The Long Tail (3 page)

As you can see, the demand way out here is still not zero. Indeed, the area under this curve is still another 16 million downloads a month, or more than 15 percent of Rhapsody’s total. Individually, none
of those songs is popular, but there are just so
many
of them that collectively they represent a substantial market. In 2005, Rhapsody ran out of inventory at around 1.5 million tracks. It’s now more than 4 million. (There are more than 9 million tracks circulating on the informal peer-to-peer networks.)

What’s extraordinary is that virtually every single one of those tracks will sell. From the perspective of a store like Wal-Mart, the music industry stops at less than 60,000 tracks. However, for online retailers like Rhapsody the market is seemingly never-ending. Not only is every one of Rhapsody’s top 60,000 tracks streamed at least once each month, but the same is true for its top 100,000, top 200,000, and top 400,000—even its top 600,000, top 900,000, and beyond. As fast as Rhapsody adds tracks to its library, those songs find an audience, even if it’s just a handful of people every month, somewhere in the world.

This is the Long Tail.

You can find
everything
out here in the Long Tail. There’s the back catalog, older albums still fondly remembered by longtime fans or rediscovered by new ones. There are live tracks, B-sides, remixes, even (gasp) covers. There are niches by the thousands, genres within genres within genres (imagine an entire Tower Records store devoted to eighties hair bands or ambient dub). There are foreign bands, once priced out of reach on a shelf in the import aisle, and obscure bands on even more obscure labels—many of which don’t have the distribution clout to get into Tower at all.

Oh sure, there’s also a lot of crap here in the Long Tail. But then again, there’s an awful lot of crap hiding between the radio tracks on hit albums, too. People have to skip over it on CDs, but they can more easily avoid it online, where the best individual songs can be cherry-picked (with the help of personalized recommendations) from those whole albums. So, unlike the CD—where each crap track costs perhaps one-twelfth of a $15 album price—all of the crap tracks online just sit harmlessly on some server, ignored by a marketplace that evaluates songs on their own merit.

What’s truly amazing about the Long Tail is the sheer size of it. Again, if you combine enough of the non-hits, you’ve actually estab
lished a market that rivals the hits. Take books: The average Barnes & Noble superstore carries around 100,000 titles. Yet more than a quarter of Amazon’s book sales come from
outside
its top 100,000 titles. Consider the implication: If the Amazon statistics are any guide, the market for books that are not even sold in the average bookstore is already a third the size of the existing market—and what’s more, it’s growing quickly. If these growth trends continue, the potential book market may actually be half again as big as it appears to be, if only we can get over the economics of scarcity. Venture capitalist and former music industry consultant Kevin Laws puts it this way: “The biggest money is in the smallest sales.”

The same is true for the other Long Tail markets we’ve looked at:

When you think about it, most successful Internet businesses are capitalizing on the Long Tail in one way or another. Google, for instance, makes most of its money not from huge corporate advertisers, but from small ones (the Long Tail of advertising). EBay is mostly Tail as well—niche products from collector cars to tricked-out golf clubs. By overcoming the limitations of geography and scale, companies like these have not only expanded existing markets, but more important, they’ve also discovered entirely new ones. Moreover, in each case those new markets that lie
outside
the reach of the physical retailer have proven to be far bigger than anyone expected—and they’re only getting bigger.

In fact, as these companies offered more and more (simply because they
could
), they found that demand actually followed supply. The act of vastly increasing choice seemed to unlock demand for that choice. Whether it was latent demand for niche goods that was already there or the creation of new demand, we don’t yet know. But what we do know is that with the companies for which we have the most complete data—Netflix, Amazon, and Rhapsody—sales of products
not offered
by their bricks-and-mortar competitors amounted to between a quarter and nearly half of total revenues—and that percentage is rising each year. In other words, the
fastest-growing
part of their businesses is sales of products that aren’t available in traditional, physical retail stores at all.

These infinite-shelf-space businesses have effectively learned a lesson in new math: A very, very big number (the products in the Tail) multiplied by a relatively small number (the sales of each) is still equal to a very, very big number. And, again, that very, very big number is only getting bigger.

