by Richard Veryard
On the Longtail blog, Chris Anderson produces some data that he interprets as evidence for The Decade the Blockbuster Died. Many comments (including mine) suggest alternative interpretations of this evidence.
An album (or film or other entertainment product) may achieve massive volumes when it is first released, or it may become a perennial best-seller. In theory, there are two routes to long-term success, so that a slowburning quality product might achieve parity with a flash-in-the-pan popular hit. But in practice, products are deleted from the catalogue or become effectively unavailable – either because the sales volumes falls below some threshold defined by economies of scale, or because of some arbitrary decision by the record company (such as a dispute with the artist). In the former case, such thresholds assume an economics based on there being a symmetry between the supply model and the levels of demand directly addressable by it.
So the statistics cited on the Longtail blog don’t reflect the “pure” behaviour of the market but reveal the distortions caused by the behaviour of the record companies. This is an example of large companies imposing arbitrary restrictions to suppress the longtail.
In recent years, the internet has apparently provided opportunities for record companies to exploit the back catalogue more effectively, but there are still many classic records and films that are not available in the latest formats. Pundits or rigged elections produce lists of the 100 greatest products in various categories (special thanks to Channel Four) and this promotes sales of these older products. But the market remains distorted, and the evidence for the longtail remains patchy.
Similar considerations apply in the pharmaceutical industry. But in the same way, a business model reliant on blockbuster drugs is looking increasingly problematic, while the industry has not yet made a satisfactory transition to the longtail.
The strategic challenges in these (and other) industries can be understood in terms of meeting the challenge of asymmetries of demand, and the need, therefore, for a business model that can use a micro-segmentation of demand to address the needs of customers one-by-one.