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Google Chairman: The Future Is the Exact Opposite of the Long Tail…

When Chris Anderson first came out with the theory of the Long Tail, Google then-CEO Eric Schmidt was one of its most ardent supporters and devotees.

longtail_book

Fast-forward just a few years, and the Long Tail was already been seriously undermined by Schmidt himself.  Indeed, Schmidt now feels the actual reality of the internet is the complete opposite.  In other words, bigger blockbusters than ever before, and smaller, less important niches than we could have ever imagined.

Here’s what Schmidt, now Google executive chairman, told the McKinsley Quarterly Review when asked about blockbusters, tails, and the future of niche media as early as 2008*.

schmidt

I would like to tell you that the internet has created such a level playing field that the Long Tail is absolutely the place to be — that there’s so much differentiation, there’s so much diversity, so many new voices.  Unfortunately, that’s not the case.  What really happens is something called a power law, with the property that a small number of things are very highly concentrated and most other things have relatively little volume.  Virtually all of the new network markets follow this law.”

“So, while the tail is very interesting, the vast majority of revenue remains in the head. And this is a lesson that businesses have to learn.  While you can have a Long Tail strategy, you better have a head, because that’s where all the revenue is.”

And, in fact, it’s probable that the internet will lead to larger blockbusters and more concentration of brands. Which, again, doesn’t make sense to most people, because it’s a larger distribution medium.

“But when you get everybody together they still like to have one superstar.”

It’s no longer a US superstar, it’s a global superstar. So that means global brands, global businesses, global sports figures, global celebrities, global scandals, global politicians.

So, we love the Long Tail, but we make most of our revenue in the head, because of the math of the power law.  And you need both, by the way.  You need the head and the tail to make the model work.

*In the original publication of this article, we mistakenly thought the comments were made in 2013, not 2008.

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Comments (17)
  1. Contrarian

    Nice pickup noting Schmidt’s quote on Chris Anderson’s book. I disagree that he said “exact opposite of the long tail”. You can see in the last line — he states you need both (even if the head supplies the bulk of revenue). This is mash of Pareto 80/20 and Long Tail.


    Reply
    1. Visitor

      “I disagree that he said “exact opposite of the long tail”.”

      You can disagree all you want to.

      Mr. Schmidt makes it perfectly clear why streaming is worhtless to artists:

      “the vast majority of revenue remains in the head”


      Reply
      1. Contrarian

        Clearly you don’t know the guts of The Long Tail is that there are still hits in the long tail paradigm. No arguing that. Or you could just read the Wiki entry. Or if you’re lazy, view the graph:

        http://en.wikipedia.org/wiki/File:Longtail.svg

        See that red line? That’s a Long Tail entry. Still hits on the left hand side.


        Reply
        1. Paul Resnikoff

          I think that point is mostly obvious, but I’d encourage you to read the full book. In it, Anderson waxes on and on about the utopian idea that niches will connect better than ever, and grow more important and larger than ever. There will be blockbusters, he admits, just on a smaller level.

          The shocking hangover here isn’t that there are still blockbusters, it’s that the blockbusters may become bigger than before. In other words, the opposite of what Anderson postulated.

          One other point: I’m surprised that nobody is defending a major aspect of Anderson’s theory, which is that businesses can be built on Long Tail, niche content. That’s true for a number of successful plays, including CD Baby. But let’s not pretend that all the Long Tail argues.

          (pardon my typos. written while listening to Beanie Siegel)


          Reply
          1. Econ

            Paul,

            I just don’t see the data backing up the premise that blockbusters will be bigger, the opposite IS happening.

            The difference is who can afford to be in the long tail and who is reliant on blockbusters. CD Baby survives in the long tail because they aren’t saddled with millions in debt; Universal NEEDS blockbusters because they are leveraged to the hilt (and they are leveraged to the hilt because their business model is historically blockbuster-based).

            I can see the argument that blockbusters are MORE IMPORTANT to distributors and some creators today than before, but I think that is more indicative of an economic slowdown than an overall trend in customer demand. It might be BECAUSE of the long tail that those ignoring it are more reliant on the head than ever before. But again that isn’t indicative of consumer preferences, that is indicative of (some) creator/distributor preferences.

            Of course it is true there is more money in the head, that’s sort of a “DUH” statement. 80% of the Spotify/Pandora listners are cranking out the hits – but 90% of terrestrial radio listeners are tuning in for the hits. This tells me the head is getting smaller. There will always be a head – but the tail IS getting longer. Back in the financial world, global credit is shrinking. Chicken/egg arguments aside, global credit is a general indicator of whether the head is growing or shrinking.


