Find a Niche: 'The Long Tail' of Sales The future of our culture — and most business — lies in niches, according to author Chris Anderson. His new book, The Long Tail, references a statistical trend to suggest that the market for items that are not "hits" will always be larger than that for the most popular items.

Find a Niche: 'The Long Tail' of Sales

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MELISSA BLOCK, host:

From NPR News this is ALL THINGS CONSIDERED. I'm Melissa Block.

ROBERT SIEGEL, host:

And I'm Robert Siegel.

What have new digital media meant for marketing music, books, videos. Well Chris Anderson, the Editor-In-Chief of Wired Magazine figures that they have lengthened the tail of the retail sales curve. Think of the very best selling items. Right now this is topping the charts at ITunes and Billboard Magazine. It's called Promiscuous by Nelly Furtado, featuring Timberland.

(Soundbite of song Promiscuous)

Ms. NELLY FURTADO (Musician): (Singing) Promiscuous girl, whatever you want. I'm all alone and it's you that I want.

SIEGEL: We've been conditioned to think of top ten hits like that one, best selling books, blockbuster movies, dominating sales. The big items at the top of the sales charts. But Chris Anderson tells us, look down at the bottom of the chart too. That's where the graph is like a long tail. You might find at about number 140,000 on Amazon's music rankings, a collection of Luchiano Barios Sequences for Solo Instruments or Female Voice.

(Soundbite of Music)

SIEGEL: This is a guaranteed non-bestseller but Chris Anderson tells us that all of those low selling items way down on the sales charts, when you add them all up, now represent a huge chunk of sales. He wrote about this in an article in Wired and now in a book called, The Long Tail: Why the Future of Business is Selling Less of More. Chris Anderson welcome to the program.

Chris Anderson (Author): Thanks.

SIEGEL: You're saying that successful providers of music, videos, books are doing it as much with many small niche audiences as with a big broad audience. Why?

Mr. ANDERSON: Well simply because it's now cheaper to do so. The reason we focus on blockbusters and hits is not because we as a culture only want blockbusters and hits but because that's what the distribution channels want. If you have limited shelf space you only put the things on that make the best use of that. If you have limited channels or screens in the megaplex, you pick the things that will aggregate the largest possible audiences that reflect the lowest common denominator, in some sense. Now you have the rise of markets that have infinite shelf space: ITunes, Amazon, NetFlix. In many cases a product is just an entry in a database and there's no cost in putting them out there and you can suddenly see just how much variety there has been all along just suppressed by the old ways of buying things.

SIEGEL: Just like you relate to the conversation you had, the trick question that was put to you that you got so wildly wrong, that sent you off on this entire pursuit of the idea called the long tail.

Mr. ANDERSON: One of my jobs as the editor of Wired is to talk about technology trends. And so I was talking to companies in digital media spacing, what's different about digital media? One of the companies I was talking to was called Ecast, and they make a digital jukebox which is like a regular jukebox with neon, and big speakers, but rather than having maybe 100 CD's in there, they had a hard drive and a broadband connection, and they had 10,000 or 20,000 or 30,000 tracks. And the CEO asked me this question. What percentage of our top 10,000 tracks do you think sell at least once per month? Because I know the 80/20 rule I assumed well it's probably 20 percent. Twenty percent of everything.

SIEGEL: The 80/20 rule being that 20 percent of your best products usually account for 80 percent of your sales, whatever your business is.

Mr. ANDERSON: Exactly, exactly. And this is the sense that the tiny minority of products are what you should focus on, and you can pretty much neglect the rest. So the 80/20 rule suggested the answer is probably about 20 percent, but I thought, maybe digital is different so I guessed 50 percent, really pushed it up there. The answer is I was wildly wrong. The answer is 98 percent. And as they went to 20,000 and 30,000 and 40,000 tracks, it remained 98 percent. Virtually everything they put out there had some demand. And I thought, well, is this unique to digital jukeboxes, or is it more common? So I would talk to Netflix and Amazon, and the music services, and they too, were telling me 98 percent. The more they threw out there the more demand they found. There seemed to be demand for almost everything. Now, they may not have sold more than once, but to recognize there's somebody out there for everything, and that we can now have an efficient way to tap all this - all these ones-ees and two-ees - and add them up together into a big market was the real eye-opening insight that came when you actually looked at the numbers behind digital media.

SIEGEL: So if the holy grail, for say a TV producer, used to be to create the show that all America will talk about at the water cooler in the morning, forget about it. This is not going to happen anymore.

Mr. ANDERSON: Well that's still the holy grail, and there still will be hits but you're increasingly seeing an audience shifting away from broadcast television and going to things like YouTube, where they're watching skateboarding videos, and Chinese teenagers lip syncing.

SIEGEL: But a video of Chinese teenagers lip-syncing, let's say, is just not as polished a product as Pirates of Caribbean: Dead Man's Chest. There is some advantage here to the big producer, no, who needs a big audience to pay off his big investment.

Mr. ANDERSON: Absolutely. One of the things we hear often from Hollywood and the television industry, is a kid with a camcorder can't do what we do, and that's absolutely true. What we're just discovering however, is that there is demand for things that don't have high production values. This is authenticity, the notion that this is actually real. Actually has popularity and the lack of polish becomes an asset. So when you look at the YouTube hits, many of them are more popular than all but the top ten television shows. They're reaching audiences in the millions, and yet they're made by someone for essentially no money, and uploaded for free.

SIEGEL: I understand how, if you were one of the ten groups, selling each 100,000 items, you're doing fine. I don't understand if you're one of the million groups, each of whom has sold one item, how you are staying in the performance business and paying for health insurance.

Mr. ANDERSON: Excellent question and the distinction is you're not necessarily in the business. Why do people make music? Well I used to be in bands when I was in my 20s, and I made music because it was really fun. Most artists don't quit their day job. The fact is that a lot of people will create things for reasons other than money, and if we only define success by commercial success, we miss the phenomena that created Youtube and created MySpace, and this is the fact that amateurs want to make things for their own reasons. They have to do with their reputation, expression, and fun and just being appreciated, and that is enough.

SIEGEL: You describe phenomena that we see very, very clearly in the Internet and online sales. But you would say that we are seeing it elsewhere too. That the rise of the microbrewery would be an example of the emergence of the zillion different kinds of beer in the country, each reaching a small audience, rather than just a couple of big name brands.

Mr. ANDERSON: Once I put out the idea of the long tail, people found residences in all sorts of industries I'd never thought of. One of the proudest moments of my last month was when I saw that Anheuser-Busch has started a division called Long Tail Libations. What's the Long Tail Beer? It's microbrews. Well it turns out that supply change innovations and stock keeping technology have allowed us to put more products on the shelf.

Supermarkets have basically doubled the number of products in the supermarket over the last 12 to 14 years. And now on a shelf where you might have just four beers, you can now have 40 or maybe even 400 kinds of beer, and there is demand for beer that isn't one size fits all. Microbrews are one example. Regional beers are another. There is the notion of craft beer, and you know. It's suddenly economic to look at the broad variety of demand out there, and offer something that isn't for everybody, but really might be for some people, and tap that long tail of niches.

SIEGEL: Well Chris Anderson thank you very much for talking with us.

Mr. ANDERSON: Thank you. It was fun.

SIEGEL: Chris Anderson is the author of The Long Tail: Why the Future of Business is Selling Less of More.

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