What percentage of the top 10,000 titles in any online media store (Netflix, iTunes, Amazon, or any other) will rent or sell at least once a quarter?
That’s the question posed by Robbie Vann-Adibe, the CEO of Ecast, a digital jukebox company, a question that launches Wired’s editor-in-chief, Chris Anderson, on his exploration of more consequences of the digital age for business.
Most people guess 20 percent, and for good reason: We’ve been trained to think that way. The 80-20 rule, also known as Pareto’s principle (after Vilfredo Pareto, an Italian economist who devised the concept in 1906), is all around us. Only 20 percent of major studio films will be hits. Same for TV shows, games, and mass-market books – 20 percent all. The odds are even worse for major-label CDs, where fewer than 10 percent are profitable, according to the Recording Industry Association of America.
Most people are wrong. The answer is 98 percent.
As my mom is wont to say, “It takes all kinds.” And indeed it does. Somebody, somewhere will want almost anything. (Even a blog about European issues.) When the marginal cost of adding, selling and delivering drops to practially zero, the true demand curve starts to emerge. And while hits still make a lot of money, their share of the total market drops because the total market is so much bigger than it was when it was confined to the shelves of the nearest retailer.
One of Anderson’s first anecdotes is the story of a book called Touching the Void by Joe Simpson. The book, by Anderson’s account, is a harrowing story of near death in the Peruvian Andes, and was published in 1988. It got good reviews, sold a reasonable number of copies, and was on its way to being out of print when a funny thing happened. Into Thin Air by Jon Krakauer became a publishing sensation. Amazon’s recommendation algorithms brought Touching the Void to people’s attention, and they bought. Random House brought out a revised edition, which in time landed on the bestseller lists. More than a decade after the book had been written.
This is something new about the new economy. Before Amazon, few people would have made the connection, and these would have had to scour used book stores for a copy of the out-of-print book. (The used book business has also been transformed by linking inventories online, and Anderson tells part of that story as well.)
Anderson’s key thesis is that the area under the demand curve out past what traditional retailers have carried is at least as large as what they do carry. In other words, there is a market for books that practically no store carries, and that market is as large as the entire bookselling market in stores. He doesn’t quite prove the case, but then again, the jury is still out, and he may well be right.
Much of the book was outlined in the original article of the same title in Wired. In fact, this was yet another case (“The End of History,” “The Clash of Civilizations”) where reading the article is probably better than reading the book. The book fleshes out the argument, adds more cases, more details and so forth, but did not, for me, break additional ground. (There is also a Long Tail blog, which has interesting discussion.)
The two most intriguing additions: First, practically any point on the demand curve is itself the head of a long tail. For example, a blog on European issues may be well down the curve in the scheme of Web sites that the general public visits. But that blog is potentially near the top of a curve of other blogs about European issues. Somewhere down that curve is a blog about Istrian items. And that Istrian blog itself is probably at the top of a curve of other Istrian blogs, subdividing into interests. There’s most likely a bottom somewhere, well before a Feynman point, where people are not blogging about Istria but going to an Istrian beach instead, but the idea stands: it’s a fractal curve.
Second, he asks how many categories have long tails. Is it just music, movies and books? Andserson says no and sketches five alternatives, each involving adding a digital component to a business that had been analog. This is a really interesting question, and I wish he had not waited until his penultimate chapter before addressing it.
I also wish, in general, that this was not a business book knocked out in about a year of his non-Wired-editing time. I wish it were a really hefty, weighty tome full of heavy-duty research. Maybe that book is out there in the long tail, or will be as soon as someone writes it…