The Long Tail Theory: From Mass Markets to Niche Markets

In the contemporary world, the success of the products of the cultural industries, particularly the content industry, has been determined by the mass demand for the products. In other words, the greater the audience or consumption of a content, the greater its success is considered.While the mass consumption of a product or service continues to be a determining factor in the market economy, in the era of the Internet, with the scarcity of audiences and the over-supply of media and content, new ways of analyzing the market are emerging. This is the case of the Long Tail Theory, a construction that is ceasing to be merely a theoretical assumption and is consolidating itself as a high-value alternative for the cultural industries.

What does the Long Tail Theory propose and why is it disruptive?

The Long Tail Theory was formulated in 2004 by Chris Anderson, a journalist, writer, physicist and editor of Wired magazine, and subsequently published in 2007 in his book The Long Tail: Why the Future of Business Is Selling Less of More.

Our culture and economy are 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 moving towards a huge number of niches in the tail“.

As production and distribution costs have decreased, especially online, there is now less need to crowd products and consumers into one-size containers. In an era without the limitations of physical shelf space and other distribution bottlenecks, products and services with a well-defined audience can be as economically attractive as those for popular consumption”. Chris Anderson

Although Anderson’s theory is more than a decade old, it is now that it appears more mature and applicable thanks to the dynamics of the web, where its relevance and successful applications are beginning to be seen.

To the extent that the Internet is preceded by an explosion of information and content without precedent, there is an over-supply and a subsequent shortage of audiences, contrary to what happened decades ago, when there was a limited number of media and information sources and a wide range of audiences. In other words, we go from many people consuming few sources to many sources consumed by few people, as in the case of niche content and YouTube channels with few, but faithful followers.

“In a context where the entertainment industry is migrating from the physical world to the digital world, a culture of diversity has emerged where new business models are emerging that focus on selling few to many”. Chris Anderson, 2007

That is, a Long Tail market is nothing but a market capable of satisfying multiple tastes and needs, regardless of the number of people individually interested in each product or service, going from a mass market to a niche market.

The most interesting thing with the Long Tail theory is that it is not only a rising social phenomenon, represented in thousands of blogs and content distribution platforms, websites, social network accounts and YouTube channels, but it is becoming a new economic paradigm, financially viable.

A good example is Spotify. While a few decades ago in a record store, a user accessed a limited number of records, almost all of them market hits. Nowadays, the same user can consume those “hits”, but also has the possibility of accessing many musical productions that are not massive, thus generating a very satisfactory individualized and personalized experience. The same phenomenon is repeated with the audiovisual consumption on Netflix, Prime Video, Hulu, or in the books distributed by Amazon or Barnes & Noble.

The Role of Thematic Content

More than three decades ago, and far before Anderson published his theory, producer John Hendricks envisioned generating television for niche markets, moving away from the traditional paradigm of mass television. That is how he created Discovery Channel, a project that few believed in its time, but that managed to become a successful thematic channel of documentaries and laid the foundations of subscription television. Nowadays, it is a conglomerate with more than eighty specialized thematic channels, focused on a niche market, proving Anderson’s theory for services not connected to the Internet.

As more thematic content is offered, the more demanding the audiences become and the higher level of personalization they demand, because they do not want to settle for one-size-fits-all products, but rather for custom designs. This forces that more and more contents need to be personalized and focused on market niches, which produces a domino effect that forces to privilege the tail even over the body or the head of the graphics and statistics.

A study carried out by Erik Brynjolfsson, from the National Bureau of Economic Research ⎯NBER⎯ of the Massachusetts Institute of Technology ⎯MIT ⎯, called: From Niches to Riches: The Anatomy of the Long Tail, concludes that the loyalty produced in the consumer by accessing a wide range of products, much closer to their tastes and distributed in the Long Tail of the sales matrix, can generate more wealth for the supplier in the long term, than selling massively the same product from the head to an unknown public.

Surely the mass media will not disappear in the next decade, but they should not lose sight of the fact that no media nowadays has the audiences it had three decades ago and surely in 10 years they will have less audience than they have now, so clearly media that do not focus on niche markets will find it increasingly difficult to ensure their survival.

In conclusion, we are witnessing the historical moment when the hegemonic no longer resides in the masses but in the niches, where diversification of supply is more important than the concentration of demand. Although we are clearly witnessing a shortage of audiences, the most important thing is no longer to have a large number of viewers, but to achieve quality in the supply of content, for much more demanding and qualified audiences, which translates into greater social and economic value for all parties involved.

By:

Gabriel E. Levy B.