What’s more, these millions of fringe sales are an efficient, cost-effective business. With no shelf space to pay for—and in the case of purely digital services like iTunes, no manufacturing costs and hardly any distribution fees—a niche product sold is just another sale, with the same (or better) margins as a hit. For the first time in history, hits and niches are on equal economic footing, both just entries in a database called up on demand, both equally worthy of being carried. Suddenly, popularity no longer has a monopoly on profitability. The new shape of culture and commerce looks like this:

THE HIDDEN MAJORITY

One way to think of the difference between yesterday’s limited choice and today’s abundance is as if our culture were an ocean and the only features above the surface were islands of hits. There’s a music island composed of hit albums, a movie island of blockbusters, an archipelago of popular TV shows, and so on.

Think of the waterline as being the economic threshold for that category, the amount of sales necessary to satisfy the distribution channels. The islands represent the products that are popular enough to be above that line, and thus profitable enough to be offered through distribution channels with scarce capacity, which is to say the shelf space demands of most major retailers. Scan the cultural horizon and what stands out are these peaks of popularity rising above the waves.

However, islands are, of course, just the tips of vast undersea mountains. When the cost of distribution falls, it’s like the water
level falling in the ocean. All of a sudden things are revealed that were previously hidden. And there’s much, much more under the current waterline than above it. What we’re now starting to see, as online retailers begin to capitalize on their extraordinary economic efficiencies, is the shape of a massive mountain of choice emerging where before there was just a peak.

More than 99 percent of music albums on the market today are not available in Wal-Mart. Of the more than 200,000 films, TV shows, documentaries, and other video that have been released commercially, the average Blockbuster carries just 3,000. Same for any other leading retailer and practically any other commodity—from books to kitchen fittings. The vast majority of products are
not
available at a store near you. By necessity, the economics of traditional, hit-driven retail limit choice.

When you can dramatically lower the costs of connecting supply and demand, it changes not just the numbers, but the entire nature of the market. This is not just a quantitative change, but a qualitative one, too. Bringing niches within reach reveals latent demand for noncommercial content. Then, as demand shifts toward the niches, the economics of providing them improve further, and so on, creating a positive feedback loop that will transform entire industries—and the culture—for decades to come.

Before the Industrial
Revolution, most culture was local. The economy was agrarian, which distributed populations as broadly as the land, and distance divided people. Culture was fragmented, creating everything from regional accents to folk music. The lack of rapid transportation and communications limited cultural mixing and the propagation of new ideas and trends. It was an earlier era of niche culture, one determined more by geography than affinity.

Influences varied from town to town because the vehicles for carrying common culture were so limited. Aside from traveling theatrical acts and a small number of books available to the literate, most culture spread no faster than people themselves. There was a reason the Church was the main mass cultural unifier in Western Europe; it had the best distribution infrastructure and, thanks to Gutenberg’s press, the most mass-produced media (the Bible).

But in the early nineteenth century, the era of modern industry and the growth of the railroad system led to massive waves of urbanization and the rise of the great cities of Europe. These new hives of commerce and hubs of transportation mixed people like never before, cre
ating a powerful engine of new culture. All it needed was mass media to give it wing.

In the mid to late nineteenth century, several technologies emerged to do just that. First, commercial printing technology improved and went mainstream, then the new “wet plate” technique made photography popular. Finally, in 1877, Edison invented the phonograph. These technologies led to the first great wave of pop culture, carried on such media as illustrated newspapers and magazines, novels, printed sheet music, political pamphlets, postcards, greeting cards, children’s books, and commercial catalogs.

Along with news, newspapers spread word of the latest fashions from the urban style centers of New York, London, and Paris. Then, in the beginning of the twentieth century, Edison created yet another mass market with the moving picture, which gave the stars of stage a new, recorded medium to reach bigger audiences and “play” many towns simultaneously.

We are a gregarious species, highly influenced by what others do. And now, with film, there was a medium that could not only show us what other people were doing, but could also endow it with such an intoxicating glamour that it was hard to resist. It was the dawn of the celebrity age.

These potent carriers of culture had the effect of linking people across time and space, synchronizing society. For the first time in history, it was a safe bet that not only had your neighbor read the same news you had in the paper this morning, and gleaned knowledge of the same music and movies, but that the same was true for people across the country.

