“Industry has a lot to do with things… The industry is tough, especially for a band like us, a rock band right now. We’re not bitter about it or anything like, “Fuck the music industry”, that’s the last thing we’re thinking. We’re all continuing to do music”
After 10 years together as a band, Dave Strauchman of “Every Avenue”, explains their break up in Oct 2012 in an interview to The Gunz Show.
Every Avenue is a pop punk band from Marysville, Michigan. They have 228,000 likes on Facebook, millions of views on YouTube but most probably you haven’t heard of them and they are still referred to as the “long tail” of the music industry.
Before their break up in 2012, Every Avenue was also one of the fastest growing artists in touring. From 11 tour dates they had in 2007, to 140 in 2010.
According to a songkick.com report, long-tail artists tour more than the most popular artists, and Every Avenue is just an example.
Their report divided artists into quartiles based on their site internal popularity ranking, which is the number of users who are tracking that artist and want to see them live.
The result shown in the graph above is clear – not only that the long tail artists tour more than the popular ones, they also present a very big growth in their touring.
In their blog songkick also mention a research that was conducted by Julie Holland Mortimer, Chris Nosko and Alan Sorensen in 2010: “Supply Responses to Digital Distribution: Recorded Music and Live Performance”
“While file-sharing may have substantially displaced album sales, it also facilitated a broader distribution of music, which appears to have expanded awareness of smaller artists and increased demand for their live concert performances. Concert revenues for large artists, however, appear to have been largely unaffected by file-sharing. Music for large artists was likely widely available prior to file-sharing, and as a result it is not surprising that demand for those artists’ concerts would have been largely unaffected by file-sharing. Similarly, the decline in album sales is much more pronounced for large artists than for small artists. Again, for small artists, file-sharing may have increased awareness of their music and encouraged some additional album sales from a larger fan base even as it displaced album sales to others.”
By the way, one famous artist who had it all figured it out already in 2002 said back then: “Music itself is going to become like running water or electricity… You’d better be prepared for doing a lot of touring because that’s really the only unique situation that’s going to be left. It’s terribly exciting. But on the other hand it doesn’t matter if you think it’s exciting or not; it’s what’s going to happen.”
The artist is David Bowie and we will be getting more meaningful and wise quotes from him in later posts.
These 2 reports teach us that the less popular long-tail artists tour a lot and that there is more demand for their concerts. That is supposed to be encouraging for the long tail musicians, right?
If that was the case, why would Every Avenue, who toured all over the place, break up after 10 years and complained about the “industry”?
If you have read my previous posts you probably already know the answer.
the short head of live music
Again, it is all because of the short head.
It seems that although the indie and less popular artists travel a lot and perform more than before, the short head rules in the live music arena in terms of money.
“The music industry is a microcosm of what is happening in the U.S. economy at large. We are increasingly becoming a “winner-take-all economy,” a phenomenon that the music industry has long experienced. Over recent decades, technological change, globalization and an erosion of the institutions and practices that support shared prosperity in the U.S. have put the middle class under increasing stress. The lucky and the talented – and it is often hard to tell the difference – have been doing better and better, while the vast majority has struggled to keep up.
These same forces are affecting the music industry. Indeed, the music industry is an extreme example of a “super star economy,” in which a small number of artists take home the lion’s share of income.”
These words were said by the Chairman of White House Council of Economic Advisers, Prof. Alan Krueger, at the Rock and Roll Hall of Fame on June 2013, The theme of his talk was: “Land of Hope and Dreams: Rock and Roll, Economics, and Rebuilding the Middle Class”.
Prof. Krueger, who also teaches Economics and Public Affairs at Princeton University, likes to explain economics using examples of the rock ‘n roll industry.
He found out that 1% of the performing artists in 2003 took 56% of all concert tickets revenues in that year! The top 5% of all artists took almost 90% of the revenues! The remaining 95% took only 10%.
The short head of live music concerts is significant.
His research also showed the change throughout the years since 1982. In that year the short head of the artists, meaning the 1%, took only 26% of the revenues of all concert tickets. The top 5% took 60% and the remaining 95% took 40%.
The bigger got bigger and the smaller got smaller.
The superstar economy beats the long tail economy
So what has happened since 2003?
