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December 21, 2004

Mass Customization

Wired's Chris Anderson writes about the extraordinary variety of potential consumer demand (The Long Tail:Yes, the book deal is now official):

Wired 12.10: The Long Tail: Unlimited selection is revealing truths about what consumers want and how they want to get it in service after service, from DVDs at Netflix to music videos on Yahoo! Launch to songs in the iTunes Music Store and Rhapsody. People are going deep into the catalog, down the long, long list of available titles, far past what's available at Blockbuster Video, Tower Records, and Barnes & Noble. And the more they find, the more they like. As they wander further from the beaten path, they discover their taste is not as mainstream as they thought (or as they had been led to believe by marketing, a lack of alternatives, and a hit-driven culture).


An analysis of the sales data and trends from these services and others like them shows that the emerging digital entertainment economy is going to be radically different from today's mass market. If the 20th- century entertainment industry was about hits, the 21st will be equally about misses.


For too long we've been suffering the tyranny of lowest-common-denominator fare, subjected to brain-dead summer blockbusters and manufactured pop. Why? Economics. Many of our assumptions about popular taste are actually artifacts of poor supply-and-demand matching - a market response to inefficient distribution.


The main problem, if that's the word, is that we live in the physical world and, until recently, most of our entertainment media did, too. But that world puts two dramatic limitations on our entertainment.


The first is the need to find local audiences. An average movie theater will not show a film unless it can attract at least 1,500 people over a two-week run; that's essentially the rent for a screen. An average record store needs to sell at least two copies of a CD per year to make it worth carrying; that's the rent for a half inch of shelf space. And so on for DVD rental shops, videogame stores, booksellers, and newsstands.


In each case, retailers will carry only content that can generate sufficient demand to earn its keep. But each can pull only from a limited local population - perhaps a 10-mile radius for a typical movie theater, less than that for music and bookstores, and even less (just a mile or two) for video rental shops. It's not enough for a great documentary to have a potential national audience of half a million; what matters is how many it has in the northern part of Rockville, Maryland, and among the mall shoppers of Walnut Creek, California.


There is plenty of great entertainment with potentially large, even rapturous, national audiences that cannot clear that bar. For instance, The Triplets of Belleville, a critically acclaimed film that was nominated for the best animated feature Oscar this year, opened on just six screens nationwide. An even more striking example is the plight of Bollywood in America. Each year, India's film industry puts out more than 800 feature films. There are an estimated 1.7 million Indians in the US. Yet the top-rated (according to Amazon's Internet Movie Database) Hindi-language film, Lagaan: Once Upon a Time in India, opened on just two screens, and it was one of only a handful of Indian films to get any US distribution at all. In the tyranny of physical space, an audience too thinly spread is the same as no audience at all.


The other constraint of the physical world is physics itself. The radio spectrum can carry only so many stations, and a coaxial cable so many TV channels. And, of course, there are only 24 hours a day of programming. The curse of broadcast technologies is that they are profligate users of limited resources. The result is yet another instance of having to aggregate large audiences in one geographic area - another high bar, above which only a fraction of potential content rises.


The past century of entertainment has offered an easy solution to these constraints. Hits fill theaters, fly off shelves, and keep listeners and viewers from touching their dials and remotes. Nothing wrong with that; indeed, sociologists will tell you that hits are hardwired into human psychology, the combinatorial effect of conformity and word of mouth. And to be sure, a healthy share of hits earn their place: Great songs, movies, and books attract big, broad audiences.

Posted by DeLong at December 21, 2004 11:50 AM

Comments

Is this some sort of subtle plug for the (newly-added and wonderful) fafshop?

Posted by: Ugh at December 21, 2004 12:56 PM


"Nothing wrong with that; indeed, sociologists will tell you that hits are hardwired into human psychology, the combinatorial effect of conformity and word of mouth."

LOL. "sociologists will tell you". "combinatorial effect" sure sounds scientific. more like "floating conjunction". but yeah, people like to have shared experiences to talk about other than the weather. friends, not perverts on spontaneously occuring discussion groups like "people who think they are in love with alberta watson after watching 'spanking the monkey' at 3am on showtime who have taken over obscure 24 forum that is result #36 on google"

by the way, once everything is converted to bits there's still the problem of ranking algorithm. aggregating and averaging subjective opinion, selective weighting and all that. (imdb isn't sophisticated enough yet, unfortunately)

Posted by: Shai at December 21, 2004 01:21 PM


This is exactly how my experience with Yahoo's Launch service has turned out. After the rough start-up, making sure bands I loath will never play again, I've found so much great music that I never would have been exposed to before. And now I'm buying more CDs, having been exposed to new good music. It's too bad the full service couldn't be free (the free service is far too handicapped to be worthwhile.) But while it's around, I'm enjoying the heck out of it.

