Tuesday, February 08, 2005
The Pareto Principle meets The Long Tail
Most of us are familiar with the Pareto Principle or the 80-20 Rule as it is also called. It is often expressed by stating that 80% of the work gets done by 20% of the workers or 20% of the products provide 80% of the profit and so forth. The Rule has been around for almost 100 years and has held true because it has reflected well the economics of the times - the economics of scarcity. Does it still apply to the economics of the Information Age, when we may have almost unlimited access to information based services and products?
Chris Anderson makes a very strong case that it does not in his Wired Magazine article on “The Long Tail”Wired 12.10: The Long Tail This article is worth reading fully not just for the stories about how the music, video, and book markets and distribution economics are changing today, but also for some help in seeing how to take advantage of the changes in information economics that can improve our options and opportunities.
The "Long Tail" is Anderson's term for the information-based marketing concept behind the success of media distribution companies like Rhapsody,Netflix and Amazon in the music, video, and book businesses. While these companies sell many copies of each of the top "hit" products, they also sell a few copies each of a vastly larger number of niche products to a very large audience of buyers. For example, music stores may only stock and sell the top 10,000 to 40,000 tracks; Rhapsody sells , or streams online, each of its top 400,000 tracks at least once a month. The Long Tail is all those non-hits that sell a few copies each, but add to a very large number of sales. Rhapsody sells more from the Tail than from its top 10,000. Amazon has similar sales statistics. As Anderson puts it "with online distribution and retail, we are entering a world of abundance. And the differences are profound." He claims these companies exhibit three big lessons, which he calls the new rules for the new entertainment economy :
* Rule 1 - Make everything available.
* Rule 2 - Cut the price in half; then lower it.
* Rule 3 - Help me find it.
As Anderson puts it " All this, of course, applies equally to books. Already, we're seeing a blurring of the line between in and out of print. Amazon and other networks of used booksellers have made it almost as easy to find and buy a second-hand book as it is a new one. By divorcing bookselling from geography, these networks create a liquid market at low volume, dramatically increasing both their own business and the overall demand for used books. Combine that with the rapidly dropping costs of print-on-demand technologies and it's clear why any book should always be available. Indeed, it is a fair bet that children today will grow up never knowing the meaning of out of ." Since this article was written, Google has begun a massive effort to digitize several large library collections and has debuted Google Print as a way to increase the size of the "digital library"(and the reach of publishers) and to provide easy browsing of the "library" for potential customers.
There is a lot to think about in all of this; but two points seem key for those of us in rural area: First, we are in that Long Tail of tiny audiences that these companies need to reach and serve; And the same techniques and systems that are set up to reach us can be used by us to reach all the rest of that market (an Information Market flows both ways). Second, that 3rd Rule is very important, there a growing need for better ways to help people find and access information, services, and products (or, to exploit information technology, focus on the information).
UPDATE (at 9AM, 9Feb 05) : Excerpt from John Kremer's newsletter; for more on him and his publications check out his website at www.bookmarket.com . Check out the market forecast for book publishing on demand; if even half of that happens, it's a huge market that alters the way we publish, find and get books.
POD Publishing: An Interesting Development
Late last week, PrintShift (a value-added solutions provider for the print-for-pay market) and ExactBind (developer of the Rapid Publishing tool suite) announced the formation of a network of on-demand book publishing centers. Their goal is to create 1,000 franchised locations where you can print and bind books on demand for delivery within two days.
?Print shop fulfillment centers will be qualified and provided with a web-based ordering system and binding equipment to enable the publishing of hard cover books on demand,? said Tom Carpenter, EBW President. ?This book publishing model represents a real breakthrough in the rapidly growing on-demand arena. Authors, publishers, schools, church organizations, art galleries, real estate companies and other segments are clamoring for their own custom books which they can now have within 48 hours and at an affordable price.?
InfoTrends/CAP Ventures of Norwell, Massachusetts, states that the on-demand book publishing market is expected to grow to from 2% of all book pages in 2000, to 100 billion book pages by 2015?a 30% annual growth rate.
For more information on these franchised centers, contact Tom Carpenter, President, ExactBind West, 20331 Lake Forest Drive #C-13, Lake Forest CA 92630; 949-598-4423; Fax: 949-598-0059. Email: Tom.Carpenter@ExactBindWest.com.
Web: http://www.ExactBindWest.com.
