Tails You Win, Heads You Lose?

Wired editor-in-chief Chris Anderson’s 2006 book “The Long Tail: Why the Future of Business Is Selling Less of More” posits a radical shift in the mass market. He says we are moving away from a market dominated hits to a market where niches will play a larger role. The title refers to a chart showing high sales on the left hand side of the demand curve which quickly tapers off into a long tail with lesser selling items on the right side. Anderson argues that because the tail is so long, the sales will rival the hits in sales potential.

He says the shift is facilitated by three factors made possible by the internet and digital technology. 1. Lowering barriers to production. This creates products to populate the tail. 2. Broadening distribution to make everything available, not just the hits; 3. Effective ways to help consumer find their way to products they want.

Anderson gave a catchy name to a business plan already widely successful at the time the book was published. He credits the concept of the long tail to Amazon’s Jeff Bezos and counterparts at Netflix and Rhapsody.

Anderson begins with the conversation he had with the CEO of a digital jukebox company. The CEO asks Anderson, what percentage of the 10,000 album inventory sells at least one track per quarter? Anderson first thinks 20%, based on the theory that generally 80% of sales come from 20% of the products – the 80/20 rule. The CEO says the actual number of cds selling at least one track per quarter is 98%. This is posited by the CEO as the 98% rule. Anderson used 98% rules as a chapter subtitle.

This is comparing apples and oranges. 98% of the albums could sell one track per quarter. And 80% of sales could still come from 20% of the albums. The observation has no bearing on “end of the hits” thesis. Anderson writes on p. 131 “I’ve described the Long Tail as the death of the 80/20 Rules, even though it’s actually nothing of the sort.” So why describe it that way in the first place?

Anderson employs the same bait and switch tactic by titling chapter two The Rise and Fall of the Hit and then on page 147 writing “Hits, like it or not are here to stay”. Anderson holds his idea right in front of our eyes so it looks big. Then as the book goes on he pulls the idea further away. From the new perspective we see it’s not so big after all. Given that The Long Tail was written for a mass audience we can forgive Anderson for shouting before introducing the nuances.

It faces a more serious challenge from Harvard Business School associate professor Anita Elberse. Elberse helped Anderson in his research for the Long Tail. Now she says her more recent analysis of sales demonstrates that hits are more important than ever.

For example in studying Rhapsody sales figures she found that the top 10% of titles accounted for 78% of all plays, and the top 1% of titles for 32% of all plays. This would suggest the blockbusters still rule.

Anderson has responded that using percentages misrepresents the true meaning of the head. He says the head should be defined as sales of the number of items found in a bricks and mortar retailer and the tail is defined as everything else. Anderson says The Long Tail is made possible by going beyond bricks and mortar so what is the relevance of this definition?

By defining the head as only the relatively limited selection available in a bricks and mortar store, Anderson artificially inflates the tail. Defining the head as the part of a graph where the hits reside and the tail as where a steep drop off occurs, creates more valid comparison.

Elberse makes this case and runs with it, arguing that in practical sales terms “a few winners still go a long way – probably even further than before” and “the tail is long and flat and content providers will find it hard to profit much from it”. It may be that way today, but we are still early in the on-line revolution.

But why must on-line retailers decide between allocating resources more toward blockbusters or more in the direction of niche products? Can’t they easily do both? On web sites employing a good search engine and social marketing (“people who like what you’re looking at also liked….) the cross-promotion to more obscure but related products is automatic. Once the on-line description has been written and properly indexed, the retailers’ work is done. The consumer can as easily look for the niche as they can look for the hit.

Beyond his economic points, Anderson argues that The Long Tail upends assumptions about mass culture. He argues “the primary effect of the Long Tail is to shift our taste toward niches…” and away from blockbusters. He sees in the numbers consumers yearning to be free of corporate blockbusters.

Elberse challenges the culture change notion citing her own sales figures from Australia’s version of Netflix, Quickflix. Her parsing of the numbers suggests there is no particular taste for the obscure. Most of the niche offerings are rented by customers who rent many videos, including hits. She presents her own theory that we gravitate to hits because it connects us socially.

Anderson is correct to question whether such an inference can be made from a snapshot of sales figures from one company down under. But I found neither argument persuasive. Both Anderson and Elberse use snapshots of data. In the rapidly changing marketplace we need trend data tracked over time.

In the meantime it is clear that sales are to be found in the Long Tail made possible by net economics of creating easy frictionless distribution and attractive ways for consumers to find products. But we knew that before Chris Anderson wrote “The Long Tail”.

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