Posted by: Stoffel at December 21, 2004 01:40 PM


He's right as to retailers but not as to producers. There is no incentive to produce material at the end of the Long Tail if the rewards for doing so are so slim (even if they are several times what they could have been in a physical world).

Posted by: Lawyer at December 21, 2004 01:57 PM


Seems like a corollary to the trends in consumption of entertainment media is the rise in popularity of internet news sources such as blogs. People are searching for news and finding treasure troves of alternative media.

Posted by: delecti at December 21, 2004 02:33 PM


Shai:

Launch has an interesting approach to the ranking problem. It works like a radio and it chooses each song it will push to you. You can't select the music it plays--you can only rank the music it plays (by genre, artist, album & song). It tells you why it chose each song. There's obviously some input from marketting or labels, because songs "Recommended by LAUNCH" have about a 99% chance of being absolute junk.

Launch picks the best music when it is "Recommended by fans of XXX", where XXX is whatever band you have rated highly. I have to assume it looks up in its database of users all of the artists among which there is a high ranking correlation among all their users. It's simple, and it works--really, really, REALLY well. I have found so much new (to me) music because people who like X like Y, people who like Y like Z, etc., etc.

Posted by: Stoffel at December 21, 2004 02:34 PM


Lawyer,

If there's no incentive, how do you explain the existence of the material? Sure, nobody sets out to be obscure, but creative materials are produced for many reasons that economists can't put into formulas.

Posted by: trostky at December 21, 2004 03:34 PM


Stoffel,

yeah. i was referring specifically to products you can't test drive, like movies. but i am a little bit suspicious about the music case. prima facie there is a cost of expanding the horizon, i.e. listening to a lot of bad music, or if it's a little too conservative, boosting the local maxima along one or more scales, e.g. genre convention.

Posted by: Shai at December 21, 2004 03:56 PM


It seems to me that whoever wrote the winner take all economy still had the better argument.

The post appears to just be a restated version of the Chinese math argument.

The reason for the 80/20 rule is trusted navigation. I read the NY Times to the extent I trust the navigator. It sure beats the alternative, searching the web for a bit or piece.

Posted by: Moe Levine at December 21, 2004 04:27 PM


Just read a great new report today by the Commonweal Institute, a new progressive San Francisco think-tank, called “Responding to the Attack on Public Education and Teacher Unions”. It shows how a well funded conservative movement is on the verge of creating a major shift toward privatization of the U.S. public schools. It ought to serve as a wake-up call to progressives, and offers a plan of action for those who care about protecting and improving America’s public education system from its adversaries, including Heritage, Cato, not to mention Bush and Cheney themselves.

The report shows that the attack on public education is part of a broader Radical Right antipathy for many “liberal” institutions and policies, such as organized labor, progressive taxation, regulation of business, reproductive choice, and the environment. The Commonweal report exposes the anti-public education perspectives being marketed daily to the American public by a virtually fascist movement led by Grover Norquist and others. It lays out how Americans now hear incessant hard-right messaging from such sources as Rush Limbaugh, Fox News, and the countless gas-bags from conservative think tanks appearing on cable TV nightly. It’s time to fight back before they eliminate public education in America – as preposterous as that may sound, it’s happening.

Check out the report online at: http://commonwealinstitute.org/reports/Responding_Ed_Report.pdf

Posted by: Chunkylover at December 21, 2004 04:43 PM


Ask tnh/pnh about the midlist sometime, if they haven't already weighed in on it. What Chris Anderson describing is a well-known phenomenon in publishing, and a major problem with the focus on blockbusters that infested the book industry about 15 years back. IIRC, publishing lost money by cutting off the long tail.

