The relevance of the Long tail
In the current issue of the Harvard Business Review there is an interesting article that challenge the Long tail concept. This is fun times, great to see some data that actually tries to challenge such a widely acknowledged theory and a symbol in many ways for the digital industry.
The author, Anita Elberse, provides some interesting examples that the Blockbuster economy is not at all dead and actually might be even more evident in the digital industry compared to traditional business.
She uses the Australian Netflix clone Quickflix (DVD rentals) together with Rhapsody (Music) to provide data to her case. The Quickflix example highlights that even if customers have obscure preferences and are heavy consumers they still tend to buy most of their titles from the popular section. Have a look at the data chart below to see how.
Each vertical bar represents a decile of DVD popularity; DVDs in decile 10 are the most popular. Each bar is subdivided to show how, on average, customers who rent at least one DVD from within that decile distribute their rentals over all the deciles. Customers who shop in the bottom decile, for example, choose only 8% of their rentals from among its titles—and 34% from among top-decile titles.
She also concludes that the top 10% of DVD rentals at Quickflix accounts for 48% of all rentals, and the top 1% accounts for 18%. Given it a substantial focus on the head rather than the tail. From the Rhapsody data she concludes that an even larger share is concentrated to the head where 10% of all music titles accounted for 78% of all plays and the top 1% for 32% of all plays.
Chris Anderson has written a reply in a blog post to the article, where his main argument is the misconception of what we define as “head” and “tail”. His definition:
“Head” is the selection available in the largest bricks-and-mortar retailer in the market. “Tail” is everything else, most of which is only available online, where there is unlimited shelf space.
This definition generates quite different results. Making Rhapsody 32% of all plays in the “head” and 68% belonging to the “tail”. Based on that Wal-mart’s music inventory is 10 000 albums, i.e. 1% of the million tracks being offered through Rhapsody.
The same goes for Quickflix, where 70% (i.e. the top 3 000 titles equals to a Blockbuster store inventory) of the sales accounts from the “head” and 30% belongs to the “tail”.
The discussion of this is an interesting read. There are some problems with it though.
Firstly, case selection, Elberse should have tried to chose an american based company that is more widely known than Quickflix to get larger approval for her data. Especially when comparing it with the main American player, Netflix. Second, definitions, since Anderson coined the term he has a certain right to make the definitions on what makes the “head” and “tail” however that definition also creates problem for digital pure plays. When your competition is not coming from physical stores but from other digital players does the Long tail concept still has any relevance for your business?
Since everyone else is also offering infinite shelf space, has low marginal costs and acn cater to any audience, what is the releveance of the concept and isn’t it then about finding the customer profile in the tail or the head rather than comparing the business to a brick-and-mortar competitor?
For example iTunes vs. Amazon. iTunes have no competitive advantage over Amazon in terms of the long tail concept (there might be more songs on iTunes which could qualify as a competitive advantage but a very fragile one and with little sustainability). Instead it’s a level playing field (on the US market) where operational strategies makes the difference. Such as iTunes often provides independent labels with more marketing space than major labels or that Amazon provides a larger DRM free selection.
This would make the concept of the Long tail an argument for taking the business online but not an idea that helps when facing other digital pure plays with a similar DNA.
Bloggar.se: long tail, affärsutveckling, hbr, harvard, itunes, amazon, quickflix, rhapsody, musik, film, digitala varor
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