According to Prof. Krueger it hasn’t changed much. The “long tail” economy didn’t affect the the live concert industry, or as the wired magazine article well said: “We Listen to Indie Bands Online, But Pay to See Madonna”.
Krueger told Ryan Tate of Wired that based on his latest research update, from February through June of 2013, the top 1% of artists garnered 56.3% of total concert revenue and that “These numbers bounce around from year to year, but I see no evidence that it has become less of a superstar economy since I last published on it”.
“Amazon had over the last few years either lowered discounts on scholarly books or, in the case of older or slow-selling titles, completely eliminated them” said Bruce Joshua Miller, president of Miller Trade Book Marketing, a Chicago firm representing university and independent presses, to DAVID STREITFELD of the new York times (July 4th 2013).
The article claims that As Competition Wanes, Amazon Cuts Back Discounts – They still offer a lot of discounts on bestsellers, where they have competition, but reduce the discounts on niche titles that can’t really be found in other stores.
STREITFELD suggests a reason for Amazon’s new discount policy: “In its 16 years as a public company, Amazon has received unique permission from Wall Street to concentrate on expanding its infrastructure, increasing revenue at the expense of profit. Stockholders have pushed Amazon shares up to a record level, even though the company makes only pocket change. Profits were always promised tomorrow. Small publishers wonder if tomorrow is finally here, and they are the ones who will pay for it.”
Amazon is the model of the “long tail theory” – If the things said in the article are true, then this might be a proof that the long tail is not really profitable. Not even for retailers.
When I was in Merida, Venezuela, in 1998, they told me I must go to the Heladeria Coromoto, a famous ice cream parlor that holds the Guinness record for its variety of flavors.
Who would say NO to the taste of a cold tuna or spaghetti and cheese ice cream?
So I went there and tried the most dreadful ice cream I have ever had, and I am not talking just about the corn or beer flavors that I took, but also the plain strawberry and chocolate.
The Heladeria Coromoto ice cream place offers more than 860 flavors. All kinds of dishes are turned into frozen ice cream, all kinds of fruits, vegetables, alcohol drinks, beverages etc. Not all of them are on the menu daily. Usually there are about 75 different flavors to choose from, a mix of what Manuel Da Silva Oliveira, the owner, calls “bestsellers like beer and rum with raisins”, traditional flavors, like vanilla and Dulce de Leche, and some “long tail” flavors such as tomato, calamari, chicken and tuna.
Manuel’s ice cream place is a landmark and point of interest to any tourist who step foot in Merida. Not for the good taste, like the ice cream in Bariloche, Argentina, but for the variety and gimmick.
What does it say about the long tail of ice cream?
It is a well-known fact that the most popular ice cream flavor in the world is vanilla. According to the International Ice Cream Association, almost 30% of ice cream lovers chose it as their favorite flavor (2012). Here are the top 15 popular flavors:
According to the International Dairy Foods Association report, we can say that the 15 most popular flavors satisfy 76.3% of ice cream fans. The rest hundreds of flavors are preferred by only 23.7%.
The 10 most popular flavors satisfy 68.3% of ice cream fans. The medium and long tail of ice cream is preferred by 31.7%. If there are 860 flavors of ice cream, it means that in the ice cream business 1% of the ice cream flavors is responsible for 70% of the ice cream consumption.
If we ignore the tuna and garlic ice cream, which you can probably only find in Merida, and say that there are 100 “real” flavors (but by that we actually say there is not much of a long tail in ice cream) then we can say that in the ice cream business 10% of the flavors are responsible for about 70% of the demand.
This is the Pareto of ice cream.
So what about Heladeria Coromoto ice cream place?
They offer the longest tail of ice cream and they are quite full and busy.
Isn’t that a proof that the long tail does work?
Well, sometimes businesses use the long tail as a gimmick, as something that differentiate them from others – Pubs that call themselves “The long tail of beer”, comic book stores that claim to have “the long tail of comics” etc.
It works because sometimes, we, as consumers, want to try something new or see something we don’t already know.
But this has nothing to do with any economy change as suggested by the long tail theory;
“Apple said that every one of the 1 million tracks in iTunes had sold at least once“
This is a common expression (from 2006) used to emphasize the long tail theory.
