Reuben Millionsofus: Well, thank you to everyone for coming
to join us here. Our guest today is not only the editor of Wired (whose office
in SL we'll be unveiling in the next couple days) but also the author of The
Long Tail, a book that grew out of a blog about the odd effects that digital
distribution is having on the way in which we view economics of content. It's a huge honor to have him here today and
with that, I'll turn the stage over to Chris Anderson and the famous Hamlet Au.
Chris Anderson: Thanks, nice to be here. It's an odd
keyboard, so my typing is going to suck.
Hamlet Au: Thanks for coming all, let me start with my own
introduction.
If "The Wisdom
Crowds" was the cocktail buzzword of the last few years, then "The
Long Tail" is the term for today. When
Chris Anderson coined it, he was describing an Internet-driven economic
phenomenon, but since then it's been applied to various pursuits, from foreign
policy to education. Sign of a book here to stay.
Unsurprisingly, The Long Tail was a New
York Times bestseller on its July release, and still maintains a very healthy
position on Amazon's chart. (The long tail of The Long Tail right there.)
His book on the aggregation and acquisition
of stuff via the Net is particularly apt to discuss here. Because if there's one thing Second Life has, it's stuff. Terabytes of user-created content from more
than 3 years of this world's existence, sitting in thousands of Residents'
inventory. So hopefully he's able to help us understand the Long Tail of the
metaverse, too.
Formerly an editor at The Economist, Chris Anderson has been
editor-in-chief of Wired Magazine for the last five years. He stewarded it through the post-dot com
crash to maintain and grow the magazine's relevance. And not just as the standard-bearer of
digital culture, but as an indispensable resource for understanding the
post-9/11 era, too.
Last year, to no one's shock, Wired won a National Magazine
Award for general excellence.
And this month, I'm happy to say, they finally featured
Second Life on the cover.
So it's a double pleasure to welcome Chris to SL, to speak
about The Long Tail and related topics, and if we're lucky, to autograph some
books, too. And with that, ladies and
gentlemen and aliens, mythical creatures, and furries of indeterminate gender,
please join me in welcoming Chris Anderson's avatar!
[audience applauds]
Thanks again for coming, Chris.
CA: This is the coolest thing I've done all
morning.
HA: To start off, give us the "elevator pitch" for The Long Tail.
CA: The Long Tail describes the world beyond the
blockbuster. Our economy and culture is shifting from mass markets to millions
of niches. The rise of distribution
methods with unlimited capacity or “infinite shelf space”, of which the
Internet is the foremost (but not only) example, have made it finally possible
to offer consumers an incredible variety of products and other goods that were
previously suppressed by the economic and physical limits of traditional retail
and broadcast.
The Long Tail refers specifically to the “long tail” of the
familiar fast-falling demand curve in economics—we’ve usually looked just at
the high part of the curve on the left, where the hits are. But the tail of smaller-sellers is incredibly
long, and when you can offer everything all those niche product can add up to a
market that rivals the “head”.
Phew... now on to the fun stuff. Ask away...
HA: Excellent. Walk
us through one of the most potent examples of the Long Tail phenomenon from
your book, and tell us a bit about the factors at play.
CA: Well. The most dramatic--but by no means only--examples
are in the media and entertainment businesses... That's where there is a huge
amount of variety and cultural diversity that has been obscured by the very
narrow focus on blockbusters in traditional distribution channels, from retail
shelves to radio stations.
For example, today, around 40% of the music downloaded on
digital music services such as Rhapsody are tracks not available at Wal-Mart, America's leading music
retailer.
For Netflix (DVDs) and Amazon (books), about a quarter of
their sales are for titles not available in the largest bricks-and-mortar
retailers in their industry. Products that aren't for everyone--but may really
suit some people--typically don't pass the economic test for traditional
retail. But because each of us has some niche interest somewhere and we now
have distribution methods with "infinite shelf space" and near-zero
marginal costs, we can now aggregate all these minority tastes. This new market
of a million niches is adding up to a big new opportunity and the
fastest-growing one around.
HA: As you say, much of The Long Tail dwells on media
content-- books, movies, and so on. But that's only a small part of the overall
economy. Does the Long Tail apply to the fundamental material or perishable
industries of modern society? In other words, is there a Long Tail for, say,
raw steel, or bushels of mache?
