If you like geeking out over Pareto and Log normal distributions or gazing at linear curves on XY graphs, Andrew Orlowski has an exclusive over at The Register which is well worth the read and raises new questions about the validity of the "Long Tail" as a business strategy.
The Long Tail is a business and economic strategy first coined by Wired's Chris Anderson back in 2004 which suggests that producers can make a killing selling a large number of unique, hard-to-find items, but that each individual item itself is sold in relatively small quantities. Anderson later published a book about his theory called The Long Tail: Why the Future of Business is Selling Less of More (2006). The theory of "The Long Tail" has been evangelized by digital natives as a way to profit from the Internet.
As Orlowski highlights, economist Will Page and Mblox founder Andrew Bud analyzed the value of the "Tail" in digital music by producing a spreadsheet with an eye-popping 1.5 million rows of data. What they discovered is that instead of a Pareto curve (a graph where the values are plotted and arranged in descending order - think a blob on the left with a really long tail extending out to the right), sales of digital music follow a Log Normal distribution - and in this case one in which 80% of the digital music inventory sold no copies at all.
As Bud explained...
Now we've seen what happens when tens of millions of choices are thrown in the air and land on the floor...There are Tails where the Tail lives as a kind of welfare state. Not this one. You starve in this Tail.
Orlowski also points out that according to Bud's and Page's analysis, 80 percent of the revenue in digital music comes from about 52,000 songs - the typical inventory of a record store.
Why is this potentially significant? It may demonstrate that Internet consumers, and as importantly advertisers, are looking for high-quality content. User-generated content can be remarkably creative and engaging, but to date has been largely incompatible with product advertisers.
It's worth wondering if maybe that's why so many technology companies now seem to be in a mad-dash to cut entertainment deals with the producers of that high-quality content. MySpace Music for instance launched in October with the catalogs of the four major record labels and independent distributors. Ten days later it streamed its billionth song. YouTube and MGM just announced an agreement to show some advertising supported full-length television shows on the video sharing site.
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