Comments on: Blockbusters stomp on the long tail, Harvard study finds

The "long tail" theory of Web economics made a big splash a few years back. New research suggests that the effect is probably overestimated.

[SVContrarian]

I'm not sure your logic holds when you're trying to displace a blockbuster. I'd argue the open source alternatives are addressing the tail of the market. SAP and Oracle are the blockbusters. The title says it all - prepare to get stomped.

[badasscat]

This would all be news to Netflix, who are - shock! - profitable specifically because of the long tail. Ditto for YouTube, and I mean, heck, you could extend it all the way to Google, who there wouldn't be a need for at all if all anybody cared about finding on the net were the top 1 or 2 sites in each category. We'd all still just be using Yahoo instead.

[topio]

badascall:

I would agree with your point but for different reason, Netflix is extremely profitable on the blockbuster side of their business and therefore is able to afford having a huge catalogue of titles that will rent hundreds of copies subsidized by the movies that rent a million or more copies.

If you read Chris Anderson's defense of his book "...the top 10% of titles (out of more than a million in that data sample) accounted for 78% of all plays, and the top 1% account for 32% of all plays."

This would Mean that even as the head of the tail grows even more concentrated and powerful the tail is becoming larger and larger, perhaps if mr Matt Asay had chosen
a less inflamatory heading for the article the main point would not be obscured.

The blockbusters will continue to be blockbusters but the tail of the market (the 22% of plays remaining after the top 10%) continues to grow, and if you take into account the ability of the internet to lower the cost of entry perhaps there is profitability to be had for the players on the lower end of the spectrum.

Taking into account the examples mentioned by matt if Alfresco , Openbravo and SugarCRM had the same cost structure as SAP or Microsoft they would be dead in less than 2 quarters, but the open source model allows them to not only survive but thrive on the 22% tail end of the market.

[topio]

badascall:

I would agree with your point but for different reason, Netflix is extremely profitable on the blockbuster side of their business and therefore is able to afford having a huge catalogue of titles that will rent hundreds of copies subsidized by the movies that rent a million or more copies.


If you read Chris Anderson's defense of his book "...the top 10% of titles (out of more than a million in that data sample) accounted for 78% of all plays, and the top 1% account for 32% of all plays."


This would Mean that even as the head of the tail grows even more concentrated and powerful the tail is becoming larger and larger, perhaps if mr Matt Asay had chosen
a less inflamatory heading for the article the main point would not be obscured.

The blockbusters will continue to be blockbusters but the tail of the market (the 22% of plays remaining after the top 10%) continues to grow, and if you take into account the ability of the internet to lower the cost of entry perhaps there is profitability to be had for the players on the lower end of the spectrum.


Taking into account the examples mentioned by matt if Alfresco , Openbravo and SugarCRM had the same cost structure as SAP or Microsoft they would be dead in less than 2 quarters, but the open source model allows them to not only survive but thrive on the 22% tail end of the market.

[topio]

badascall:

I would agree with your point but for different reason, Netflix is extremely profitable on the blockbuster side of their business and therefore is able to afford having a huge catalogue of titles that will rent hundreds of copies subsidized by the movies that rent a million or more copies.


If you read Chris Anderson's defense of his book "...the top 10% of titles (out of more than a million in that data sample) accounted for 78% of all plays, and the top 1% account for 32% of all plays."


This would Mean that even as the head of the tail grows even more concentrated and powerful the tail is becoming larger and larger, perhaps if mr Matt Asay had chosen
a less inflamatory heading for the article the main point would not be obscured.

The blockbusters will continue to be blockbusters but the tail of the market (the 22% of plays remaining after the top 10%) continues to grow, and if you take into account the ability of the internet to lower the cost of entry perhaps there is profitability to be had for the players on the lower end of the spectrum.


Taking into account the examples mentioned by matt if Alfresco , Openbravo and SugarCRM had the same cost structure as SAP or Microsoft they would be dead in less than 2 quarters, but the open source model allows them to not only survive but thrive on the 22% tail end of the market.

