Wired ran an article by Chris Anderson 2 years ago (which subsequently spawned a book) about a phenomenon dubbed "The Long Tail". The phenomenon is effectively explained with an example from Rhapsody Online Music Service:
“Not only is every one of Rhapsody's top 100,000 tracks streamed at least once each month, the same is true for its top 200,000, top 300,000, and top 400,000. As fast as Rhapsody adds tracks to its library, those songs find an audience, even if it's just a few people a month, somewhere in the country.“
The idea is that somewhere out there, there are people who love the “misses” as much as the “hits” and are willing to pay for them whenever they are available, but in the current economic/distribution model, there is only room for mass marketed product, “For too long we've been suffering the tyranny of lowest-common-denominator fare…Why? Economics. Many of our assumptions about popular taste are actually artifacts of poor supply-and-demand matching - a market response to inefficient distribution”, writes Anderson.
The rise of online retailers and online versions of stores have reduced the problem of physical space to stock anything and everything. Now that the stores are massive warehouses spread throughout the country, there is no problem of lack of space. Music services like Itunes go them one better: they don’t even need warehouses, the merchandise is digital, there is no physical good to produce, ship, or stock. “Now, with online distribution and retail, we are entering a world of abundance…with no shelf space to pay for and, in the case of purely digital services, no manufacturing costs and hardly any distribution fees, a miss sold is just another sale, with the same margins as a hit. A hit and a miss are on equal economic footing, both just entries in a database called up on demand, both equally worthy of being carried. Suddenly, popularity no longer has a monopoly on profitability. If the 20th-century entertainment industry was about hits, the 21st will be equally about misses.”
Online stores do much of their business based on recommendations. “People who bought similar items also purchased….” on Amazon, recommendations on Netflix and so on. This helps pare down the endless choice available online and also allows people to discover various media that they never would have known about on their own, “a good recommendation encourages exploration and can reawaken a passion for music and film, potentially creating a far larger entertainment market overall…And the cultural benefit of all of this is much more diversity, reversing the blanding effects of a century of distribution scarcity and ending the tyranny of the hit.”
What are the implications of this model? Could the music industry go back to the days of relying on sales of singles over albums? In an article in article in Fortune back in August, Devin Leonard wrote about the death of record labels. Quoting David Kwatinetz of The Firm Management Group, "[Record labels] are in a death spiral. The record business will shortly be extinct. But the music business, the business of creating music, will not be - because people love music." Leonard writes, “Record sales became so profitable that the labels were willing to give up their revenue streams from ticket and T-shirt sales. That was great until Napster came along and CD sales plummeted.…now these same companies are so focused on making their quarterly results from album sales that they can no longer build long-term careers for their artists. The record companies are no longer so powerful, because artists have more ways to get their music to fans. In July, Thom Yorke, Radiohead's lead singer, released a solo album, "The Eraser," on an independent label. It was promoted on the homepage of iTunes Music Store and became the No. 2 record on the Billboard 200. Who needs a major label when you can do that?”
Is this democratization of media product going to be for the best? Or do we need a form of gatekeeper to separate the wheat from the chaff for us? It’ll be interesting to see how it all plays out in the coming years.
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