The long tail and video games, Part I has an article up on what digital delivery is doing for the industry. It’s a good start, but like most of these pieces doesn’t go nearly deep enough.

The place to start when talking about digital distribution is Wired editor-in-chief Chris Anderson’s article, “The Long Tail.” (He has a blog of the same name and is turning the article into a book). It’s the most important and most intelligent piece I’ve seen on the future of entertainment.

Digital distribution was struggling (except for, you know, the tens of millions of people who illegally downloaded music on Napster and other peer-to-peer sites) until iTunes came along with its 99-cent downloads. But nobody in the mainstream press that I saw questioned whether that was really a fair price; or whether there should be variable pricing; or whether $10 is too much to pay for a case-less, liner notes-less, CD-less, lower-quality version of an album you could buy for $10 at Best Buy (yes, Best Buy sells CDs as loss leaders, wha’evah); or what iTunes was actually selling you, since if an iTunes “album” is just a ripped version of a CD you already own there seem to be unsolved legal questions as to why you can’t just download a backup version; or, along the same lines, why you’d have to pay a second time if you buy an iTunes track and your computer crashes or your iPod gets stolen. Instead of asking these questions, it seemed that journalists didn’t want to be perceived as supporting those evil, law-breaking, no-good-kids who loved Napster. So they anointed iTunes as the model of fairly priced digital music delivery.

Because few questioned this pricing model — which is pretty close to the current, physical distribution model — people continued to treat digital distribution as simply an online version of what we have now. The mindset was simply “people will get their music online, instead of in stores.” There was little attempt –beyond the obvious “indie bands can find a bigger audience!” and “Interscope can cut out the middle man!” — to consider what that means for consumers, for artists, for entertainment companies. (Some reticence was warranted given that, as Malcolm Gladwell has pointed out, the first Internet explosion and e-commerce boom were more about technological and structural changes in the physical world than they were about the Interweb itself. But it’s taken far too long to move beyond that hesitancy.)

Anderson’s article is so important because he makes the convincing case that digital distribution is not just the physical world moved online. Two of the great problems of real world entertainment — the need to find a local audience to make stocking material economically worthwhile; and the physical constraints of limited shelf space, broadcast spectrum, theater screens, etc. — disappear online. Whereas these problems led to our hit-driven entertainment model — “Hits fill theaters, fly off shelves, and keep listeners and viewers from touching their dials and remotes,” Anderson writes — the rise of Netflix, Amazon and online music services have shown that our entertainment palettes are much broader:

Unlimited selection is revealing truths about what consumers want and how they want to get it in service after service, from DVDs at Netflix to music videos on Yahoo! Launch to songs in the iTunes Music Store and Rhapsody. People are going deep into the catalog, down the long, long list of available titles, far past what’s available at Blockbuster Video, Tower Records, and Barnes & Noble. And the more they find, the more they like. As they wander further from the beaten path, they discover their taste is not as mainstream as they thought (or as they had been led to believe by marketing, a lack of alternatives, and a hit-driven culture).

An analysis of the sales data and trends from these services and others like them shows that the emerging digital entertainment economy is going to be radically different from today’s mass market. If the 20th- century entertainment industry was about hits, the 21st will be equally about misses.

Anderson calls the vast catalog of misses “the long tail.” It’s the top 400,000 tracks on Rhapsody that are streamed at least once a month (Wal-Mart has only about 40,000 tracks on its shelves). It’s the more than half of Amazon’s book sales that come from beyond its top 130,000 books — the number a typical Barnes and Noble carries. And on and on. As long as you offer a song, a DVD, a book, whatever, someone will find it. (The two-part key to this is the need to have the hits as well as the misses, and the recommendations and other tools the websites use to point people toward the misses: “the success of Netflix, Amazon, and the commercial music services shows that you need both ends of the curve. Their huge libraries of less-mainstream fare set them apart, but hits still matter in attracting consumers in the first place. 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.”)

— January 31, 2006

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