The rise of such powerful technologies of mass culture was not greeted with universal acclaim. In 1936, Marxist philosopher Walter Benjamin expressed his concern for the loss of “aura” (the transcendent qualities of art) in an age of mechanical reproduction. Emphasizing the examples of photography and film, along with recorded rather than performed music, Benjamin worried that “mechanical reproduction of art changes the reaction of the masses toward art. The reactionary attitude toward a Picasso painting changes into the progressive reaction toward a Chaplin movie…. The conventional is uncritically enjoyed, and the truly new is criticized with aversion.”

But he hadn’t seen anything yet. The impending explosion of the broadcast mediums of radio and television would eventually change the game completely. The power of electromagnetic waves is that they spread in all directions essentially for
free,
a trait that made them as mind-blowing when they were first introduced as the Internet would be some fifty years later. The ability to reach everyone within dozens of miles for the price of a single broadcast was so economically compelling that broadcaster RCA even got into the radio-set manufacturing business in the early 1920s to subsidize and thus accelerate the adoption of receivers that could pick up its programming.

But local and regional broadcasts still only reached local and regional audiences, which often weren’t big enough for national advertisers. Going national would require another technology. In 1922, AT&T’s long-distance and local Bell operating divisions developed technologies for transmitting voice-and music-grade audio on the then-new long-distance phone networks. New York’s WEAF station, which had long been a technology test bed, put together a regular schedule of programs and created some of the first broadcasts to incorporate commercial endorsements or sponsorships. They were redistributed to stations beyond New York on long-distance phone lines. This was an immediate success, and created links with other stations that could go both ways, taking national what was once local coverage of sports or political events.

This was the beginning of what would become known first as “chain” or “network” broadcasting. It was also the start of a shared national culture, synchronized to the three-note NBC chimes, which were originally a system cue to network engineers to switch between the news and entertainment feeds.

Between 1935 and the 1950s, the Golden Age of Radio led to the rise of national stars, from Edward R. Murrow to Bing Crosby. Then television took over, birthing the ultimate in lockstep culture. By 1954, an astounding 74 percent of TV households were watching
I Love Lucy
every Sunday night.

The Golden Age of Television marked the peak of the so-called watercooler effect, the phrase describing the buzz in the office around a shared cultural event. In the 1950s and 1960s, it was a safe assump
tion that nearly everyone in your office had watched the same thing the previous night. Most folks had probably seen Walter Cronkite read the evening news, and then tuned in to whatever the top show was that night:
The Beverly Hillbillies, Gunsmoke,
or
The Andy Griffith Show
.

Throughout the eighties, nineties, and even into the twenty-first century, television continued to be the great American unifier. Peak sewage usage was routinely measured at halftime of the Super Bowl. Telephone network capacity records were set for call-in voting during the first season of
American Idol
. Each year, TV advertising set a new record as companies paid more and more for prime time. And why not? TV defined the mainstream. Prime time may not have been the only time, but it was the only one that really mattered.

But even as the nineties drew to a close, with the networks basking in their commercial success, the cultural ground was shifting beneath them. The first cracks were to appear in the usual battleground of youth rebellion: music.

Although music was first made more than just performance by the phonograph, it was radio that created the pop idol. In the 1940s and ’50s,
Your Hit Parade
became a fixture of Saturday night, billing itself as “an accurate, authentic tabulation of America’s taste in popular music.” Then, with the rise and youth appeal of rock and roll and R&B, came personality-driven playlists and the celebrity radio DJ. In the 1950s, Alan Freed and Murray “the K” Kaufman helped turn radio into the most powerful hit-making machine the world had ever known.

The machine hit its peak in the form of
American Top 40,
a syndicated weekly radio show started by Casey Kasem in 1970. It began as a three-hour program that counted down the top forty songs on
Billboard
’s Hot 100 singles chart. By the early 1980s, the show was four hours long and could be heard every Sunday on more than 500 stations in the United States alone. For a generation of kids who grew up in the seventies and eighties, this was the carrier signal of pop culture. Every week millions of them synchronized themselves to the rest of the nation, obsessively tracking which bands were up and which were down in a list of songs that wouldn’t fill a single rack in a record store.

