The (Very) Thin Tail and Some Implications

1280px-long_tail-svg

Revenues (vertical axis) vs. Items for Sale

The “thin tail” or “long tail” when used in the online, digital realm, refers to the sales distribution of music, videos, books etc. and represents the phenomena that because the incremental costs of “stocking” a digital item such as a book or video is low (for all practical purposes essentially zero) that many items can be made available online that have relatively low sales.

Just how long and thin is the tail?

  • 2007: 91% of the 3.9 million digital music tracks sold fewer than 100 copies; 24% sold only 1 copy each;
  • By 2016: 96% of 9 million available tracks sold fewer than 100 copies; 40% sold only 1 copy each.
  • In 1997 the top 1% of theatrically released films took less than 10% of the total box office; the bottom 90% took about 50% of the revenues;
  • By 2016 the top 1% accounted for 26% of total revenues and the bottom 90% about 12%.

If you are a small business or a one-person operation, unless you hit the jackpot on the lottery of online sales and have one of the few blockbuster hits, your chances of earning enough money to make ends meet is harder than ever. However, there is hope and opportunity in this very long and thin tail.

First, the role of a trusted editor or “curator” (which is a bit of a buzzword at the moment) can become valuable to others because while the blockbusters are easy to spot, wading through the immense tail requires time or random luck. For consumers not wanting to leave it all to random chance, businesses that provide an edited list of hidden gems can become valuable.

Second, while the online channel provides a cheap way to market products or services, small or one-person shops should think in terms of scarcity for their offerings. One of the things your correspondent has noticed first hand is that the resurgence of vinyl record albums has lifted the prices of older, good condition records because, among other things, such records were often of higher quality (they knew how to press records back in the day whereas today, many records today are pressed in hastily assembled record plants staffed by people who may have never seen a record press before). Even among new records there is a definite price mark-up for records pressed at a very few, premier pressing plants. By definition capacity, and therefore availability, is limited.

Physical items that are in demand but scarce is one way to improve the revenues of people working in the long tail. Such scarcity is not just a marketing ploy but an outcome of the level of effort and expertise the item requires. The challenge is to pour that effort into something where the number of customers, or bidders, out weighs the number of items for sale.

Another way is to emphasize experiences that are time-limited. Musicians — other than the very few who sell blockbuster numbers of digital downloads and CDs, like Adele — now make the bulk of their money from live performances. Face-to-face, “high-touch” interaction can create the conditions where the demand can, given the right value proposition, outstrip supply.

Of course in some cases there is no long tail, at least, not for long: it is winner takes all. Smartphones and social media platforms are an example. Once there were several competing smartphone offerings, now there are only 2 or 3 and any one in the tail (hello BlackBerry) will soon depart or have departed.

 



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