The Long and Short of It

The Times Online had an interesting article which questioned the theory of Chris Anderson’s ‘long tail’ economics. Its conclusions are based on a new study by Will Page, chief economist of the MCPS-PRS Alliance, the not-for-profit royalty collection society. Page finds that more than 10 million of the 13 million tracks available on the internet failed to find a single buyer last year. 80 % of all revenue came from around 52,000 tracks and of the 1.23 million albums available, only 173,000 were ever bought, meaning 85 per cent did not sell a single copy all year. This would support the old 80/20 rule that states 80% of inventory only returns 20% of profit whilst 20% will return 80%. The conclusion long established in inventory and production management that you cut the 80% and focus on the 20% that makes money.

Chris Anderson in his book The Long Tail predicted that the internet economy would shift from a relatively small number of “hits” at the head of the market, toward a “huge number of niches in the tail” and in doing so question the 80/20 rule.

The issue is not who is right and who is wrong. as history will always be rewritten to fit the facts. The explosion of digital material is now skewing the debate. Once material is digitally available the operational cost is relatively small, but the value of the collection as a source of search, discovery and purchase, is huge. Would you buy from Amazon or ABE if they didn’t have the depth and range of titles available and all that differentiated them was price? Service also adds a value factor, but the range and availability of ‘stuff’ is often the initial draw. Why do people use Google search?

We would also suggest that the long tail may be cyclic in its appeal. As we replaced our CDs with MP3 and went to storing our collections digitally, we obviously trawled the tail and bought from it. However, when we have consolidated our collection, we revert back to more current material, which is bound to skew towards the old 80/20 rule. So we offer that there is an added dimension of time that needs to be considered and we would not expect that last year was one where the emphasis was on rebuilding the collection. If we are correct in our thinking then the real value of the tail may be seen as we shift from owning collections to now paying to play them by renting them online. This model has not happened yet, but we would expect a shift to occur more in the book world than the heavily converted music world as people realise that owning ebooks may not be as wise as renting them on demand.