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 programmes 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”
Tags: analytics, blockbuster, Chris Anderson, economist, long tail, New Moon, Niche Marketing, niche sales, prediction, print on demand
Paul:
is an example of what I mean: “commonly accepted that products with low sales volume can, en masse become bigger markets than sales of blockbuster products.” That is a common misread of long tail, maybe, but shouldn’t really be “accepted”…
I’ve always had a problem with the Long Tail paradigm, not because I disagree with it fundamentally, but that it is way too often taken for a ride to a place it doesnt belong. Your opening comment (sorry to use your words against you
The long tail is good for businesses that can focus and make money on niches. Very few, however, are able to put together a “string of pearls” that will outdo the big boys. Maybe Chris Anderson can explain why P&G is still dumping smaller coffee and jam brands, and why Unilever does a portfolio pruning of hundreds of products once every 5 years (“cleaning out the tail”, if you will).
For small businesses, the long tail is a nice strategy to pursue. For 99% of medium to large businesses, not so much.
Paul,
Nice post. Thought provoking.
It would be nice if consumer product companies could come up with blockbusters routinely, but it just doesn’t happen all that often. There are very few companies like Apple in the world, able to put out one blockbuster after another. IT seems to me that being able to do that requires a uniquely innovation-oriented culture. Still, smaller and mid-sized companies can be pretty nimble and put together a few “hits” with some steady performers among their product offerings and do quite well for themselves. Sometimes incremental innovations on products can make a big difference. I don’t think this approach is necessarily a bad thing, as long as there’s a steady revenue stream and decent profits.
Kevin, appreciate your thoughtful comments. You said, “For small businesses, the long tail is a nice strategy to pursue. For 99% of medium to large businesses, not so much.”
Let’s take a small but growing online business such as Spotify that has close to zero carrying costs, an online storefront, and ability (because of digital product) to carry near unlimited products.
Do you think the major variable for whether long tail is a successful strategy is more along the lines of type of product/service (hard good vs digital), distribution mechanism, carrying costs, and opportunity costs?
Ted, you said, “It would be nice if consumer product companies could come up with blockbusters routinely, but it just doesn’t happen all that often. There are very few companies like Apple in the world, able to put out one blockbuster after another.”
Could not agree more. But now I have questions. Is it an innovative culture that helps a company string together hit after hit, experience, genius, luck? All of the above? Are there other factors?
Even the most successful movie executives turn out clunkers–and these are folks with a pulse on customer preferences, a genius mindset, and they often work in highly innovative cultures. Is there a single criteria of success that has more “weight” than others?
To adopt a blockbuster mentality, with traditionally millions on the line, I think you have to be more right than wrong. Fishing for ideas on how to make it happen…
Paul – I’m pretty sure there is no “secret formula” to blockbuster success, but at least two of the examples you cite – “New Moon” and “The Lost Symbol” – suggest that some blockbusters may actually depend on a long-tail but one that leads up to them, rather than following. “New Moon” after all is the second film in a series for which the audience was built over several years through the book market. Similarly, Dan Brown’s recent success is undeniably connected to the success of “Angels and Demons.”
If the answer is “success begets success,” that might not be very helpful to people trying to create blockbusters, but then again, it might, if you really think about it.
Matthew, thank you for some very thought provoking comments. Your idea that blockbuster success could be “set up” via long tail actions, or previous events over time is compelling and definitely deserves more study.
Now, as to secret formulas in predicting blockbuster success- at least for the movie business, one company thinks they have it…
http://sloanreview.mit.edu/the-magazine/articles/2009/winter/50207/what-people-want-and-how-to-predict-it/
That article reminded me of this one from the New Yorker about some guys who thought they had developed a “formula for hit movies: – http://www.newyorker.com/archive/2006/10/16/061016fa_fact6
I liked it. So much useful material. I read with great interest.