[Pete Bardo]

The top 10% is where the profits are, why would I go after the rest? The "long tail" strategy only really benefits the advertising networks--Google, Yahoo, etc. Any of you ave tried to buy those keywords? They turn out to be very expensive. So, not only are the returns few in number, the profit margins are very small or even negative! The long tail may have a rattle on the end, but it's hardly worthwhile pursuing it.

[jimmyed2000]

If you're only looking for money you are probably right Matt. It gets more interesting when you look for value instead. I consider all community contributions to be valuable, and there is a lot of value in the long tail for open source projects and open source companies.

[Earl Benzar]

Wait a second. The RIAA and MPAA are complaining that their sales are being hurt. These are the "blockbuster" producers, right? Something doesn't add up here. If the blockbuster is in ascedence, then how can these two industries be so damaged by the net?

I'm not convinced that the long tail is a dead model.

[bernardgolden]

Think this sees the strategic advantage of carrying the long tail incorrectly. Selling individual copies of obscure anything isn't that profitable, and even in aggregate probably isn't so profitable -- although the cost side of the equation is better for digital goods than physical goods.

However, in terms of "owning" the long tail provider positioning in the market, the strategy is very powerful, *even* if most of your sales comes from the short head. Being positioned in customers' or prospects' minds as "the place that has all the XYZ (movies to rent, books to buy, etc.) I might want" makes it more likely that I will use that provider as my default supplier of *all* XYZ, whether blockbuster or obscure.

Even more powerful as a incentive to use a supplier is easy on-line access combined with long tail supply. The ease and certainty in ordering something from a supplier that one knows will carry the desired XYZ trumps being pretty certain that one can find the desired XYZ at a local physical store. And, of course, on-line access and the corresponding ability to carry larger inventory (because you've got it all located at a giant warehouse somewhere in Nevada rather than multiple stores strewn throughout the US) are highly integrated pieces of the same strategy.

And *everyone*, no matter who they are, has a mix of mainstream blockbuster and long tail individual-desired XYZs in their likely purchasing mix, making a long tail offering more attractive, *even* if the amount of long tail XYZ purchases are relatively small.

I think Anderson overstated his thesis, but, let's face it, who's going to buy a book with a diffident theme rather than a "there's a new world out there" theme, especially from the editor of Wired!

So in sum, even if long tail profitability is rather small (and it's undoubtedly somewhere between the HBS article and Anderson's febrile vision), competitive advantage adheres to a market entrant that offers (and more importantly, owns) that market position (e.g., Amazon, Netflix).

[wmfischer]

After reader the Elberse piece, it's not clear to me that she even makes the case that all the profits are in blockbusters. She argues that blockbusters are really popular which is not the same thing at all and is really a rather banal argument.

A bestselling novel can be profitable for a publisher. But the likely candidates for bestsellers get bid up and publishers often guess poorly. Hence they often lose money on a blockbuster strategy. The same holds for movie studios. Netflix needs to provide ready access to new release "blockbusters" and their customers punish them if they are not readily available. This forces Netflix to eat a lot or margin on their new release business and is large reason why they focus of having great merchandising algorithms to push customers off of the new release wall. more thoughts at http://blog,workhound.co.uk

Bill
workhound.co.uk

[wmfischer]

After reader the Elberse piece, it's not clear to me that she even makes the case that all the profits are in blockbusters. She argues that blockbusters are really popular which is not the same thing at all and is really a rather banal argument.

A bestselling novel can be profitable for a publisher. But the likely candidates for bestsellers get bid up and publishers often guess poorly. Hence they often lose money on a blockbuster strategy. The same holds for movie studios. Netflix needs to provide ready access to new release "blockbusters" and their customers punish them if they are not readily available. This forces Netflix to eat a lot or margin on their new release business and is large reason why they focus of having great merchandising algorithms to push customers off of the new release wall. more thoughts at http://blog.workhound.co.uk


Bill
workhound.co.uk