Chris Anderson from Wired first postulated the “Long Tail” phenomenon back in October 2004 and it was updated again in Wired on 2006 Tiny slice, Big Market (the concept of a MegaNiche?)
The phrase The Long Tail (as a proper noun with capitalized letters) was first coined by Chris Anderson in an October 2004 Wired magazine article [1] to describe the niche strategy of certain business such as Amazon.com or Netflix. The distribution and inventory costs of those business allow them to realize significant profit out of selling small volumes of hard-to-find items to many customers, instead of only selling large volumes of a reduced number of popular items. The group of persons that buy the hard-to-find or "non-hit" items is the customer demographic called the Long Tail.
Given a large enough availability of choice and a large population of customers, and negligible stocking and distribution costs, the selection and buying pattern of the population results in a power law distribution curve, or Pareto distribution, instead of the expected normal distribution curve. This suggests that a market with a high freedom of choice will create a certain degree of inequality by favoring the upper 20% of the items ("hits" or "head") against the other 80% ("non-hits" or "long tail"). [2]
My take on a Long Tail
In essence one of the easiest analogies is the difference between a Music Store and an iTunes. A physical store has a finite limit on the amount of stock it can display on it’s shelves, so as a consequence of this limit it needs to stock and display the most popular music to ensure a decent turnover and revenue - whereas with an on-line store with little restriction on it’s stock (add more HDD’s?) and a very cheap and scalable distribution system (the internet) that the customer actually pays for can not only stock a huge amount of titles but it also needs to only hold one of each.
His latest missive was about the way everything on the Web is free… or getting there?
Everything get’s cheaper in digital format?
Essentially this distills down to the trend that once anything gravitates from physical to silicon/software it appears that there is an almost unstoppable force that will place the price of that commodity under a constant downward pressure due to what might be described as the “Economics of IT” and the way the cost accelerates downward under the sheer weight of scalability, it almost seems to be the nature of Technology?
Appendix at the bottom for example of how cheap hardware is getting
This can also be demonstrated very clearly with the news of Google’s new App Engine being released today? Google Jumps Head First Into Web Services With Google App Engine - It’s free for the first 10,000 developers who get in the door, and even though there are restrictions on its capabilities (at the moment) I think it’s all quite reasonable to expect that this will build from here and still be listed as Beta in a couple of years when it’s still free and got millions of users?
In an aside as to how Google manages to provide it’s service for free, I was recently chatting to a colleague, and he told me that Google don’t buy Servers or even Desktops – they just buy the motherboards and hang them in the racks – the maintenance cycle simply consists of a tech going around the Data Centre and replacing the failed systems once a week. Apparently they are looking at moving to newer DC supplied M/B’s so that it’s safer, but other than that it just keeps ticking. (Please let me know if this is correct? I’d consider this info to be anecdotal and not confirmed)
So from my perspective the one shining ray of light that shouts about being free is Music via MP3.
On the one hand, now that it has been absorbed in to Silicon (i.e. Digitized) the price is in an ever downwards spiral, and yet on the other hand it perfectly validates Chris’s Long Tail theory that people can still make money in fulfilling a niche demand?
This is also demonstrated somewhat by the more popular artists who have branched out beyond just providing the musical content and now diversified into clothes, designer accessories, perfumes, etc.
Video
The main issue looming on the horizon here is what is going to happen to the Motion Picture Industry (isn’t that a quaint way of phrasing it?) if they don’t pull their collective finger out? Just in case they haven’t been paying attention during the last decade we have moved from traditional TV (I’m not counting VCR’s) to Tivo for the US (1999) and Sky+ for the UK (2001) so that for most people who do enjoy TV they have had it on demand for some time now.
In some ways TV and Video have stagnated in development since the launch of these devices, I’m sure there will be folks carrying on about BluRay etc. but once the commodity has been digitized it’s game over – from that point on the ONLY medium that we all want to use is whatever we have to hand – iPod, PSP, Portable HDD, SD Card, iPhone, Laptop, etc. Who cares if you can or can’t burn it on to a plastic disk? What I’m trying to point out here is that once the product or service has been turned in to a string or stream of bits then the Studio has effectively given up control, and the sooner that they can understand this from the recent history of the Music Business the better off they will be.
There are other ways to make money from content, and clearly the biggest one going at the moment is advertising where we would appear to be in the midst of a titanic fundamental shift where advertising that was normally placed with traditional media is now moving steadfastly in the direction of the Wired World, be it YouTube, whatever. I seriously think the Studios have had a coffee or two and are up to speed on this, but at the moment they don’t see a way out and so they are watching the dwindling revenues and hoping for a miracle?
