Osprey Insights Osprey Events Osprey Opinion Osprey Blog

Executive Book Club

The Long Tail

The Long Tail: Why the Future of Business Is Selling Less of More
Author: Chris Anderson

A sea change has occurred in the marketplace and it’s affecting the way we do business. In his seminal book, “The Long Tail: Why the Future of Business Is Selling Less of More,” Chris Anderson, editor of Wired, describes the economic revolution triggered by the Internet and forces of globalization. The book has created a buzz that’s unlikely to subside soon.

Provocative and thoughtful, Anderson’s book contrasts the traditional, blockbuster-driven market with an emergent niche economy that’s driving the marketplace and reshaping our culture. It’s the free enterprise system on steroids.

“If the twentieth-century entertainment industry was about hits, the twenty-first will be equally about niches,” he explains. The entertainment business is only Anderson’s first case. His ubiquitous Long Tail phenomenon can be seen in books, film, music, media and advertising‹virtually every market community.

Anderson introduced us to the concept in his ‘04 Wired feature piece. Since then, he’s covered it through his popular blog, www.longtail.com. His idea crystallized after he glimpsed the monthly sales stats of the online music retailer, Rhapsody, with its inventory of over 1.5 million songs.

Anderson noticed that the number of times the thousand top-selling tracks were downloaded comprised less than one-hundredth of a per cent of the total. But demand for the remaining, lesser-selling titles seemed unbounded. When the relationship between inventory and volume is graphically illustrated, it resembles a long tail.

What he found remarkable is that almost every one of Rhapsody’s singles will sell at least something while old guard retailers, like Walmart, only have room to stock about 60,000 singles on their shelves.

“Not only is every one of Rhapsody’s top 60,000 tracks streamed at least once each month, but the same is true for its top 100,000, top 200,000, and top 400,000‹even its top 600,000, top 900,000, and beyond. As fast as Rhapsody adds tracks to its library, those songs find an audience, even if it’s just a handful of people every month, somewhere in the world. This is the Long Tail.”

In the Digital Age, the old 80/20 Rule becomes supplanted by the Long Tail principle. Put another way, a limitless bounty of products in low demand collectively accounts for a far greater portion of sales than a few top sellers. This marks the end of the blockbuster era and the beginning of “niche marketing”.

How did this come about? Technology now makes it feasible to both produce and distribute a vast number of titles. The Web has lowered the entry barrier for producing content while providing unlimited, “virtual” shelf space making it possible to feature a vast array of titles of music, books, film‹you name it.

Low-selling items collectively represent big numbers for retailers who can reach small, avid audiences. The winners are web-purveyors like Google, iTunes, Amazon, Netflix, and eBay, etc. The losers are traditional vendors who lack a digital strategy for delivering their wares to far-flung niche audiences.

The Long Tail extends to any type of media from news and opinion to advertising. Instead of being limited to a finite number of traditional media outlets, people can now consume their news from a growing variety of Internet-connected sources like RSS news feeds, podcasts, viral videos, and the blogosphere.

The Long Tail economy has set the business world on its ear. Democratizing the marketplace, at an atomic level, transforms us from being mere consumers to becoming a community of contributors. Open-source, peer-driven content brings diversity and arguably drives creativity. The Economy of Scarcity yields to a post-modern Economy of Abundance.

Since Anderson’s Wired article first appeared, “Long Tail” has become synonymous with an endless demand curve as well as the disruptive impact of user-generated content. The book’s popularity is likely to transform Anderson’s thesis into a lasting paradigm. In time, “Long Tail” will likely connote niches created by Web 2.0.

Anderson’s arguments are well-reasoned and illuminating. The Long Tail is both conclusive and reflective. One can’t help but step back and marvel at Amazon, the first company to capture the collective wisdom of customers on a grand scale while selling them more stuff in the process. Who will top that, and how?

» More Osprey Reports