Chris Castle is Managing Partner of Christian L. Castle Attorneys, Los Angeles and San Francisco.
You’ve probably heard the expression “the long tail” used by Web 2.0 cognoscenti. Despite the largely uncritical acceptance the idea received a few years ago, research shows that for artists the “long tail” is the “wrong tale”. But it may inform a way to leverage past marketing investment in “niche” recordings traded on illegal p2p networks but currently not licensed.
It Actually Is About the Hits After All: Enter the Wrong Tale
A few years ago–between Internet crashes–the “long tail” theory surfaced in the technology press. The theory maintains that hit-driven businesses are obsolete. What artists should really focus on was not a few things that sold a lot, but a lot of things that sold a little-the “long tail.” Sales would be distributed proportionately in the “long tail” because the Internet allowed niche consumers to buy small quantities of lots of things generating significant revenues for retailers.
How rightsholders can produce the “more” and cover their margins out of the “less” only troubled rightsholders-particularly with companies like Google pushing the theory before the Crash. Proponents never thought retailers might run out of things to sell. (In 2006, this “less is more” theory was spun into a 288 page book called “The Long Tail: Why the Future of Business is Selling Less of More”, and was marketed in the UK under the subtitle “Why Endless Choice is Creating Unlimited Demand.”)
The “long tail” theory is now being analyzed critically, starting last year with the comprehensive study of Professor Anita Elberse of the Harvard Business School (“Should You Invest in the Long Tail?”). She concluded:
“[T]he [long] tail represents a rapidly increasing number of titles that sell very rarely or never. Rather than bulking up, the tail is becoming much longer and flatter…[T]his is the truth of the long tail. [Rather than benefiting niche marketers,] digital channels may be further strengthening the position of a select group of winners [,i.e., making online channels even more of a hit-driven business than offline retail].” (My emphasis.)
Another study by Will Page, Chief Economist of PRS for Music (the UK songwriter collecting society), confirmed these results and found that for PRS writers, “20% of tracks in our sample…sold at least one copy, and hence, 80% of the tracks sold nothing at all…. you’re looking at a 80/0.38% rule [as opposed to the 80/20 rule or Pareto principle] for all the inventory on the digital shelf.” (My emphasis.)
No one can afford to produce competitive new titles for the “long tail” as the production and marketing expense exceed projected revenues. Few rightsholders can afford the clearance costs for digital exploitation of back catalog, either. Professor Elberse again identified the problem in her research: “Music companies, for instance, often decline to make old content available online because clearing the rights is too cumbersome [and expensive].”
Hit driven marketing drives demand. The problem is that the larger the demand, the more users steal the hits–using “false innovators” like Limewire–that they discover through licensed companies like iTunes. Let’s be honest-it’s not hard to compete with “free,” it’s hard to compete with stealing.
Black markets defy measurement, but the explanation for the “wrong tale” phenomenon of zero sold may be simple-the big marketing budgets that drive big hits also drive users to illegal p2p services where they not only download the current hits but also the older back catalog that is unavailable on licensed services. Downloading current hits is expected, but it is the back catalog losses that are potentially revealing. As Eric Garland (CEO of Big Champagne) says, “File sharing communities are the domain of the [“rarities”, the] unreleased, the so-called out of print, live tracks, odds and ends”–most of are not available through legitimate channels.
The “long tail” may be discredited, but it stimulates discussion about leveraging back catalog-which is in demand on illegal p2p services.
Licensing and Monetizing the Wrong Tale
Will Page and Eric Garland have a new study that likely confirms that illegal trades vastly outnumber licensed digital sales. (Billboard’s Glenn Peoples has a good story on this study).
The problem with measuring black market competition is that most black market content is simply not available in a licensed environment either because it isn’t cleared or artists don’t know the recordings exist, especially live recordings.
If artists can’t stop illegal uses of their works, they may be able to at least claim ownership to these rarities and make them available commercially (assuming reasonable quality). It may be worth developing “best practices” for commercializing these rarities. Artists, unions, songwriters, producers, record companies and music publishers should hash this out.
Some key issues:
–claiming but not gaming. Help artists, songwriters, labels and publishers claim their rights in rarities found on p2p networks, then offer them for sale through legitimate channels; and
–for previously signed artists, pay catalog artists an industry standard rate (and songwriters the statutory rate) for deep catalog tracks not previously cleared for digital so that the recordings (including “out of print”) could be offered for sale with minimal clearance cost.
This approach isn’t a panacea for piracy, but it could compete with one of the attractions for p2p users. It is not without risk, but so is doing nothing. Doing nothing gets to the end of the tail very quickly.
Opinions expressed are those of the author and should not be attributed to anyone else. Copyright 2009 Christian L. Castle. All Rights Reserved.