Longer Tails — and Taller Heads

This is the question of the season for two reasons: Dead Man’s Chest, the recent installment of Pirates of the Caribbean, which launched last night, and The Long Tail the much-blogged, long-awaited book by Wired’s Chris Anderson. Kraken The movie features (what else?) a Kraken, a veritable long-tailed, high-headed Leviathan that unceremoniously sucks ships out of the ocean.

Dead Man’s Chest is not just a movie — it is a fully packaged, well merchandised blockbuster. So sure was Disney of the success of DMC, that it filmed part three at the same time on the same locations as part two.

Not bad for a movie based on a theme park ride. You may remember those moments in The Black Pearl where you could not believe that they had contrived a scene just to match a moment on the now two decade old theme park ride — but they did. To judge from the current movie, Disney is about to redo the half century old Jungle Cruise into a Dead Man’s Chest ride. Traditionally don’t you do the movie first, then the merchandising?

The New York Times declared the film

“not just a movie, (but).. a glistening, sushi-grade chunk of franchise entertainment, which means that maximal enjoyment of it comes with certain obligations. It is the second episode in what will be at least a trilogy – the third installment is scheduled for release next summer – and full appreciation of its whirligig plot will depend on thorough acquaintance with the first “Pirates of the Caribbean” picture, conveniently available for purchase on DVD. And since “Dead Man’s Chest” brazenly dispenses with the convention of an ending – it’s pretty much all middle – you will, by virtue of buying that ticket, have committed yourself to buying another one a year from now if you’re the least bit curious about how the whole thing turns out. By then, chances are good that you will have forgotten most of what happened in “Dead Man’s Chest,” so you’ll have another disc to add to the shopping cart.

As for the “all-star three-way battle of the cheekbones (Orlando Bloom vs. Keira Knightley vs. Johnny Depp)”, well

“Ms. Knightley is, once again, a vision of imperial British pluckiness, with an intriguing dash of romantic recklessness that surfaces toward the end. Mr. Bloom, as is his custom, leaps about, trying to overcome his incurable blandness, and is upstaged by special effects, musical cues, octopus tentacles and pieces of wood. Naomie Harris turns up for a few scenes of hammy voodoo, and Mackenzie Crook and David Bailie contribute some proletarian slapstick….Two sequences in particular stand out, and would stand alone nicely as shorts: I will always think of them as “Fruit Kebab” and “Runaway Hamster Wheel.”

Then comes Chris Anderson, reporting that high heads (blockbusters) have been replaced by long tails (infinite selection — a unique product for every customer). Anderson first told the story in the October 2004 issue Wired, where Anderson serves as editor. A former physicist and writer for the Economist, Anderson does his homework. He published bits of the book on his blog, and responded admirably to criticism. (Anderson is a friend and someone I admire. He opens one of his chapters with the story of my company. I have a financial interest in at least part of his story being true.)

John Cassidy at the New Yorker has published a solid review of the book. (Remarkably, Cassidy fails to disclose that both the New Yorker and Wired are owned by Conde Naste, which would not only have been the right thing to do professionally, but would have strengthened part of his argument as well.)

Anderson’s inspiration for writing “The Long Tail” was a visit he paid to a digital jukebox company called Ecast. In business, it’s often said that twenty per cent of the products generate about eighty per cent of the revenue. This version of the so-called 80 / 20 rule might suggest that most of a retailer’s inventory-in the case of Ecast, about ten thousand albums ready to download-is worthless. But when Anderson spoke with Ecast’s chief executive he found that ninety-eight per cent of the albums in the library sold at least one track every three months. “And because these were just bits in a database that cost nearly nothing to store and deliver,” Anderson writes, “all these onesies and twosies started to add up.”

Once you’ve seen one long tail, you start seeing them everywhere, especially in media. Netflix, a DVD-rental company that allows its customers to order films online and receive them in the mail, has a library of more than sixty thousand titles. At Blockbuster stores, ninety per cent of the movies rented are new releases; at Netflix, about seventy per cent are from the back catalogue, and many of them are documentaries, art-house movies, and other little-known films that might never have had theatrical release. “The lesson is that what we thought was a naturally sharp drop-off in demand for movies after a certain point was actually just an artifact of the traditional costs of offering them,” Anderson notes. “Netflix changed the economics of offering niches, and, in doing so, reshaped our understanding about what people actually want to watch.”

Both eBay and Google turn out, in Anderson’s account, to be long-tail businesses, too. On any given day, about thirty million individual items are bought and sold on eBay, many of them cheap and obscure. Barely a decade after Pierre Omidyar founded eBay, more than seven hundred thousand Americans report it as their primary or secondary source of income, according to a study by the market-research firm AC Nielsen. For Google, the long tail is populated by small advertisers. Major corporations pay to get their ads placed next to the results of popular search terms, such as “luxury S.U.V.s” and “flat-screen televisions.” But much of Google’s annual revenue, which now exceeds five billion dollars, comes from tiny companies whose ads appear next to queries like “Victorian jewelry” and “Hudson Valley inns.”

The least convincing part of Anderson’s book is his treatment of what he calls “the short head,” the part of the curve where popular products reside. Although he acknowledges that best-selling books and blockbuster movies won’t vanish overnight, he suggests that demand for them will gradually decline: “the primary effect of the long tail is to shift our taste towards niches.”

Is this what we’re seeing? In the film industry, more movies are being produced than ever before, but seven of the ten all-time top-grossing films worldwide have come out since 2000: three “Lord of the Rings” movies, three “Harry Potter” movies, and “Shrek 2.” It’s true that over-all attendance at movie theaters has been slipping, but the biggest films are still doing well, as was demonstrated recently by “The Da Vinci Code” and “X-Men: The Last Stand,” both of which enjoyed highly successful opening weekends despite tepid reviews. Four of the top-selling novels ever published-the works of J. K. Rowling and Dan Brown-have appeared since 2000, too.

The music industry, on which Anderson bases much of his argument, may be a special case. Album rock reached its peak in the late nineteen-seventies, and, with the rise of genres such as hip-hop, house, and grunge, the music market had begun splintering well before the Web arrived. File-sharing and the iPod accelerated this trend, but this hasn’t eroded the demand for the most popular songs: if illegal downloads are included in the “sales figures,” the over-all demand for songs by supergroups like U2 and the Rolling Stones may be greater than ever.

In other words, what Disney knows about Depp (and what Jack Sparrow discovered about the Kraken) is that very high heads not only co-exist with very long tails, but can be a lethal combination. Will more choice lead to more competition? Not necessarily — fragmented product markets do not always lead to fragmented industries. Surely the Internet has produced more choice, but will it produce more competition? In other words will consumers or investors benefit from the increase in choice? The answer is far far from clear.