TV Shows and Movies
So what’s going to happen to Video? If we take it that we are now entering an age where Video is something that by default is now stored, transmitted and received in digital format it becomes pretty simple to hit the "Forward 30 secs" button and pass the Advertising completely - and this is what is scaring the pants of the Studio and TV execs.
After all this is the fundamental difference between Movies/PayTV and Free to air TV (FTA), the advertising segments on FTA broadcasts are what pays for the whole model, now if people are recording the TV series, episodes etc and retransmitting via bittorrent (with or without stripping the ads) to other folks then this is effectively curtailing the Broadcasters revenue stream?
My take on this (please feel free to comment if you disagree?) is that the Movie and TV players have always kept a keen eye on trying to make as much money out of the content as is possible, and rightly so in a free market economy, and this has been possible while the distribution system was tightly controlled by them. So Movies typically play to large cinema complex’s first (that presumably pay a premium to premier?), then a wider number of cinema and distribution houses, then DVD release, then DVD Rentals, TV Premiere’s and then finally TV reruns? And in this way they try to maximize the return on the original investment of making the content in the first place.
Now unfortunately this cosy state of affairs that was all very nice for the content creators but what they didn’t quite anticipate was that they had effectively "let the genie out of the bottle" when they decided to go along with changing over from VHS tapes to DVD’s, once this was agreed to and they had conceded to move from Analogue to Digital then this is the moment they lost control of the content. By 2000 the DeCCS code for the DVD was broken, the AACS for HD content was broken in early 2007, and since then the only real impediments to holding back the masses from going ahead and sharing this wildly across P2P sites has been the size of the files and the corresponding bandwidth as well as the threats of lawsuits from the Studios and TV Stations.
So once we started to get to around 2005/2006 and bandwidth was becoming a bit faster, XViD and DiVX codecs were becoming commonplace in consumer DVD players, DVD Recorders were getting cheaper and before you know it entire TV shows and full episodes were appearing on the internet within hours of them being aired in the US - now the Exec’s were really starting to get worried…
Advertising
So what are they going to do? I would say that the distribution system that we now take for granted for Audio (MP3 files) and Video (AVI files) via the internet is so efficient and personal that it is here to stay unless something better comes along - what they need to do do is stop thinking of how they can stop it, it’s like King Canute trying to stop the tide, it is nigh on impossible. I would think they are better off trying to follow the lead of what most people are turning their hands to on the Web and embrace the concept that once it’s turned digital and it’s in the silicon it’s as cheap as can be - but you get it with advertising!
The old model of advertising in video was to stop what the customer is watching and force them to watch something that you want to advertise but only for a short time and then go back to the original material that the customer wanted. Typically people would tend to ignore this, so advertisers manage to pack more sound effects in to "pump" the volume without the volume changing - we just muted the set. With modern technology it’s getting easier to bypass the advertising all together, and if you are watching recorded shows on a DVR you can just skip 3 minutes in a heart beat.
So it would appear to me that the old method of TV advertising is almost at it’s use by date anyway? I think what we will be seeing soon is ads that appear along the edge of the screen (left, right, top or bottom depending on the action?) during the actual program and these will be akin to the banner ads were are used to seeing on web pages.
One example of what this might look like is here: Overlay.tv Adds Links and Easter Eggs to Music Videos
The key to this will be getting ALL the TV signals being broadcast in digital otherwise it wouldn’t work, so there is still a window of opportunity on a number of fronts, so in the meantime you’ll have to keep trolling the bittorrent sites for the episodes of the show you *were* watching before the local station decided to move that show to a 3am time slot on Monday morning?
Appendix: Examples of Hardware costs from days gone by….
The Macintosh II, introduced in 1987 for US$5,500
http://arstechnica.com/articles/culture/total-share.ars/6
Try this for size, anyone with an iPhone has more power at their disposal than this server from 10 years ago:
The Hewlett-Packard NetServer E50 is a case in point. The unit I tested (street price: $2589) had a 333-MHz Pentium II CPU, 64MB of RAM, and a 4GB Wide Ultra SCSI hard drive; the 4GB SCSI tape backup is a nice enhancement. Like many bargain-basement desktop PCs, the E50 comes without a monitor. More important, it lacks an operating system:
http://www.pcworld.com/article/id,3992-page,3-c,servers/article.html
And…. that’s without a display or an O/S? now you can get the equivalent from AT&T…. 
Loading ...