Read this primer first: Following is an excerpt from Chris Anderson’s initial article in Wired Magazine. It suggests an entirely new economic model for the media and entertainment industries, one that is just beginning to show its power. This economic model challenges the Pareto Principle (aka 80/20 Rule)
“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 month?”
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.
But the right answer, says Vann-Adib鬠is 99 percent. There is demand for nearly every one of those top 10,000 tracks. He sees it in his own jukebox statistics; each month, thousands of people put in their dollars for songs that no traditional jukebox anywhere has ever carried.
People get Vann-Adib駳 question wrong because the answer is counterintuitive in two ways. The first is we forget that the 20 percent rule in the entertainment industry is about hits, not sales of any sort. We’re stuck in a hit-driven mindset - we think that if something isn’t a hit, it won’t make money and so won’t return the cost of its production. We assume, in other words, that only hits deserve to exist. But Vann-Adib鬠like executives at iTunes, Amazon, and Netflix, has discovered that the “misses” usually make money, too. And because there are so many more of them, that money can add up quickly to a huge new market.
I first heard Chris Anderson’s “long tail” theory about 18 months ago at a Salesforce.com conference where Anderson was the keynote. Since then I’ve been finding long tails all over the place.
Recently Anderson published a book of the same name which describes in detail ways that technology is turning mass markets into millions of niches. We’ve all been hearing these kinds of thoughts for years, but when you really stop to think about it, there’s somthing very important here.
Quick list Big ideas:
Hits aren’t as big as they used to be - the blockbuster, chart topping hits - Because it’s easier for people to create and easier for people to distribute and share digital files, people are finding more options, which makes the pie larger and the piece held by the hits smaller as a percentage of the overall market.
Give people more choices and people will take them - too much choice can be stressful, but given access to choice, people will always take it. As people make different choices, niches become visible, niches that have always been there, but now they’re visible - long tail success comes through providing FILTERS to help people sort out what they want.
Abundance vs. scarcity - The “Hit” culture extends to products on store shelves. We may not realize it, but our choice is limited in stores, and is replaced by convenience. See Paul Pilzer, “Unlimited Wealth” - scarcity thinking is engrained in our culture - struggle to make money by giving things away (BetaMax, Microsoft). Watch what happens when we start thinking abundantly.
We’re moving from passive consumers to active producers - and most “producers” are in it for recognition more than money - the Web wouldn’t be what it is today if this weren’t true. The money is in the head, the passion is in the tail, and the head’s getting smaller as a percentage of the overall market
Long tails everywhere:
At my work - Colts Long Tail (tyranny of locality) - It only takes 60,000 people to fill the stadium, but there are 5.8 million Americans who say the Colts are their favorite team. More than half of these fans live outside Indiana. Over 1 million uniques visit our Website (www.colts.com) each month and 75% of these are from out of state. Apparentely, you don’t have to live in Indy to be a Colts fan. (long tail of teams - fantasy) Fantasy football is another interesting phenomenon. There are 32 NFL teams. But what about the fantasy draft? If there are 1 million fantasy players that means at least 1 million teams (with avid fan base of 1). These players still have their allegiance to one of the 32 original teams, but may get more gratification week to week from their own fantasy squad. With fantasy they get direct rewards, they can impact the outcome, they can live vicariously and they can interact with others who share their passion for football and competition. Does this long tail have the power to make the head smaller? Or will it continue to grow?
At the polls - party system (impractical with long tail of issues) - imagine a nation of 270 million people trying to agree on anything! It’s no wonder we are finger pointing saying the “other party” is dividing America. Of course we’re divided. There are too many issues for any two parties to envelope them all satisfactorily so that all party members agree on all things. Politics, therefore, is about compromise, something the head does naturally but the tail resists. How can government get better by embracing the long tail?
At my church - We are a celebrity driven culture, but Jesus reminds us that each one of us is important to God. In fact, humility and service to others are more important that being popular. We are to be united, but we are also supposed to embrace and use the unique gifts God has given to each of us. Again, there may not be much money in the tail, but wouldn’t we all be happier if we listened to this advice?