CA: Mache? But to answer your question, yes. To greater or
lesser degrees, it applies almost everywhere that digital economics are
lowering the cost of distribution. That includes hard goods (think eBay) and
services (think Google AdWords, which are the Long Tail of advertising.)
To give an example that shows just how far you can take
this, Anheuser-Busch recently started a new division called "Long Tail
Libations".
[audience laughs]
What's the Long Tail of beer? Microbrews! Supply chain efficiencies in supermarket
distribution now mean that you can efficiently stock twice as many products as
just 15 years ago, so there's room for minority beer tastes.
HA: (Mache are those leafy greens you put on salads. Trader
Joe's has them, they're hard to manufacture, but they rock.)
So to my next question... Don't the realities of corporate
management make the Long Tail fairly irrelevant? Take the film industry. When a
big budget movie is a huge hit, the parent corporation's stock goes up, and the
executives get rich. So executives have
incentive to finance out-the-gate hits, but do they really have an immediate,
next quarter incentive to foster the long tail of their back catalog, where
profits are slow to come?
CA: But hits are unpredictable. Why risk your career on the
toss of a dice when you can spread the risk over a larger portfolio of smaller
investments? The profits in the back catalog (which is just one form of the Long
Tail) aren't slow--they're steady!
HA: A lot of people worry about how the Long Tail effect
might fracture society. To that concern, you've said, "We may be more
fragmented, but we'll also be richer as a culture." But let's consider a
specific example. If thanks to the Long
Tail, all the conservatives are only reading Bill O'Reilley and his kind, and
all the liberals are only reading Al Franken and his kind, how can this
possibly make our political culture richer?
CA [nods]: Yeah, I
get that a lot. Clearly the political climate at this moment isn't helping.
Broadly, I think that this is just a case of a pendulum overswing. We've been
so hungry for fresh, authentic voices in politics that we're rushing for the
blogs, even though they're often shrill. I suspect over time we'll get better
at compiling a more balanced view from many source rather than just counting on
the New York Times to do it for us.
HA: Wired.com just reported about a Second Life project that
can take in-world objects and fabricate them in the real world. Assuming this 3D printing becomes a
widespread and affordable procedure, what Long Tail applications do you see
coming out of it?
CA: I saw a great quote the other day that 3D printing
"makes complexity free". Moore's
Law made transistors free, which is why we can "waste" computing as extravagantly
as we're doing right now. 3D printing
makes complicated objects as cheap as simple ones. So the question is what's
the physical version of something like the Mac UI? I suspect that it will be things that are
"unnecessarily" detailed and beautiful--because we can. That would be
cool.
HA: Obviously the purchase of YouTube by Google is the big
Internet news this week. Reflect on it for us. What's it say about the Long
Tail phenomenon?
CA: It's a huge vote of confidence. Media learned how to
compete with the Long Tail in the 90s, because the bandwidth of the time made
text work online. Then the music
industry learned to compete with the Long Tail around 2000, when the bandwidth
made sense for MP3s. Now TV is going to
have to compete with web video. They thought we wanted thirty minute and one hour
dramas and high production content that only they could created. The truth is
that we do, but we also want more. YouTube
offers us more, and what's great about it is that's it's unbounded in supply,
diversity and source.
HA: Rodica, there were some questions from the audience?
[Event moderator] Rodica Millionsofus: Yes, Gwyneth Llewelyn want to know Wired has
been at the forefront of the Net culture — always was and always will. Some
Wired editors and columnists are regular residents of SL now. Do you wish to
reveal now the plans that Wired has for Second Life?
CA: Fortunately, I've got [Wired editor] Chris Baker, my SL master, sitting
next to me here. Rodica has built us an amazing environment and there will be
an open house there… [Ed - details to come ]
Rodica Millionsofus: Ariel and Csven both have economics
related questions:
Ariel asks, “If Long Tail revenues of any significance are
spread over time, what are the short term incentives to producers who can often
get a higher short-term return on investment?” Csven asks, “How's the time-based work coming on the data?”
CA: Yikes. Okay, I'll try to answer that one. There are two Long
Tails in content. One is broad appeal down to narrow appeal. The other is new versus old. So the Long Tail
revenues that you describe as being slow to mostly refer to the second, the monetization
of archives over time. The other big
point to make is that we're not just talking about a monetary economy. Most of the content created in the Long Tail
these days --from blogs to web video -- is done for free, with no expectation
of financial return. There are plenty of business opportunities in
*aggregating* that content, but the money doesn't necessarily accrue to the
creators.
