Newspapers: does the 'long tail' apply to new entrants?
By stephendavis on Sep 27, 2006
Every couple of years, a new business idea comes along that immediately seems to be liberally applied to all sorts of business situations and issues. Very soon, you start to hear people using it outside of its original business context.
In his book, 'The Long Tail: How Endless Choice is Creating Unlimited Demand', Chris Anderson suggests that businesses 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, i.e. the traditional 80:20 rule) and moving toward a huge number of niches in the tail. He argues that the 'long tail' can be applied across most product sectors and markets - whether or not they are online businesses.
His original article in Wired magazine reportedly resulted from a conversation he first had with the CEO of Ecast, an online music store. It emerged that of the 10,000 albums available to download from the Ecast web site, a staggering 98% sold at least one track per quarter. Unlike conventional music retailers, constrained by the amount of real estate and promotional point-of-sale display, the economics of online retailing are shifting sales away from hit albums in the charts.
The same principles can be applied to book sales and publishing but not to newspapers.
Newspapers are the most perishable of all consumer products. The retail shelf life of a daily newspaper is usually 12 hours at the most. Nobody wants to read yesterday's news.
Added to this, a high proportion of the cost of publishing a newspaper is accounted for by its printing and distribution as well as newsgathering and marketing costs. Substantial economies of scale and high entry costs, not to mention the defensive actions of existing players, has acted as a barrier to new entrants. The print unions also used to exploit the perishability of newspapers knowing that any production stoppages could irreversibly restrict sales for that edition.
For these reasons, we are unlikely to see the same number of new market players as compared to broadcasting or online. Furthermore, falling circulations among existing titles will force publishers to diversify into new areas to distribute their cost bases. In the past few weeks, the Daily Telegraph, the Times and the FT have all announced plans to create a single newsroom operation combining their print and online operations.
BTW: Unlike many business books that try to expand a single idea to a 250,000 word essay, Chris Anderson's book is both highly readable and relevant with many real-life examples.