The Long Tail by Chris Anderson - Highlights

The Long Tail:

• Given availability, a large number of obscure items can sell as well as a small number of popular items
• Due to limited physical space, retailers only carry content that can generate enough demand to pay off
• The solution was to only sell the hits

EXAMPLE:

1988: Joe Simpson writes Touching the Void & receives good reviews, but only modest success

1998: Jon Krakauer writes Into Thin Air, a publishing sensation

• Touching the Void suddenly starts to sell again
• Random House rushes a new edition to keep up with demand
• Book stores place it next to Into Thin Air
• IFC Films releases a docudrama of the story
• Touching the Void OUTSELLS Into Thin Air by more than 2:1

WHY? Amazon placed it on the suggested reading list

RHAPSODY:

• No physical limitation
• Not only are their top 100,000 tracks streamed at least once a month, so are their top 200,000, top 300,000 and top 400,000

“What percentage of the top 10,000 titles in any online media store (Netflix, iTunes, Amazon, or any other) will rent or sell at least once a month?”

• Most people guess 20 percent

• The 80-20 rule (Pareto’s Principle)
• Only 20 percent of major studio films will be hits.
• Same for TV shows, games, and mass-market books
• Major-label CDs - < 10% are profitable

• But the right answer is 99 percent, says Vann-Adibe

• The CEO of Ecast, a digital jukebox company

WALMART

• As egalitarian as Wal-Mart may seem, it is actually extraordinarily elitist.
• Must sell at least 100,000 CDs to cover overhead & make a sufficient profit

• Less than 1 percent of CDs do that kind of volume.

RULES OF THE LONG TAIL:

1. Make everything available

• Bring customers down the Long Tail by first creating it
• Netflix embraces niches

• Offers offbeat content which drives new customers
• Cuts the cost of customer acquisition which is key for a subscription company

• Netflix has, in effect, broken the tyranny of physical space

1. Cut the price in HALF… now lower it

• Pull consumers down the tail with lower prices
• Use a two- or three-tiered pricing structure to pull consumers down the tail with lower prices
• iTunes:

• New and popular songs (the hits) are usually around $1.29 per song
• Less popular and older songs are either .99 cents or .69 cents

1. Help me find it

• Use recommendations to drive demand down the Long Tail.
• “Great Long Tail businesses can then guide consumers further afield by following the contours of their likes and dislikes, easing their exploration of the unknown”
• Pandora does this with the thumbs up/thumbs down buttons and radio channels based on music by a similar artist, within a similar genre, etc.
• 60% of Netflix rentals come from recommendations based on browsing behavior

The success of the long tail comes from providing the hits and leading consumers to the obscure