The Long Tail and My Long Rant

If you follow any tech blog you would no doubt have heard of the term “The Long Tail” before. It’s not an entirely new concept but it’s gaining more and more media coverage in recent years due to the success that first-generation “long tailers” such as Amazon and Google are enjoying.

The Long Tail is a book by Chris Anderson, editor of Wired and the person who first coined the phrase, that explores how the theory can be applied in so many different aspects of the world today, from YouTube to retail marketing.

Before we move on to my thoughts, I shall explain the concept of a Long Tail. Here’s a primitive graph I drew with the pen tool in Photoshop that shows the relationship of sales with respect to popularity of products.

Figure 1

Popularity is sorted by rankings, with the most popular starting with “1” on the left. As you can see from Figure 1, the most popular items sell significantly better than the less popular items. (Well, duh!)

The area shaded yellow in Figure 1 contains products that a brick-and-mortar retailer will stock. It makes sense to stock only the most popular items so as to maximize profit. CD shops can only stock a limited number of titles because they have a limited amount of display space. Cinemas can only screen the latest Hollywood hits because old and independent films do not get enough audience to pay for the limited number of screens and timeslots.

But what if an online service like RealOne’s Rhapsody can offer as many songs as they can license, all at the same time? We’ll get a graph that looks like this:

Figure 2

It’s still the same graph, just extended further. Online retailers are not restricted by the traditional retail bottlenecks. Having 100 million songs costs only slightly more than having 1 million songs in a digital library, and digital storage is only going to get cheaper.

When online retailers increase the variety of products they offer, they notice an interesting trend: the popular items still sell better, but even the least popular item sells at least a few units.

In traditional retail, an item needs to sell a predetermined amount per time period or else it will be unprofitable due to the overhead costs of maintenance and the potential revenue you are sacrificing by giving shelf space to a less popular item.

In online retail, it doesn’t matter. An item is profitable as long as it sells one or two copies. The cost of maintaining a huge catalogue online is so low that the cost of including more items in your offerings is virtually zero. You don’t have limited shelf space, you don’t need to hire more workers to maintain a bigger shop and you don’t need a bigger warehouse. Hard disks are getting cheaper by the second.

When you have such an enormous catalogue, the items at the bottom of the popularity list are really unpopular, to the point of selling one copy every year perhaps. But even then, you still make a profit off it because it costs you nothing to offer the product. For every day a CD sits unsold on your physical shelves, it lowers your overall profit margin. But a 10 megabyte song left unsold in your terabyte-size music catalogue costs you nothing to offer. In fact, when it does sell, even if it’s just one single download, you automatically make a profit off it.

The idea of the Long Tail is that instead of making millions of dollars for each item near the top of the popularity rankings, you can make one dollar each from a million items at the bottom of list, something that was not possible before the Internet due to the bottlenecks associated with physical retail.

Tyranny of the Mediocre

The area that is most affected by the Long Tail revolution is the entertainment industry. In the days before the Internet and even now, Hollywood’s business formula has always been to create mass-appealing works. These are not the best movies in any sense of the word, but they appeal to the lowest common denominator. Everyone watches Hollywood movies not because they are that person’s favourite movies but because those are the only movies available.

Each Hollywood movie must sell a set number of tickets or it will be unprofitable and therefore a failure, therefore each movie was created with the Average Joe in mind. If you are a film critic seeking higher forms of artistic expressions, well too bad for you because you aren’t part of the majority and therefore insignificant in terms of overall profits. Independent films may be better in terms of artistic merits, levels of creativity or entertainment value, but they will never capture enough of the average audience to find a place in the cinemas.

Let’s face it, everyone has different tastes. A movie that I think is the best movie in the world may not be so for 90% of the world. People differ so much that it’s simply easier and more profitable for Hollywood to create one single mediocre movie that appeals equally to everyone instead of a million extraordinary movies that each appeals greatly to one or two person. When the only movies available to the average consumer are Hollywood movies, he or she will end up watching Hollywood movies, simply because there is no other choice. It is the tyranny of mediocrity.

Internet is changing all that. A video that involves in-jokes about a specific interest such as anime can get a few thousand hits on YouTube. To an anime fan, that video targeted at people who share the same interests as him can be a whole lot more meaningful than a Hollywood movie targeted at no one in particular. To him, that video might just be the best video in the world, even though it’s FAAAAR from a Hollywood movie in terms of popularity.

