Where a retailer might offer, say, 30,000 songs on CD, an online music store can offer a million. The hits will still sell far more than the misses, but since almost every download finds someone willing to give it a try, the long tail could provide the majority of sales. "Now we could look to the right [of the graph], which could be as economically valuable as the left," says Anderson.

The entertainment industries provide an accessible illustration of the long tail, and Anderson reckons these will take up about half his forthcoming book. However, he also cites Google as a long-tail business, because of its contextual advertising. The first big Internet sites aimed to attract millions of users so they could sell banner ads to major brands. Google's AdWords, by contrast, are so cheap that almost anyone can buy them, and they can be targeted at a handful of users. Google's financial success therefore comes from aggregating lots of small advertisements shown to small audiences -- a long-tail effect.

EBay is another long-tail business. It is not about auctioning a few old masters for 20 million pounds apiece; it's about providing a market where huge numbers of people can sell almost anything for a couple of quid.

None of this means Hollywood studios will stop trying to make hit movies and make misses instead. However, Anderson refers to the long tail as "a million billion niches," and niche products can be profitable, if they can find their audience -- or vice versa.

Mass-market advertising is clearly out of the question for niche products, but Internet retailers have already developed ways to make them visible, particularly Amazon. One example is the social software that does "collaborative filtering." Other people who bought X also bought Y: Your taste may be similar. Getting buyers to write reviews and create their own hit lists and wish lists also helps buyers to find people with similar tastes, and perhaps to try their recommendations.

But the process only works if a Web site offers a full range of products. "Hits still matter," says Anderson, because they are needed to attract mainstream buyers. After that, recommendations can encourage them to try niche products, driving them down the long tail. Offering only hits, of course, does nothing to expand the market and change consumer behavior.

Another question is: "What does the tail do to the shape of the head?" This is one of Anderson's research projects. At the moment, on the Pareto principle, the top 20 percent of titles probably bring in 80 percent of the revenues. Will there be a leveling of the graph if more demand moves to the long tail? Anderson thinks so.

Finally, there's an apparent conflict between the economics of the long tail and the progress made over the past few years by Creative Commons, a copyright reform movement started by Lawrence Lessig, a Stanford University law professor (and Wired columnist). This has been driven by the argument that, for example, out-of-print books are not worth anything, so copyright owners might as well give them to the community for reuse.

The long tail argument, in contrast, suggests that copyright owners should make everything available online, as cheaply as possible, because it will still find buyers, and the aggregate sales could be significant.

Anderson tackles this problem on his Long Tail blog, where he points out that the people who usually find new commercial outlets for the back catalog are the ones who repurpose and/or remix it, not the original copyright holders.

With both Anderson and Lessig speaking at the O'Reilly Emerging Technology 2005 conference in San Diego last week, it would have been interesting to hear them discuss the problem. Alas, it didn't happen.

However, the issues are closely related. At the moment, the major film studios and record companies are pricing their online, digital products (if any) to defend their retail sales, not to exploit the low cost of doing business over the Net. The obvious and perhaps inevitable result is rampant piracy.

At ETech, Lessig said the big copyright holders were trying to blind the technology to conform to 18th century law, rather than reforming the law. Maybe they'll read Anderson's long-tail book, when it comes out, and see the light. If Anderson is right about a change from the old economics of shortages to a new economics of abundance, will they have a choice?

Recent Stories