Chis is focusing on the time aspect of the long tail today, using his quantitative analysis background. All of the trend indicators pointing towards networked markets, all of the data is there on the servers of Google and Yahoo, been there for ten years. No economists have really looked at that data yet. "The Long Tail" evolved from what that data point towards. Background blah blah, you know the curve, etc. Economic shape of the 21st century will be a power law (exponential), as opposed to a bell curve. With limited shelf space, look at the left of the curve. Unlimited shelf space, look at the right. In a straight line analysis, income goes down with audience. Film box office dropped off the line when they ran out of screens. Scarcity in distribution killed movie revenues. Power law stopped the long tail from expanding naturally. The missing pattern in the trend is the missing market that's lost to lack of distribution. Slide focusing on songs available at Wal-Mart versus online store Rhapsody with unlimited shelf space that includes Wal-Mart's inventory. Sum of the infinite long tail represents 40 percent of the market. Sales outside of bricks are approaching half of the market, therefore. Trends are pervasive in Chris' economic analysis. I love Chris' analysis because it's so fundamentally reality-based!
Some narrow sellers are ones with an inherently small audience, some are old items finding new audiences. Chris now paints the long tail model in a 3-D model with long tails in a time-dimensioned model extending off of the main long tail curve, a keenly important point. It does help to drive the point home, though, and will probably provide a more accurate economic model.
Graph of a hit album's decay, straight line function, as factored by it's relative ranking in the charts. Niche album decays, but more slowly, fitting the model overall but coming off a lower point in Chris' 3-D model. Tap the old and the niche, there's gold.Taxonomies can restrict in the physical world - only so many shelf space. Google brings it to your attention. DVD Station is a burner kiosk with an online database, search for it and burn it on the spot. Hits sole less at first in this service, the tail provided more. The tail is more accessible in the physical world (wonder what food costs in Star Trek with the machine that generates food on demand - wonder what the menu hit rate would be.) But NOW DVD Station makes all of the same revenues from the tail PLUS a proportion of revenues similar to physical outlets for the popular materials. Boom.
DVD retail economics work for Wal-Mart because aging inventory becomes a loss leader to sell newer goods, can lower prices gradually as inventory ages. A Blockbuster video store has fewer options, no alternative revenue sources from high-ticket items.
Blockbuster vs. Netflix: people like older movies better, it's passed the test of time. Recommendation engines have churned, it's probably pretty good, beyond the distortion of advertising that may make it difficult to understand it it's really good or not. Blockbuster hit machine offers highest cost with lowest chance of satisfaction versus Netflix which offers lowest cost and highest satisfaction.
Google's time machine: 66 percent of Google search traffic is to posts more than one month old. Good old pages accumulate more links. We see this in our own site, where we have certain key pages that have enormous traffic proportionately based on key link referrals. BY CONTRAST, blogs have 61 percent of traffic in < 1 month, but the tail is growing.
Print and archives: Cost of holding builds up over time, economics are fundamentally bad. Versus near-zero cost of storage for digital media. Six facilities being built for print on demand (see Lightning Source), many Amazon titles are done print on demand already! Cost of returns is huge in book industry, stores are afraid of running out, so they over-order and then return. Print on demand allows that to be avoided.
Old TV shows: $4-6 DVDs, old cartoons and westerns, significant demand. It's now a channel to tap archives effectively. Gaming industry: A "time machine" that allows older game players to be emulated on a new platform, support retro gaming community.
Book coming out in July: "The Long Tail: Why the Future of Business is Selling Less of More."
Funny dynamic in book market: books go out of print but they don't go out of print from a consumer market perspective, but secondary market doesn't pay authors. Festival exception for film rights clearance, few have gone through rights clearance, hope that distributors will do it for you. Clearing rights is the elephant in the room, the big block to the long tail. Long tail of ad-driven publishers, no ad sales force. New big thing, about scaling down. Google scales down to advertisers who wouldn't have advertised otherwise. WKRP example, TV show about a radio station, almost impossible to clear rights to copyrighted SONGS in show, hence no revenues from syndication. Everyone wants to live the "hit" life, yet some artists give away music for free on MySpace to build grass-roots support that will convert to revenues. Gift economy will co-exist with the commercial economy, one dominated by copyright, another by creative commons.
Chris shows a raw spreadsheet on abundant market versus scarcity market. The long tail vendors have a lower but FLATTER curve: more equal distribution of revenues overall.
Question: How does this impact how you're going to market your book? Chris: It's not all about the 80/20 rule, more about the 50/50 rule. For the book, open sourced the research, argued that it makes for a better book, beta testing works for sites, why not books? Gives peer review exposure, allows corrections and improvements. Instead of "short head" of editor have gone to "long tail" of peer review, 2,000 people have reviewed, extremely valuable contributions. (In essence the audience becomes authors).
Great stuff Chris, as ususal.
