-demand services of the cable companies. Or think of Movielink, the feeble video download service run by the studios. Due to overcontrolling providers and high costs, they suffer from limited content: in most cases just a few hundred recent releases. There's not enough choice to change consumer behavior, to become a real force in the entertainment economy.
By contrast, the success of Netflix, site, and the commercial music services shows that you need both ends of the curve. Their huge libraries of less-mainstream fare set them apart, but hits still matter in attracting consumers in the first place. Great Long Tail businesses can then guide consumers further afield by following the contours of their likes and dislikes, easing their exploration of the unknown.
For instance, the front screen of Rhapsody features Britney Spears, unsurprisingly. Next to the listings of her work is a box of "similar artists.
If you click on that and are pleased with what you hear, you may do the same for Pink's similar artists, which include No Doubt.
And on No Doubt's page, the list includes a few "followers" and "influencers," the last of which includes the Selecter, a s ska band from Coventry, England. In three clicks, Rhapsody may have enticed a Britney Spears fan to try an album that can hardly be found in a record store.
Rhapsody does this with a combination of human editors and genre guides. But Netflix, where 60 percent of rentals come from recommendations, and site do this with collaborative filtering, which uses the browsing and downloading patterns of users to guide those who follow them "Customers who bought this also bought In each, the aim is the same: Use recommendations to drive demand down the Long Tail.
This is the difference between push and pull, between broadcast and personalized taste. Long Tail business can treat consumers as individuals, offering mass customization as an alternative to mass-market fare. The advantages are spread widely. For the entertainment industry itself, recommendations are a remarkably efficient form of marketing, allowing smaller films and less-mainstream music to find an audience. If that process were carried otherwise, the effect would not have been the same.
The fast tempo and advanced technology have produced the Internet era. The audience now has new needs in accordance with the environment we live in.
New broad tools are available that can be used to conduct the same service as in the 80s. The conventional tv-shows and radio programs now become secondary, or to put it differently — replaced by a wide range of other possibilities like DVDs, Websites, Video Games, iPods, mp3, etc. According to many, that marked the beginning of a new social era , which brought a set of opportunities that came at a price. Online marketing is not a straightforward matter due to thousands of variabilities and alternatives.
Digitalization and technology meet on solid grounds despite the current fluctuations that shape the worldly economy. The extensive research on the subject conducted by Anderson generates much more than simple numbers. This steam, allows the products to achieve immortality — referring to a longer lifespan. The longevity is only a fantasy for the shelf products, regardless of how hard these manufacturers work in order to improve their durability.
Even blockbuster commodities are a part of the same short-term process. Anderson is highly skilled to talk about the out-of-box mentality by which he clarifies the decline in box office sales worldwide and the constant increase of niche firms. Each section conveys a unique message, backed by facts and information drawn from reliable sources. Move side by side with technology 2. The substitute era 3. The power of democratization and digitalization. Welcome to the New Online World, where niche downloaders pay extra attention to digital products rather than those old-fashioned tangible commodities.
Megabytes are the perfect substitute for mega-buildings — giving birth to something new. Nowadays, almost anyone with access to computer and internet can become a published author, celebrity, or businessman. Undoubtedly, the Internet has the pivotal role in eliminating all the barriers that used to exist.
These obstacles served as blockades for companies especially new ones to reach new heights. Like this summary? The book is written for one purpose — to enable any reader that lacks expertise in understanding products to quickly grasp the material.
There is no shortage of high-quality examples, able to drive this point even further. Chris Anderson, editor-in-chief of Wired magazine, coined the term Long Tail in an article that became a reference for anyone who wanted to understand the new consumer relationships in pervasive digital media times. We live in an era of great opportunities for innovation where products are launched each year. However, most of them fail and, most of the time, waste time and money spent building a product that consumers do not want or need.
While on the other hand, the consumer market has always been a hit industry where a product needed millions of units sold to be considered a success, but with the advent of the internet, the dynamics of hits has entered a long and steady decline.
Most are inclined to think of blockbuster movies or best sellers when they are going to develop new products for profits. Imagine the following example: If you are a bookstore, what sells most?
A single best seller or hundreds of niche books? The long tail model proves that it is possible to survive in the new economy without depending on big hits. When Jeff Bezos created the company, he realized that on the internet it was much easier to offer a colossal volume of options to his customers and that niche books were extremely lucrative. In the online market, a niche product sold is as valuable as a hit.
According to Chris Anderson, there is a demand curve established in any sector: While the hits are the head of the curve, the niche products, with lower demand, represent the long tail, the tail of the curve. Anderson states in his book, and proves with clear arguments, that meeting the various specific needs of several well-defined niche markets can bring even more success to a company than trying to attract the largest possible audience with big sellers.
With endless catalogs, consumers reveal what they want. The more things they find, the more they discover their tastes and preferences are not as mainstream as previously imagined.
If mass media and our hits-obsessed culture have influenced them , the more choices they make, the more they are surprised by their tastes. But all this is something new, and in the past, there have always been artificial limitations that prevented infinite catalogs. In the retail market, products are most often stored directly on site, and this impedes diversity of stock. For a CD to be in a record store, for example, the store needs to be able to sell four copies of it a year, and because it is a local business, it is stuck with its neighborhood preferences to have demand for a product.
Traditional retailers have to cut their product catalog for space constraints and also preferences for that location.
Physics laws are also a restriction. The number of available radio and TV frequencies limits the number of stations a city can have, for example. Each of these stations also has a limited show inventory.
So the focus on hits is understandable, in a world of scarcity. All individuals have particular and non-popular preferences, and the scarcity market does not meet these demands.
In every market, there are more niche products than hits and the cost to reach these niches has dropped dramatically over time.
Today, it has become possible to offer a much larger portfolio of goods.
On the other hand, potential consumers need help finding these niche products given the sheer volume of options. This help comes through the filters. Filters can be online search tools, social networks, user reviews that have bought those products, and are essential to help consumers discover new products. When the variety of goods expands, and the filters come into play, hits become less attractive, and the niches add up.
There are so many niche products that, combined, can rival the hits. As a result, the natural demand curve is revealed, without the scarcity determined by the context and bottlenecks of the past. The biggest enhancer of the Long Tail is the reduction of the cost to reach a niche.
And for this to happen, some forces must take action:. The personal computer is, without doubt, the best example.
It allows people to have access to technology that previously only professional musicians and filmmakers had access. Consumption costs have to be reduced to democratize distribution.
The internet, for example, allows people to reach out to others without having to make significant investments. Supply and demand need to be connected. Consumers need to discover the new products available in the market for the system to work. The relationship between supply and demand is based on the amount of content that is available at any given time.
The more content released on the market, the longer the tail will be. The explosion of personal computing through computers and smartphones in the last few decades has made people capable of producing their music, writing their own books, and even making their movies. The emergence of communities like Youtube and Myspace created a new audience in search of content targeted to their tastes and a multitude of new creators, who supplied this demand. These communities, as well as pervasive technology, have significantly reduced the costs of content creation and this has made people produce more.
Before, to create a song you needed to rent a studio, hire a producer, musicians and download instruments. Today, just a few software in some cases even free are required for you to put your music available in MP3 on the web. The fact that production costs have fallen so much that even often people do not have the revenue generation as the primary objective to create.
The new model allows individuals to create new things by experimentation, curiosity, influence, and fun. This new paradigm creates voices that were not heard before. If the encyclopedia Britannica employed thousands of researchers to build its content and had hundreds of thousands of entries, in the digital world, the rules changed.
At Wikipedia, without hiring a full-time scientist or researcher, thousands of amateurs created millions of entries.