Question: Should You Invest In The Long Tail? Answer: Not Really

by Lydia Loizides, Aug 15, 2008, 4:00 PM

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As many of you know, I have never been one to pay heed to the latest and greatest pop-business theories. So when I came across an article in the July/August Harvard Business Review, "Should You Invest in the Long Tail?" by Anita Elberse, I was very intrigued.

Elberse's findings indicate that, thankfully, "It would be imprudent for companies to upend traditional practice and focus on the demand for obscure products. The data show that it is difficult to profit from the long tail." (I may not know her, but I like the way she thinks!)

You see, as many in private circles have argued, the long tail is not applicable when examining profitability and content value. It appears that the commoditization of distribution channels -- from the shift to digital and the disproportionate increases in choice and product -- actually leads to further concentration of the "popular" or "hit" content. Elberse has proven that blockbusters prevail monetarily and are valued more by consumers. I won't give it all away here, but I would like to share the following data points that came out of her research.

1. About digital music sales: "When I differentiate between artists on smaller, independent labels and those on major labels, I find that the former gain some market share at the tail end of the curve as a result of the shift to digital markets. However, the advantage quickly disappears as we move up the curve: A more significant trend is that independent artists have actually lost share among the more popular titles to superstar artists on the major labels... Thus digital channels may be further strengthening the position of a select group of winners."

2. Recent sales data: "In my most recent correspondence with managers at Nielsen Soundscan, I learned that of the 3.9 million digital tracks sold in 2007 (the large majority for 99 cents each through Apple iTunes) an astonishing 24% sold only one copy, and 91% -- 3.6 million tracks -- sold fewer than 100 copies."

3. For advertisers: "When trying to strengthen your presence in digital channels, focus on marketing your most popular products." Suffice to say that for producers and distributors alike, the long tail may simply be a distraction away from the reality that is the content business: quality sells, the rest not so much.

I encourage you to invest the time to read the rest of the article -- your long-term success may depend on it.

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