The Long Tail in Question
May 25, 2009 at 5:00 am | In Marketing, Music Business | 1 CommentTags: Amazon, audio, Catalog, CDBaby, Chris Anderson, consumers, Content, Demand, digital, Digital Media Digest, distribution, Economics, Harvard, internet, iTunes, label, long tail, Music, Online, Project Studio, Record Labels, Supply, The Long Tail, Tunecore
Chris Anderson’s Long Tail Theory is under scrutiny, and both sides have reason to claim victory. I’d be interested in Chris running his numbers again with data from iTunes and AmazonMP3. If I had to guess, his 98% rule is overstated at best. Keep in mind he was doing his research on data from 2004, which is way too early to develop a trend rule that will stand the test of time. Regardless, after analyzing the data that I do have access to, I fully believe in the value of the “tail”, but I’ve come up with a series of x-factors that I believe were underestimated, ultimately leading to a 98% rule in question, and Long Tail under the microscope.
- Project Studio Proliferation in the 90s:
- Creative and Financial filters were destroyed.
- Music creation became affordable…not just consumption.
- Supply increased exponentially.
- Digital Content Delivery Services:
- The Internet:
- Destroyed traditional distribution filters
- Introduced a retail environment absent of scarcity.
- Distribution products without demand became possible.
- Consumers given access to their niche
- The Majors realize value in Digital Distribution:
- Released a flood of product with little or diminishing demand into the market. For example, out-of-print titles could be resurrected without the traditional costs of manufacturing, stocking, and distribution.
- Streamline processes to make extend their “tail”.
I believe we will hit what I call a “Ground Zero” with audio content by 2010. The Majors will have completed their catalog delivery and any pent up product still looking for distribution will have found it’s way into the digital marketplace. By then, who knows what new technologies will be available or what challenges lie ahead. I appreciate Anderson’s work in trendspotting and hope, for the sake of us all working in the industry, he will continue to keep his theory fluid, updated, and transparent.
iTunes Shutting Down?
October 4, 2008 at 1:39 pm | In Music Business | Leave a CommentTags: apple, digital, iTunes, label, Music Business, NMPA, price, publishing, retailers, variable pricing
I blogged a while back on thin margins for Digitial retailers, but given the recent publisher fiasco, where they were asking for a rate hike to 16cents, I felt it necessary to reitterate with this link.
iTunes certainly wouldn’t shut down and risk losing the 90% powerplay they currently have on the market, but it does show that the margins are thin enough to get them on board against the NMPA. The bigger issue is that iTunes doesn’t want to discuss variable pricing, but if the labels pass the hike onto the retailers, they would have no choice in the matter to keep the store open and in the green. Variable pricing has been a long standing issue between the labels and Apple, and any crack in that foundation could lead to significant ground for the labels.
Quote – Digital Media Digest
July 20, 2008 at 7:09 pm | In ...And I Quote | Leave a CommentTags: business, Digest, digital, free, illegal, Industry, label, Media, Music, p2p, Quote
“There will always be Freeloaders, but it is the labels’ prerogative and responsibility to get the music to the fans without encouraging any illegal activity.”
No Profit in Downloads
July 14, 2008 at 8:45 pm | In Music Business | Leave a CommentTags: 99, apple, business, download, Industry, iTunes, label, margin, Marketing, Mastercard, mechanicals, merch, Music, Napster, profit, Rhapsody, royalty, strategy, Visa, Zune
Let’s face it, the Labels are going to take 70% and that’s fair. What? It’s Not? Of course it is…They spent the thousands in studio and production cost, not to mention manufacturing and distribution, only to have the artist sell more T-shirts and stickers at their merch table because all of their fans are hooked up via BitTorrent. It’s not like they pocket the 70% anyway. There’s overhead, mechanicals, and other royalties that have to be paid, not to mention someone who has to sit down and sift through the data so the auditors don’t pitch a fit.
The question is…Can you be profitable with the other 30% and the answer so far is an overwhelming NO!
You may think you’ve struck gold when you find that company that allows you to setup your own storefront for 10 or 20 bucks, pull in the titles you want to sell and then let’s you make 10 to 15 cents per tracks sold, but the reality is that noone shops at these stores. iTunes and Amazon are satisfying 95% of the digital consumers out there and Rhapsody, Napster, Zune, Passalong, and many other reputable brands are fighting for the loose change already.
After you realize this doesn’t work, you can try building your own store from scratch and licensing in the labels in order to keep more of the profit. The reality of that is that in order to be your own retailer, you have to engage with Visa and Mastercard who are going to take 15 cents per transaction and then another 2 or 3 percent of everything you make leaving you with the same 10 to 15 cents you had in the first scenario. It forces you into developing a marketing strategy around bundling and encouraging larger purchases and that’s where you lose touch with your consumer. They don’t want to spend more than 99 cents and if you make them, they will still find what they want and buy it…just NOT from you.
The economics just aren’t there. They just don’t work. It’s barely worked for iTunes and the dream of selling digital music is driving company after company into the ground. It’s not worth the hassle and if you are looking to be entertained with your money, you’d be better off buying lots of fireworks or just flushing it down the toilet.
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