            Reply
          2. Simon

            new talent innevitably comes from the long tail… the power law 80:20 curve will always be present, its like the golden ratio, its a naturally occuring ratio.. The real issue is that nothing is static. There are new solutions to these issues and new opportunities, but they must be powered and fulfilled at the edges of the network, not the core.


            Reply
    2. Visitor

      the big simple fact that was overlooked on the long tail was simply this…

      NO HEAD = NO TAIL

      done.


      Reply
      1. Visitor

        “NO HEAD = NO TAIL”

        Indeed. And what does Spotify ask from artists?

        That we lose our heads in return of a fictive tail — a fairy tale, you might say — that may or may not come. That’s the simple strategy behind their infamous ad:

        “You’ll never have to buy music again!”

        So always remember two things as an artist:

        1) Spotify doesn’t want you to sell your music. Every sold record is a lost stream.

        2) Don’t give your music away to Spotify. Every sold record is worth 140 streams. And figures from Norway and Sweden show that — surprise, surprise — nobody buys your music when they can stream it.


        Reply
        1. Visitor

          “1) Spotify doesn’t want you to sell your music. Every sold record is a lost stream.”

          Spotify doesn’t want to sell your music because it didn’t make them any money. The overhead was too high. But every record sold is another stream they don’t have to pay for. Hence is why they want you to import your music and do so by default upon installation. They would like nothing more than for people to only listen to music they already own.


          Reply
  2. Visitor

    “While you can have a Long Tail strategy, you better have a head, because that’s where all the revenue is”

    It’s great to see that Mr. Schmidt finally gets it.

    Now we probably won’t have to hear Spotify’s Katie Schlosser repeat this anytime soon:

    “Streaming is all about the Long Tail value proposition of each individual user.”

    http://www.digitalmusicnews.com/permalink/2013/20130510spotify

    Let’s hope artists and other rightholders have learned the lesson, too:

    Don’t give your music away to Spotify and other greedy streaming companies!

    Sell it from iTunes now, because that’s where all the revenue is.


    Reply
  3. user908

    These remarks appear to be five years old:

    2008 interview with Eric Schmidt


    Reply
    1. Buck

      Nice catch. This is old news


      Reply
      1. Visitor

        So Mr. Schmidt told us 5 years ago why streaming wouldn’t work.

        We should have listened…


        Reply
    2. Paul Resnikoff

      Thanks user908. Sort of changes things in a strange way, because the Anderson book came out in 2006 (though, as I remember, it was quite some time after the Long Tail flame was burning). So, just a few years later, the data started saying the opposite; the ideas were revised.


      Reply
  4. Radio & Records Vet

    I was never quite as enamored of the Long Tail Theory as Anderson et.al. were when he came up with the principle. As a internet retailer and distributor for several years, I always recognized the “head” was the most important part of the snake, and that the tail only grew longer and more narrow as it lengthened. It was true that the tail’s aggregate value was greater than the whole of the head, but each piece contained in the tail made very little in comparison to what came before.

    The notion of parity that some believe is the essence of an open market platform like the Internet is a myth. In reading Mr. Schmidt’s new book, The New Digital Age, it appears to me that he and his collegues are correct in their assertions relative to the Power Law.


    Reply
  5. Simon Edhouse

    this whole debate is really interesting, and we are trying to do something about fixing some of these problems… take a look at bittunes.org (sometimes to fix a polluted river you have to start at the head of the stream) … The long tail theory is valid, but whenever you see centralised service delivery, i.e. when distribution, rights and payment systems, are centralised you will find yourself stuck in an old paradigm. – Music discovery is largely social now, distribution and moentisation should be at the edges of the network too, not at the core. ~ Then you’ll get a new tail, and a new head. But waaaaay less centalised players, just millions of active edge-participants.


    Reply
  6. duh

    i called long tail wrong by 2005, seeing that it would all come down to advertising budgets. one band and their friends releasing, blogging & touring still can’t compete with a record co. 200 “bloggers”, videos, ads, etc.

    iTunes stopped leveling the field long ago (dropping iMixes, and front page placements), Pitchfork has paid placements/editorial, HuffingtonPost, Youtube, Facebook too, all are past organic. etc etc.

    We’re going to get more all-in massive acts like Bieber, or only 200 million dollar movies, and low/no budget stuff, no middle ground stuff. Huge 3D movies were/are a hedge against pirating; so is Lady Gaga, or Rihanna — they can make dough selling their perfumes or clothing lines… unlike an indie act.


    Reply

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