But there are millions of little videos just like this, targeted at millions of differing interests shared by millions of different communities. Each video, viewed by only a few to a few thousand people, is just a small part of the Long Tail, but together that Long Tail reaches a larger audience than the biggest Hollywood movies. Such a long tail cannot survive in the traditional market because distribution used to be limited by physical distances.

If there are only ten fans of Movie Y in the whole of Country X, then there’s no point for a shop to stock Movie Y DVDs because the potential customers are too few and too dispersed for the shop to make a profit off it. However on the Internet, all the tens of fans of each country are connected to one another by near-instant digital communication. An online retailer can sell 10 DVDs of Movie Y to 10 fans from each country and still make a profit off it, even if less than 0.00000001% of the world has even heard of Movie Y.

And if the movie is stored and sold digitally, then it costs next to nothing for the store to stock it. And since in such a system an independent film costs just as much to distribute as a Hollywood movie, there is no reason not to offer both. The Hollywood movie will still sell a few thousand times more copies, but there is no reason not earn a little more profit by offering an independent film too, or any movies you can get your hands on for that matter. Unlike running a cinema, selling an independent film online is not depriving you of a chance to sell ANOTHER Hollywood movie and thus earn more profit. You can afford to stock and sell them all.

And when you offer more choices, people will choose them. An estimated 40% of Amazon’s profits come from books that even the largest brick-and-mortar book stores in the world cannot afford to stock simply because they are too far into the Long Tail. Of the tens of thousands of CDs released every year, a CD store can probably afford to stock only a few hundred of the most popular titles, but ALL of them can be purchased online. And people do buy them. The untapped potential of the Long Tail that stretches to infinity is just beginning to show itself.

The Long Tail is NOT Junk

It is a common misconception for people to think that the the Long Tail consists of nothing but junk and those items are unpopular because they are bad. That is probably true for some of them, but the reality is that the Long Tail consists of both ends of the spectrum. For example, compare a 4″ portable TV, a 32″ TV and a 60″ plasma TV. Which one is going to accumulate the highest number of sales?

My bet is on the 32″ LCD. The 4″ and 60″ do not sell as well not because they are bad or useless but because they have more specific targets. Not everything in the Long Tail is bad, just niche.

Beyond Retail

The Long Tail is not just an economic theory, its social implications are also far-reaching.

So… what has this theory got to do with you, a reader of my little blog? Well the truth is that by reading this blog, you are part of a Long Tail: The Long Tail of Blogs.

There used to be a few publications read by millions of people each, now there are millions of blogs read by a few people each. My blog is one of them. The Chris Anderson calls this the “democratization” of mass media and I agree.

It doesn’t matter whether you think that those millions of blogs are worthless compared to professionally made publications. A majority of them are probably trash if you judge them by journalistic merits, that is the truth. But at the same time, those blogs hold unique meanings to their readers that a publication targeted at the masses can never hope to achieve.

A blog about anime is a lot more meaningful to me than an entertainment magazine that occasionally has one page on anime. A blog about Gundam is a lot more meaningful to a Gundam fan than an anime magazine that occasionally has some articles about Gundam. There is no such thing as a niche too small for the Internet.

Indeed, anime itself is part of the Long Tail niche and it received a huge boost from the Internet. Before the Internet, only the most mainstream of anime can hope to ever reach an audience beyond Japan. People did not watch anime simply because they were never given a chance to try it. With the Internet, people are now given to chance (albeit illegally) to watch anime that they would never have otherwise watched and more and more of them find that they like it. Anime is still a niche compared to mainstream entertainment, but now it’s a profitable one for American companies.

In Other Words…

In traditional media, things that are mainstream (popular) are given more airtime, more shelf space, more advertisements and more of everything simply because they are deemed to be more likely to succeed. And if they do eventually succeed, they become even more mainstream. Similarly, things that are niche are not given any attention by the media distributors and these things can never hope to raise out of their niche status.

With the Internet, everything is given equal opportunity to succeed and you find that surprisingly some things that were classified as niche do a lot better than expected.

A really good Hollywood movie and a really good anime movie both cost nothing to download from BitTorrent. A person who has never watched these two movies can download them both with equal ease and, after viewing them, decide on which one he/she likes better. Out of a 100 people, perhaps 20 will end up preferring the anime and watch anime over Hollywood next time. I am one of them.

