Long Tail vs. The Blockbuster

December 14, 2009
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Ever since Chris Anderson penned “The Long Tail,” it’s commonly accepted that products with low sales volume can, en masse, become bigger markets than sales of blockbuster products. However, a recent Economist article takes a different angle, suggesting that marketing executives should, in fact, make the big bet and go after the blockbuster “hit” product.

 

Back in 2005 when “The Long Tail” first hit bookshelves, Wired Magazine editor Chris Anderson advocated business executives should, “forget squeezing millions from a few megahits” and instead focus on niche markets where sales volume from obscure products can potentially tally big profits.

Mr. Anderson made a compelling case that just because a product or service isn’t a “hit”— doesn’t mean it won’t make money. Citing concrete examples from Amazon, Netflix and music service Rhapsody, Anderson argued when it comes to consumer choice (especially online), more is better and “fringy fare” can be extremely profitable. In fact, one key conclusion from “The Long Tail” is to “embrace niches.”

Is the mass market dead? Is niche marketing the wave of the future? The author of an Economist article titled, “A World of Hits,”


 

Ever since Chris Anderson penned “The Long Tail,” it’s commonly accepted that products with low sales volume can, en masse, become bigger markets than sales of blockbuster products. However, a recent Economist article takes a different angle, suggesting that marketing executives should, in fact, make the big bet and go after the blockbuster “hit” product.

 

Back in 2005 when “The Long Tail” first hit bookshelves, Wired Magazine editor Chris Anderson advocated business executives should, “forget squeezing millions from a few megahits” and instead focus on niche markets where sales volume from obscure products can potentially tally big profits.

Mr. Anderson made a compelling case that just because a product or service isn’t a “hit”— doesn’t mean it won’t make money. Citing concrete examples from Amazon, Netflix and music service Rhapsody, Anderson argued when it comes to consumer choice (especially online), more is better and “fringy fare” can be extremely profitable. In fact, one key conclusion from “The Long Tail” is to “embrace niches.”

Is the mass market dead? Is niche marketing the wave of the future? The author of an Economist article titled, “A World of Hits,” suggests otherwise.

A key premise of the Economist article is that in fragmented world — with abundant choice — blockbusters matter more than ever. Citing television examples such as “American Idol,” “Survivor” and others, the author says that “top programs are holding up well” and often at the expense of lesser entertainment options.

The article also mentions that “hits” are important in the music industry. For instance, even as overall album sales have declined 18% in Britain since 2004, albums occupying the number one spot have actually increased in sales. In addition, managers at Spotify music service disclose the most popular tracts on Spotify now account of 80% of streams. Moreover, in a rebuke to niche marketing—for a six month period, 1.5 million tracks on the service weren’t touched at all!

In fact, the author of the Economist article concludes, “Just because people have more choice, does not mean they will opt for more obscure entertainments.” In fact, a few examples show the opposite is occurring:

  • The top three US newspapers have all held onto subscribers much better than local/metro papers.
  • Vampire movie, “New Moon” earned more in a day than any other film in history.
  • The Lost Symbol by Dan Brown sold 1 million copies in the first day
  • In the past ten years, the top ten best-selling books in Britain increased from 3.4 million to 6 million.

Adding more fuel to the fire, research firm SNL Kagan calculates that between the years 2004-2008, movies that cost more than $100 million to produce, “consistently returned greater profits to big studios, than cheaper films.”

These are substantial and concrete examples that the “blockbuster” isn’t dead. However, let’s be fair to Chris Anderson, especially because he doesn’t advocate giving up on blockbuster products or services altogether. “Hits still matter,” he says, as a way to lure customers to an online or offline location. From there, recommendation algorithms (online) or trained personnel (offline) can steer customers towards other products or services that may be just as enticing as the blockbuster.

Long tail vs. the blockbuster? Perhaps there’s room for both.

In the Economist article, Jeff Bewkes, head of Time Warner says as much, “Both the hits and the long tail are doing well.” And going forward, a steady stream of profitable niche products/services alongside a stable of blockbusters may be the ultimate “win-win” approach for enterprises.

Questions:

  • With a potential audience of one billion, is a one-shot commercial on the SuperBowl worth $3.1 million (USD)?
  • Movie makers would love to always churn out “hits”, but they’re usually few in number. How can studios determine in advance which movies will be popular?
  • Long tail vs. blockbuster. Do you favor one approach over the other?

Related article: HBR “Long Tail Economics, Give me Blockbusters