Another one is the story in the introduction to the “long tail” book, of how Mr. Anderson learns from Ecast, a music-streaming company, that 98% of its catalog gets played at least once a quarter. Much more than most would predict.
I remember that at that time, when I first read it, I was also surprised. It does show that there is a demand for almost all pieces of niche music.
But does it support the long tail theory or oppose the Pareto principal? Of course not! It only shows that Ecast and I-tunes have a lot of stuff to sell and that there is some demand to almost anything, but it doesn’t say anything about the revenues generated from that long tail or about the percentage of products that is responsible for 80% of the revenues. It can still be 20%.
By the way, during its first week (on May 2003), I-tunes sold one million songs. Only 50% of the 200,000 titles were sold at least once. By June it jumped to 80
The 98% becomes 88%
In july 2006, Lee Gomes wrote in the Wall Street Journal, that 2 years after Anderson’s conversation with Ecast (2004) in which he learned that 98% of their catalog gets played at least once a quarter, things have changed. Their catalogue has grown dramatically but the 98% has become 88%. 12% of the songs were not played at all.
At the same time even less positive information about the 98% rule was coming from another music streaming service, Rhapsody – From the 1.1 million songs, 22% had no demand what so ever and another 19% got just one or two plays.
In his article, Gomes demonstrates how the long tail is not that long and how the Pareto is no longer 80/20 – it is now 90/10!
“Ecast says 10% of its songs account for roughly 90% of its streams … monthly data from Rhapsody showed the top 10% songs getting 86% of streams … 2.7% of Amazon’s titles produce a 75% of its revenues … Bloglines, the widely used blog-reading tool, lists 1.2 million blogs; real ones, not computer-generated spam blogs. The top 10% of feeds grab 88% of all subscriptions.”
And what about Itunes?
In August 2006 the Guardian reported that “at a recent debate hosted by digital music consultancy firm MusicAlly, eMusic’s chief executive David Pakman came up with a startling claim. He said that 10% of product on iTunes accounts for 90% of the store’s total sales. Rather than smashing the 80/20 rule, the world’s most popular download store appeared to be exacerbating it.”
One year earlier, Netflix, the movie rental company (at that time they were an online DVD movies rental service), made its data available as part of a $1 million prize competition to encourage the development of new ways that will improve its ability to introduce customers to lesser-known titles they might find appealing.
Professor Serguei Netessine and doctoral student Tom F. Tan from Wharton took the challenge.
They did find a long tail of titles (the number increased from 4,470 in 2000 to 17,768 in 2005) but they also found that the 80/20 principal had an even stronger effect, with demand for the top 20% of movies increasing from 86% in 2000 to 90% in 2005.
Five years after his Russian wife left him in Italy for a young servant, Vilfredo Federico Damaso Pareto made his most famous observation. He found that twenty percent of the population in Italy owned eighty percent of its land.
The year was 1906 and this observation, that had nothing to do with his wife’s abandoning him, did have a lot to do with his Sociological views on what was going on in Italy at that time.
“At the bottom of the Wealth, Men and Women starve and children die young. In the broad middle of the curve all is turmoil and motion: people rising and falling, climbing by talent or luck and falling by alcoholism, tuberculosis and other kinds of unfitness. At the very top sit the elite of the elite, who control wealth and power for a time — until they are unseated through revolution or upheaval by a new aristocratic class. There is no progress in human history. Democracy is a fraud. Human nature is primitive, emotional, unyielding. The smarter, abler, stronger, and shrewder take the lion’s share. The weak starve, lest society become degenerate.” He wrote.
His views, which he didn’t keep to himself, together with his arrogance, sarcasm and contempt towards those who didn’t agree with him, didn’t make him very popular among some people, and he would probably die young from unnatural causes if he wasn’t so good with swords as well as with words.
Vilfredo couldn’t predict that his observation on the distribution of land would turn into something much bigger and general. Something that we call today “the Pareto Principal” and means that 80% of the effects come from 20% of the causes.
80% of your company’s revenues come from 20% of your customers and from 20% of your products, 80% of your stock comes from 20% of your suppliers, 80% of your sales are achieved by 20% of the sales team, 80% of your problems at the office are caused by 20% of your employees, etc.
