A Lack Of Scarcity Feeds The Long Tail By Increasing The Pie

from the rethink-the-pie dept

Continuing the ongoing series on economics in the absence of scarcity, today's post is about rethinking the overall "pie." One of the problems that people have in grasping some of this is that they focus very much on the "haves" in the existing model, rather than the "have nots." In other words, in a world where scarcity is present, there are a limited set of options, and that means that many potential options never even make it to the market. This is what Chris Anderson talks about concerning "The Long Tail," when businesses are entirely hit driven.

It's what makes people ask the $200 million movie question, wondering how the same kind of huge blockbuster movies can be made without scarcity, or how rockstars will reach rockstar status. However, part of the problem with this is that while scarcity may create these types of huge hits, and abundance may decrease the likelihood of any individual work to be that same kind of hit, it expands the overall market by making it much easier for the long tail to exist. Without having to worry about stocking a limited number of shelves, an Amazon or a Netflix can carry unlimited products -- opening up an entirely new market for movies that don't need to reach the same level of blockbuster to be a success. In the same sense, a record label no longer needs to churn out a huge hit in Britney Spears to make up for all their duds, but can invest smaller amounts in many, many more artists, recognizing that it's possible to be modestly successful with many more artists, adding up to a much bigger pie overall -- and a much less risky business, since there's less reliance on just a few big hits.

What's important here is the recognition that as you remove scarcity from the equation, it may dilute the huge mega-successes, but inflates the ability to have a lot more moderate successes that add up to a lot more overall. The existing system, with scarcity, is often a bimodal distribution. There are the haves at one end, and the have nots (or the hoping to be the haves) all the way at the other end. However, as scarcity is removed, the distribution morphs into the famed power law curve. There are still hits at one end, though, there may be fewer of them. However, rather than simply jumping all the way from the super successful to the poor, starving and hopeful, you get a much nicer distribution from top to bottom of super successful, to moderately successful to less successful -- but with a much great overall value under the curve.

Unfortunately, many of the complaints about economics without scarcity focus on the fact that some at the high end of the bimodal distribution (the "rockstars" or the "mega hits") will lose some of that status without forced scarcity. But, the problem is that argument completely ignores what it does to the rest of the curve, moving up many who were at the other end (the poor, starving artists) into a position to be able to actually create a lot more product, rather than having to go out and find "a real job" that pays them a regular salary. The only "losers" here are a few people at the very, very top. Everyone else, however, benefits -- and the net benefit is tremendous. It does involve a shift in business models for those who relied on the hits, but it's a huge opportunity to expand a business while making it a lot less variable and a lot less dependent on catching one or two big hits to make the numbers work.

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  1. identicon
    Clive Young, 7 Dec 2006 @ 8:47am

    Concert Touring

    While the philosophy of the Long Tail and leveling the playing field for the little guy and all the rest is a very sound and democratic ideal, there are/will be major downsides to it--such as the cultural death of music.

    This is due to an area which I happen to cover as a journalist: concert touring. Most of the highest grossing tours these days are by older, baby-boomer favored acts, and in recent years, there have been increasingly fewer new acts that can fill arenas, stadiums and amphitheatres. Much of that can be blamed on lousy albums, poor artist development on the labels' part and skyrocketing ticket prices, but it has all resulted in dropping concert attendence for the last few years. The threat of the Long Tail, however, will make things considerably worse.

    That big, fat, middle part of the curve will make a mess of touring, because most of the acts that will fit in that area won't be able to fill a decent-sized venue. This has nothing to do with talent, and everything to do with proximity of one fan to another. Once you factor in the coming rise in label-less artists--musicians and bands who can make a living on having 30,000 fans worldwide buying their songs on iTunes, etc.--the days of the big arena tour, or even a gig at your local 3,000-seat theatre, are basically over. You'd never be able to get enough fans in one place to justify mid-level touring.

    While neither you or I will be shedding a tear for the overpaid rock stars of the world making less money, this will have a demonstrable effect on the livelihoods of all the people who work in the tour and venue industries--roadies, sound companies, lighting companies, truck drivers, caterers, the beer guy at your favorite venue and many, many more. Literally hundreds of thousands of people in the U.S. alone--and as a result, their families--will be hit financially.

    All this affects the concert-going experience, already getting hurt from the aforementioned issues (ticket prices, lack of acts), which means fewer and fewer people will go to see live music. That will only sink music even further into cultural irrelevancy, because live performance is the heart of what music is about; take that out of the equation and there's nothing to make future generations bond with music the way that the boomers and Gen X did. As it is, to many kids today, music is the soundtrack to the games on their Xbox, not something to be enjoyed on its own. That's cultural irrelevancy.

    And all this doesn't even begin to address the time needed to sift through all the competing music and media out there to find something you like. Bring more things to eyelevel and it becomes intimidating to even decide to try and dig through it all. Too many people will shrug and decide not to bother making the effort to find new music, which is a real shame. You have the time and inclination when you're younger, but to tell someone who has a family, a mortgage and a leaky roof that they have to fix that they also have to dig through websites and other media just to find a few good songs for their iPod? They won't bother--free time is far too scarce. This winds up as just another strike against music's place in our culture

    I seriously believe that this potential influx of acts into the middle of the curve will financially hurt a lot of people and culturally destroy music. While I realize this is a worst-case scenario, I certainly hope that the Long Tail theory and its results turn out to be a lot of theoretical hooey.

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