eMusic's model proves lucrative

Either the hubbub surrounding The Long Tail has naturally brought tangential news stories to the fore, or perhaps I'm just seeing things through that new lens as I work my way through the book, but a story in today's USA Today again points up a shift in industry toward niche markets thanks to technology.

In this case, eMusic is the subject. The company offers subscribers the opportunity to download mp3s of songs with no DRM attached. That's usually the focus of stories about the company, and this one is no different. But as usual, if you read beyond the first few paragraphs, the real story is told.

eMusic has carved out an 11 percent market share in the digital music sales business, second to iTunes' massive 67 percent share, according to the article. But eMusic has done so with no major label offerings. Instead, the company offers more than 1 million songs from independent labels, essentially leaving the big hits to iTunes and other services. Far from being a losing proposition, the company sells about 5 million downloads each month. That's a healthy long tail.

Still, according to USA Today, CEO David Pakman does hope to lure major labels, but not necessarily with the idea of offering another place to sell their hits. Instead, he has proposed giving eMusic access to labels' back catalogs that aren't otherwise available so they can be marketed to eMusic's older, more passionate music fan base.

"The results would be dramatic," Koch Records head Bob Frank tells USA Today. "eMusic would market the hell out of those songs."

Of course, the answer has been "no." It's frustrating to see the labels essentially turn down free money with the misguided notion that they would lose something in the process. The future is based on choice, and the more people have, the better it will be, particularly for entertainment companies.


It's not a warehouse full of books

The New York Times offers yet more coverage of The Long Tail, this time looking at the book industry. As with most things related to the book, it seems to miss the point, which is not necessarily that large corporations will get rich selling one copy of a million different things to a million different people, but that smaller companies selling a few things to those in several niches will find ample success where, prior to certain technological advances, they would fail.

The Times article finds that "publishers remain wary of the long tail theory, largely because they haven’t figured out how to make money off it." This, of course, is the point. Big publishers/record labels/film studios don't get it, because they're always after the hits. They won't stock 10 copies of a book for years in the hope that they'll someday sell, and the long tail doesn't suppose they'll suddenly start. It's the little guy -- or rather, guys in aggregate -- who will benefit from the long tail. The article eventually gets around to this in the, um, tail of the article, yet the writer seems not to notice that she has quite successfully buried her lead:

"Some small presses build their business entirely on the long tail, bringing back into print esoteric titles that are in the public domain or had been abandoned by other publishers as unprofitable," she writes, sharing the stories of the New York Review of Books Classics imprint, which, according to editorial director Edwin Frank, is "happy with any book that sells over 5,000 copies.” With lower overhead, a company that sells 5,000 of a few different things can do quite well for itself. Several of these companies can then equal the sales clout of the big houses.

Meanwhile, Jeff Jarvis at BuzzMachine spins this off into a number of interesting directions. Print-on-demand, using blogs to promote obscure titles, etc. I think he puts a bit too much faith in the ability of blogs and hyperlinks to solve any ill, but it's thought provoking as always.


Riding the long tail

The settlement between Kazaa and the music and film industries offers a way, should either industry choose to take a chance, for them to tap into the power of the Long Tail. The settlement, which calls for Kazaa to pay the music industry $115 million and the film industry an undisclosed sum, also will lead to Kazaa's operators legitimately licensing and distributing copyrighted material. Sure, you can argue the means, but the ends -- the music and movie industries having a ready-made network of people with the right tools and desire to download their wares -- are certainly enviable.

How does the Long Tail apply? Well, this isn't the first network the industries have aligned with to facilitate distribution of music and movies, but it's one that adds significantly to their reach. It can't cost much for labels or studios to digitize anything in their back catalogs and make it available for sale online. Yes, as critics of Chris Anderson's book The Long Tail have pointed out, hits will still dominate sales charts. But the one thing that keeps people from digging deeper when looking for something to buy is lack of availability (or even knowing something could be available). As more and more low-cost distribution networks become available, more opportunities to sell out of that back catalog are presented.

Andrew Taylor at the Artful Manager blog wrote about the theory and its potential impact on nonprofit arts groups. A commenter wondered if the Long Tail would mean so much choice that the potential audience for any one thing would become fractured. I don't think so, and in fact think that the same thing that makes the Long Tail possible -- near-limitless access to content and information, will actually make it easier to assemble groups of interested people around nearly everything. These niches still won't become mass attractions, but they certainly have a greater chance of finding a sustaining audience than in the past.

Hugh at Gaping Void makes a valid point that, as I wrote in my previous post, seems to get lost in the debate as people try to debunk Anderson's theory: He is a professional cartoonist who doesn't "really publish anything in the conventional sense." He does use his cartoons in indirect online marketing campaigns to help sell Stormhoek wine, bespoke tailored suits and other things. "Would this approach have been possible before the Internet and what Chris Anderson calls 'The Long Tail'? Of course not."

Perhaps Anderson does overstate things at present by implying that the head and the tail are drawing equal. But he is dead-on in anticipating a time when the tail looms very large for those who choose to embrace it. Offer access to enough niches, and you'll find yourself with a very viable business plan not reliant on hits.


Heads or tails?

My return after a long layoff was spurred by The Long Tail Chris Anderson's new book about how online retailing has allowed those in niche markets to make a go of it against the world of blockbusters and limited choice at traditional bricks and mortar stores.

I've been reading Anderson's blog for more than a year, watching in near real-time as he sorted through the issues to be covered in the book. Given his focus on entertainment offerings, it struck a chord. Some of his postings sparked debate, but it wasn't until the book's release recently that people really started to discuss the merits of his theory.

There are plenty of people who think Anderson has hit upon something revolutionary, but it's the naysayers that offer the most interesting reading. Lee Gomes with the Wall Street Journal weighed in today, saying Anderson's numbers are flawed. "It would be wonderful if the world as Mr. Anderson describes it were true: one where 'healthy niche products and even 'outright misses' collectively could stand their ground with the culture's increasingly soulless 'hits,'" he writes. "But while every singer-songwriter dreams from his bedroom of making a living off iTunes, few actually do, mostly because so many others have the very same idea."

Two points: Anderson doesn't argue that bedsit singers are going to get rich thanks to the Long Tail; online retailers who offer the work of hundreds of such artists might. Also, while Anderson may be projecting a bit into the future (something he addresses on his blog in part by saying, "Which is why the language Gomes cites from the book jacket is actually all phrased in the future conditional tense"), his point remains valid. It is clear that those offering more choice can remain viable and even compete with those who do not. Does the Long Tail equal the Head right now? Might it soon? Would Amazon stock so many books if it thought otherwise?