As Lawyer observes, one is not going to be able to afford too much production at the far end of the tail. How this affects the material...varies. Computing has made the technical side of media production much less expensive. But nothing is going to make recording a symphony orchestra or producing a full-screen movie cheap. Less obviously, a part of the cost of production at the low end is feeding the little guys until they get big enough to stand on their own two feet, and here Anderson's model falls down. Time was, publishers would lose money on the first few books by most new authors, until they'd finally developed as artists, gained a following, and started turning a profit for their publishers. That's much less common now, and that has always been very rare in popular music.

Excellent thing for the NEA to do, but somehow I don't think it's going to happen any time soon.

Salon essay on the midlist:
http://www.salon.com/books/feature/2004/03/22/midlist/index.html

Please get the no-paragraph-breaks in previews problem fixed. Please?

Posted by: Randolph Fritz at December 21, 2004 06:39 PM


The author makes great points. As it relates to Hollywood, about every three to four decades there has been a major paradigm shift in the business that involves both the artisic side (both in terms of content and in terms of technology) and the business side. The last shift, which came in the 1960s and 1970s, saw the end of the "old" Hollywood and the beginning of the "new" Hollywood, the end of the studio system and the beginning of the committee system, the end of the Hayes code and the beginning of the ratings system, an ever expanding frontier of special effects possibilities, the abandonment of certain genres (most notably the western) and the embrace of new genres (the action flick among others.)

The next revolution - the digital revolution - is likely to be equally profound, and has the potential to do for filmmaking what the printing press did for writing. As it stands, the best digital formats (HDTV) are still prohibitively expensive, but its only a matter of time before kids with talent and a few thousand bucks in digital equipment in Dubuque or Buffalo can do great work. And digital projection (which is expected to be nearly universal in another decade), makes circumventing the traditional and official avenues of distribution possible for the first time. Prints will be distributed by DVD rather than on film (the latter of which are obscenely expensive for owners of venues), which means that theatre owners will no longer be taking a huge financial gamble by giving indie filmmakers a shot. Add to that the growth of broadband, and internet distribution, and the possibility of working outside the system may finally become a reality for enterprising filmmakers.

Posted by: Sneaky Pete at December 21, 2004 10:41 PM


Lawyer,

Speaking only for myself: before I had a web page, I made CDs that almost no one bought. These days, I still make CDs that almost no one buys, but I can make them one at a time so that it doesn't cost me much, and I can put tracks up for download, which means that far more people hear my music (especially when a track catches the ear of a radio DJ) and I get compliments from around the world. I'd love to make some money as well, but it's basically a happy situation, and I have all the incentive I need.

Posted by: Tim Walters at December 21, 2004 10:49 PM


Tim, take a look at Mperia (www.mperia.com). I am not associated with Mperia, or their payment service Bitpass, in any way.

Posted by: Randolph Fritz at December 22, 2004 06:20 AM


The Hollywood/Bollywood example is off. Films are often given "platform" releases in a few cities before opening wider across the country. This is done with US as well as foreign films, so that positive reviews from New York and LA used to publicize the film. It also builds a very high per screen average, which is a good way of impressing the theater owners in smaller markets.

The Bollywood movies are released in the US, just not through US distributors. As I understand it, businessmen either buy or rent an older theater (sometimes just for a night) and then show the Bollywood movies. The Regent Theater in Arlington, Mass. showed them for a year or two. I was amazed by the size of the crowds.

Trivia: The Laurel Cinema in Maryland, which is in the shopping mall where George Wallace was shot during a campaign appearance in 1972, now runs Bollywood films. Haven't drawn any conclusions, but it does make you think.

Posted by: Mary R at December 22, 2004 07:36 AM


"But nothing is going to make recording a symphony orchestra or producing a full-screen movie cheap. ."

ever since the early eighties, synthesizer, sampling, and later computer composition programs have all been rapidly improving. As synthetic sound creation becomes more important, it will follow moore's law in improvment. It is currently much easier to produce well-arranged album in your bedroom using a few computer programs with only a few actual physical boxes. Soon only audiophiles and experts will be able to tell if a symphony was recorded by a real sympohny or by one guy on a computer. This will, and has been having a large effect on the number of people who can make music.

However, pop will stick around: its about community. Consider how anyone in jr adopst the style of their favorite mucisians: from baggy sport jerseys to black fishnet to spiked armbands. Pop music is the easiest and least demanding genre to be a part of, and doesn't create the "outsider feeling." big record companies spend a lot of money to manufacture their product: the pop music community. it will stick around.

Posted by: yoyo at December 22, 2004 01:32 PM