The New Music Niche Markets : The Long Tail

"Forget squeezing millions from a few megahits at the top of the charts. The future of entertainment is in the millions of niche markets at the shallow end of the bitstream."

If you haven't read it in print, in the last issue of Wired magazine, get a copy. It's on page 170.

If you don't have the time to go and get a copy, surf off now to Wired.com and print this article out.

If you are a musician and can't find a way out to survival from the apparently too few opportunities made available by the mainstream recording business you need to read this article through.

If you are reading this on a piece of printed paper and have no computer nearby, no Internet connection and no traditional newstand to support this quest, here is why you MUST read this article by Chris Anderson, Wired's Editor in chief.

He writes:

"...most of us want more than just hits. Everyone's taste departs from the mainstream somewhere, and the more we explore alternatives, the more we're drawn to them. Unfortunately, in recent decades such alternatives have been pushed to the fringes by pumped-up marketing vehicles built to order by industries that desperately need them.

Hit-driven economics is a creation of an age without enough room to carry everything for everybody. Not enough shelf space for all the CDs, DVDs, and games produced. Not enough screens to show all the available movies. Not enough channels to broadcast all the TV programs, not enough radio waves to play all the music created, and not enough hours in the day to squeeze everything out through either of those sets of slots.

This is the world of scarcity. Now, with online distribution and retail, we are entering a world of abundance. And the differences are profound.

To see how, meet Robbie Vann-Adibé, the CEO of Ecast, a digital jukebox company whose barroom players offer more than 150,000 tracks - and some surprising usage statistics. He hints at them with a question that visitors invariably get wrong: "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-Adibé, 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.

....

To get a sense of our true taste, unfiltered by the economics of scarcity, look at Rhapsody, a subscription-based streaming music service (owned by RealNetworks) that currently offers more than 735,000 tracks.

Chart Rhapsody's monthly statistics and you get a "power law" demand curve that looks much like any record store's, with huge appeal for the top tracks, tailing off quickly for less popular ones. But a really interesting thing happens once you dig below the top 40,000 tracks, which is about the amount of the fluid inventory (the albums carried that will eventually be sold) of the average real-world record store. Here, the Wal-Marts of the world go to zero - either they don't carry any more CDs, or the few potential local takers for such fringy fare never find it or never even enter the store.

The Rhapsody demand, however, keeps going. 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.

This is the Long Tail.

You can find everything out there on the Long Tail. There's the back catalog, older albums still fondly remembered by longtime fans or rediscovered by new ones. There are live tracks, B-sides, remixes, even (gasp) covers. There are niches by the thousands, genre within genre within genre: Imagine an entire Tower Records devoted to '80s hair bands or ambient dub. There are foreign bands, once priced out of reach in the Import aisle, and obscure bands on even more obscure labels, many of which don't have the distribution clout to get into Tower at all.

...

When you think about it, most successful businesses on the Internet are about aggregating the Long Tail in one way or another.

Google, for instance, makes most of its money off small advertisers (the long tail of advertising), and eBay is mostly tail as well - niche and one-off products.

By overcoming the limitations of geography and scale, just as Rhapsody and Amazon have, Google and eBay have discovered new markets and expanded existing ones.

This is the power of the Long Tail. The companies at the vanguard of it are showing the way with three big lessons. Call them the new rules for the new entertainment economy.

Rule 1: Make everything available.

Rule 2: Cut the price in half. Now lower it.

Rule 3: Help me find it.

...

Rhapsody does this with a combination of human editors and genre guides. But Netflix, where 60 percent of rentals come from recommendations, and Amazon do this with collaborative filtering, which uses the browsing and purchasing 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.

For consumers, the improved signal-to-noise ratio that comes from following 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.

Such is the power of the Long Tail.

Its time has come."

Excerpted from "The Long Tail"
Wired
October 2004
by Chris Anderson
http://www.wired.com/wired/archive/12.10/tail.html

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