THE END OF THE HIT PARADE

As the twenty-first century opened, the music industry—the ultimate hit machine—basked in its power. The resounding commercial success of teen pop—from Britney Spears to the Backstreet Boys—showed that the business had its finger firmly on the pulse of American youth culture. The labels had finally perfected the process of manufacturing blockbusters, and their marketing departments could now both predict and create demand with scientific precision.

On March 21, 2000, Jive Records demonstrated that clout by releasing
No Strings Attached,
the second album by *NSYNC, the latest and greatest of the boy bands. *NSYNC had been developed at an even larger label, BMG, but on the advice of its marketing gurus had switched to the urban-oriented Jive to get more street cred (and counter a slightly fey image). It worked. The album sold 2.4 million copies in its first week, making it the fastest-selling album ever. It went on to top the charts for eight weeks, selling 11 million copies by the end of the year.

The industry had cracked the commercial code. They had found the elusive formula to the hit, and in retrospect it was so obvious: Sell virile young men to young women. What worked for Elvis could now be replicated on an industrial scale. It was all about looks and scripted personalities. The music itself, which was outsourced to a small army of professionals (there are fifty-two people credited with creating
No Strings Attached
), hardly mattered.

Labels had good reason for feeling confident. Fans were flocking to record stores. Between 1990 and 2000, album sales had doubled, the fastest growth rate in the industry’s history. The business trailed only Hollywood in the entertainment industry ranks.

But even as *NSYNC was celebrating its huge launch, the ground was shifting beneath the industry. The Nasdaq had crashed the week before the album’s release, and continued to fall sickeningly the rest of the year as the dot.com bubble burst. No other albums that year set records, and total music sales fell, for only the third time in two decades.

Over the next few years, even after the overall economy recovered, the economics of the music industry got worse. Something fundamental had changed in 2000. Sales fell 2.5 percent in 2001, 6.8 percent in 2002, and just kept dropping. By the end of 2005 (down another 7 percent), music sales in the United States had dwindled more than a quarter from their peak. Twenty of the all-time top 100 albums had come out in the five-year period between 1996 and 2000. The next five years produced only two—OutKast’s
Speakerboxxx/The Love Below
and Norah Jones’s
Come Away with Me
—rank 92 and 95, respectively.

It’s altogether possible that *NSYNC’s first-week record will never be broken. Imagine if this boy band goes down in history not just for launching Justin Timberlake but also for marking the very peak of the hit bubble, the last bit of manufactured pop to use the twentieth century’s fine-tuned marketing machine to its fullest, before the gears were stripped and the wheels fell off.

Here’s a chart of all the hit albums since 1958: gold (over 500,000 sold), platinum (1 to 2 million), multiplatinum (2 to 10 million), and diamond (10 million and up).

Between 2001 and 2007, the music industry’s total sales fell by a quarter. But the number of hit albums fell by more than 60 percent. In 2000, the top five albums—including megahits from Britney Spears and Eminem—sold a combined 38 million copies. In 2005, the top five
sold just half that; only 19.7 million copies. In other words, although the music industry is hurting, the hit-making side of it is hurting more. Customers have shifted to less mainstream fare, fragmenting to a thousand different subgenres. For music, at least, this looks like the end of the blockbuster era.

WHO KILLED THE HIT ALBUM?

What caused a generation of the industry’s best customers—fans in their teens and twenties—to abandon the record store? The industry’s answer was simply “piracy”: The combined effects of Napster and other online file trading and CD burning and trading gave rise to an underground economy of any song, anytime, for free. And there’s something to that. Despite countless record industry lawsuits, the traffic on the peer-to-peer (“P2P”) file-trading networks has continued to grow, with about 10 million users now sharing music files each day.

But while technology was indeed behind the customer flight, it didn’t just allow fans to sidestep the cash register. It also offered massive, unprecedented choice in terms of what they could hear. The average file-trading network has more music than any music store. Given that choice, music fans took it. Today, not only have listeners stopped buying as many CDs, they’re also losing their taste for the blockbuster hits that used to make them throng those stores on release day. Given the option to pick a boy band or find something new, more and more people are opting for exploration, and are typically more satisfied with what they find.