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
    MyNameIsMatt, 7 Dec 2006 @ 12:12pm

    Concerts will thrive

    "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."

    This is just false. Patently false. Stadium filled concerts may become culturally irrelevant, but not music for music's sake. There are still plenty of highschool bands out there, and plenty of teen pop being produced that doesn't get on to game consoles.

    Also, I disagree with your vision of concert losses. Again, while big band sell out concerts may be of the old, what people really want are small intimate venues. The only thing holding that back is the idea that only good concerts have one headline band in a stadium of 50k people. That's old business model mentality, and as access to a larger group of bands opens up, I foresee concerts, at least more locally, thriving.

    "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"

    How is this any different from today's situation? It isn't. Actually, with iTunes it's insanely easier, and my older friends have reinvigorated their music collection because of it. In the past, they'd have to goto the store and buy a CD. How would they know what CD to buy? Listen to music on the radio or goto a concert. Very time consuming. Now, they can preview and buy rather easily at work and home. I see the exact opposite happening as to what you see coming. Music has much to gain from the long tail.

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