In the old model of media distribution, the executives decide that the anime movie is not even worth releasing on DVD and you don’t even get to make that comparison. Out of a 100 people, 100 of them will watch Hollywood movies next time simply because they know nothing better. You as the consumer do not get to make the first decision.

And that is why Chris Anderson calls it the “democratization” of media: The consumers are taking back our right to watch what we want to watch and not what the companies THINK we want to watch.

So really, anime fans and companies in America owe a lot to online piracy for breaking down the vicious cycle found in traditional media distribution.

The Problem of Diversity

One huge problem with this trend is that people are watching and reading more and more diverse topics. Thirty years ago, you would have been watching the same TV channels, listening to the same radio stations and watching the same movies in the same cinema as everyone else in the neighbourhood simply because there was no other choice.

Today, you can instead surf the net, rent some movies through Netflix, play a MMORPG, watch a video on YouTube, listen to a podcast on an obscure topic or watch one of the hundreds of niche and diversified channels available on cable.

This means that a teenager of today’s generation has less interests in common with his or her neighbours than one from any generations in the history of mankind. Only two people in my class watch the same anime I do. No one plays the games I play (and I’m not even talking about eroge). I bet no one has read “The Long Tail” besides me. Thanks to the Internet, people can spend their time on what they are really interested in. But at the same time, we lost the common topics needed for small talks and social interactions in real-life. As popular as anime is, if you are an anime fan living in a small town of a few hundred you are likely to be alone.

That is why many have turned online and why you are reading my blog. Instead of trying to find common topics with the people around us, we can instead find people online who already have the same interests as us. Arguably, this is diluting social bonds in the modern world.

The Paradox of Diversity

But is it really a problem?

People used to organize themselves based on physical proximity. We used to associate ourselves with our town, our city and our nation. A nation of people with similar culture bonds together, often with the encouragement of shared xenophobia.

Over a century ago, an East Asian was unlikely to have much in common with an European, whether in terms of interests, life style or mindset. The physical distance between places prevented people from sharing their ideas with anyone other than their neighbours. Barring the rich, the scientists and the politicians, no one knew what was really going on in other countries and what the thinkings of people of other nations were really like. This set the stage for the two World Wars, where the national leaders fully exploited the ignorance and xenophobia of their people and their soldiers.

The diversity brought about by the Internet is actually unifying the world, as counter-intuitive as it may sound. Fifty years ago, the only things my grandparents in China knew about America was that it supported the Nationalist enemy and fought against China in the Korean War, in other words it wasn’t exactly what you call a good impression. My grandmother had not met any Americans before in real-life until late into her seventies. By diluting the traditional bonds we share with our neighbours, the Internet is at the same time allowing us to form new bonds with people on the other side of the planet, something that my grandparents could not do just fifty years ago.

I have chatted with anime fans from America, Finland, China, Japan and Australia and found that lot of them were nice people just like most people I meet in real-life. I also read about the Vietnam War, the Cultural Revolution and the Nanking Massacre. Twenty years ago, I could only have done the latter and I would have formed my opinions (extremely negative ones no doubt) about those countries based on that alone. It’s no wonder that in the last century, people hated each other so much that they fought two World Wars over it. Those people never had a chance to understand each other.

Physical bonds will always be there. No matter how advance the Internet becomes, we will always need to maintain physical relationships for a variety of reasons. But the Internet is creating a whole new world by allowing us to communicate and to understand one another despite our physical distances. Not only does it give us the means to communicate, it provides us with the countless common topics we can talk about. Thanks to our common and often niche interests, I can get to know a person on the other side of the planet so well that it would have make no difference even if he lived next door to me.

Perhaps when everyone gets on the Internet, we may someday finally have world peace.

Of course, I can foresee a few possible problems with my idealistic dream. For example, the world could end up being redivided into countries with Internet access (and thus eventually have similar culture and values) and countries without (outside the global culture sharing network). Also, the Internet world, while unrestrained by physical distance, is still currently fragmented by language barriers. It is entirely possible for geo-political influences to be redivided into a few language blocs, perhaps as few as just two: English and Mandarin, after the rest gets assimilated as Internet progresses.

But eventually, whether it takes three hundred or three thousand years, the Internet will unite mankind. You can quote me on that.

Wow. 2800 words. That was a long rant… 眠いよ　＿|ï¿£|O