Now for the second question. Csven, could you elaborate?
Csven Concord [from the audience]: Some time back you posted a couple of images
showing some time-based data. Just
wondering if you've continued that analysis.
CA: Ah. Yes, I did a project on the Long Tail of Time (for a
Long Now lecture.) We quantified the decay function of content (mostly music)
over time, thanks to a cool service called InfoFilter. It, unsurprisingly,
turned out to follow a powerlaw curve as well, although it was hard to make
many predictions on the exponents because music is so diverse. What we're mostly focusing on right now is
estimating the latent value in archives by looking at where sales fall off the
predicted powerlaw curve.
Rodica Millionsofus: Speaking of new versus old, Epredator
[Potato] wants to know, "Is Web video going to have to compete with participation in
the metaverse?" He continues that
question with, "Do you think the Long Tail applies to the number of environments
like Second Life, i.e. lots of metaverses?"
CA: I think the question is what YouTube competes with. Does
it compete with TV, the Web, real life, or Second Life. I suspect the answer is that it mostly
competes with TV and the Web, and less with interactive and communal activities
such as games and SL.
As for the second part, I see lots of Long Tails here. Yes,
lots of niche communities, both within places like SL and in other metaverses.
Also the content created in-game, of course. And finally the different usage
modes, from casual to intense, which are not as widely spread in traditional
gaming.
Rodica Millionsofus: A computer columnist for CBC Radio and
Television Canada asks: "Do you see an economic tipping point in third world countries near
term? For instance, do you imagine micro-finance led/Grameen Bank-style
projects such as groups of women artisans in the Sudan becoming a significant part of the Long Tail?"
Sue Stonebender [laughing from the audience]: That would by my question, I'm the
columnist asking...
CA: Yikes. That's a bit outside my area of expertise. I did
run the Economist bureau in Southern China in the 90s,
but that's not third world anymore. But to try to answer your question...
Many people have noted that there's a similarity between the
Long Tail and CK Prahalad's "bottom of the pyramid" theory, which is
also about the big market below the traditional markets. I spent a while in India trying to match the two, and I came to the conclusion that they're about
different effects. CK's theory is about commoditization--making products so
cheap that anyone can afford them. My
theory is about nichefication--making product variety so wide that all tastes
are served, regardless of price.
Rodica Millionsofus: Icon Serpentine wants to know: "How
does the Long Tail affect small business and independent artists?"
CA: Well, it's a very good thing, but I wouldn't expect the
rewards to be loads of money. Basically, the democratization of the tools of
production and distribution mean that it's easier to make and distribute
products, which means that there's more variety out there and that it's easier
to tap distributed demand and not just the usual geographically-concentrated
demand. That means larger audiences, for
a start. How to turn that into money isn't always clear, although in music at
least there's a clear shift from selling music as a product to using free music
as an advertisement for the live show, which is an experience that can't be
replicated well online (SL aside!).
For other small businesses outside of entertainment, the
opportunities lie in being more efficiently aggregated in global markets. Like
the eBay effect, but in more markets and for more goods.
Rodica Millionsofus: And one last question from Zenigma
Suntzu… He asks, “What are some of the
ways to convert a business that has been ‘head’ focused to Long Tail? For example, print music where quite a lot of
it is out of print and unavailable.”
CA: The big issues in those business lie in the conversion
of the products to digital, and clearing the rights. Each industry is
different, but in general those transaction costs are still really high. I call that the "elephant in the
room" of the Long Tail, and it's the biggest barrier remaining. The costs
of releasing archival material have to be so low that you can afford to have
much of it not sell at all.
You just can't predict what will sell and what won't, so you
have to find methods to get it all out there and let the marketplace sort it
out.
[audience applauds]
Chris Anderson bows, then moves to the autograph session, signing the SL edition created by Falk Bergman.
Anderson autographs his book for a leopard-lady fan
Reuben Millionsofus: Thanks so much for coming Chris. Next time we'll get you an actual long tail
from Luskwood to wear.
A cool video montage of the event is available on YouTube.
Quick ways to sell your house
Posted by: sell house | Saturday, June 28, 2008 at 06:36 PM