The understating that there is a Pareto principal cleared the way to the Pareto efficiency, meaning that we should focus on the 20% that are responsible to the 80% – be nicer to the 20% of our customers that buy 80% of our stuff, make better room in our store to the 20% of the products that generate 80% of our revenues etc.
The Pareto principal was also challenged by the long tail theory.
“Forget the Pareto principal, it is so 1906 “, said the people of the long tail theory, “The Internet has the potential to substantially increase the collective share of niche products, thereby creating a longer tail in the distribution of sales”.
In other words they said – the 80/20 was relevant when there was no long tail, when the number of different products in the store was definite and relatively small, but now, when there is an infinite number of products and unlimited shelves in the store, the 20% that generates 80% of the sales is now much bigger.
There are several reasons why blockbusters in the last several years have became so big, but the most important one would be that we talk and hear about movies more than ever before.
The word-of-mouth about movies
In 2008, Universal McCann published one of the most important researches on word of mouth, examining 17,000 respondents in 29 countries. The research name was: “when did we start trusting strangers?” and we will elaborate on it later on.
One of the findings of this research was that movies are the most “reviewed” type of products, brands or services on the web. Almost 60% of the respondent said they had reviewed films online.
The word of mouth about movies work both ways – it turns some movies into mega hits and at the same ease and speed it ruins others.
The word of mouth about movies works both ways – it turns some movies into mega hits and at the same ease and speed it ruins others.
“Friday is the new weekend”
Brüno, the Sacha Baron Cohen mockumentarycomedy, was released on the weekend of July 10, 2009. The numbers on Friday were pretty good, reaching 14.4 million dollars, but 24 hours later, on Saturday night, it collapsed by 40%. All the other top movies that were playing that weekend presented an increase from Friday to Saturday.
So what happened to Bruno?
The TIME said:
“In the old days — like, until yesterday — movie studios judged the success of their big pictures by how much they grossed on the opening weekend. But in the age of Twitter, electronic word-of-mouth is immediate, as early moviegoers tweet their opinions on a film to millions of “followers.” Instant-messaging can make or break a film within 24 hours. Friday is the new weekend….
Brüno could be the first movie defeated by the Twitter effect.”
Ironically, last week, we got another sharp reminder of the 2 sides of this coin – While Jurassic park broke all times weekend earnings record, another movie broke the record for lowest opening ever with earnings of 918$. I am talking about FIFA’s “United Passions” starring Tim Roth.
Next on “the short head of movies”:
We don’t need another hero – One Batman is enough
The easy definition would be: “the opposite of the long tail theory”, but nothing is that easy and it wouldn’t be completely correct.
The long tail theory from the early days of the internet (2000+) claimed that “our culture and economy is increasingly shifting away from a focus on a relatively small number of “hits” (mainstream products and markets) at the head of the demand curve and toward a huge number of niches in the tail.”
It has its observations on retailers, manufacturers and consumers.
As for consumers, the long tail theory suggests that: “When consumers are offered infinite choice, the true shape of demand is revealed. And it turns out to be less hit-centric than we thought. People gravitate towards niches because they satisfy narrow interests better, and in one aspect of our life or another we all have some narrow interest”.
We would love to think of ourselves as people with “narrow interests”, wouldn’t we? Meaning that we all have “unique niche interest” meaning that we are all … unique and interesting.
But are we really? Think about it for a minute. We will get back to it later.
As for retailers and manufacturers it suggested that “As the costs of production and distribution fall, especially online, there is now less need to lump products and consumers into one-size-fits-all containers. In an era without the constraints of physical shelf space and other bottlenecks of distribution, narrowly-target goods and services can be as economically attractive as mainstream fare.”
The long tail theory might work for retailers (Amazon, iTunes, Netflix etc’) but does it really work for manufacturers? Is it really what the consumers want?
Well… probably not.
This is where the “short head theory” begins.
It continues with observations on the real current status of the head (let’s say for now that it is far from “short”) and with explanations on how it has grown that big so fast (let’s say for now that the social media had something to do with it).
From movies to music to consumer electronics… it happens everywhere.
The heads are no longer short and the tail is no longer long.