I’ve finished The Long Tail. Here’s a final point from the book that I liked.
He reminds us that in the early 80s, Hollywood priced the first generation of videotapes at about $75. The theory, he writes, was that this was what a typical family of five would spend on three or four visits to the theater. Obviously, in hindsight this was a stupid pricing strategy. Demand for movies turns out to be highly elastic, and you can sell a lot more movies at $15 or $20 than you can at $75–enough that total revenues go up as a result of the price cuts. Today, the sales and rental of DVDs is on par with movie tickets as a revenue source. Although it’s possible that charging a premium for a new technology made sense, it’s almost certain that the video market would have taken off faster if Hollywood had started out with prices at $30 or $40 instead of $75.
It seems to me that as the movie and music industries move into the digital age, they’re making the same mistakes. The music industry seems to think that 99 cents is unreasonably low. But I think the opposite is probably closer to the truth; demand for music, like the demand for movies, is likely to be highly elastic. If the music industry cut prices to 49 cents a song, a lot of existing customers would buy twice as many songs. Moreover, there are some people who are currently getting their music from illicit file-sharing networks, but would be enticed to buy from an online store at a lower price.
The same seems likely to be true with movies. Apple has priced movies at $10-15, in line with DVD prices. Other movie services seem to be converging on those price points as well. But without the production, distribution, and retail costs associated with shipping a plastic disc around, the marginal cost of getting a movie to consumers via the Internet is far less than $10. It’s likely that here, too, they’d sell a lot more movies for $5 than they would for $10.
I recommend Anderson’s book. It’s an entertaining read that’s packed with insights about the emerging long tail economy.
Matt Yglesias makes a good point about the Birdmonster story:
I have to think it would be odd to see tons of folks want to follow down this particular path over the long haul. Just because technological changes may make it easier to do publicity, marketing, distribution, etc. on a DIY basis doesn’t necessarily make doing things that way appealing or advisable. After all, there’s no particular reason to think people ready and able to produce music people want to hear are going to have enormous aptitude or inclination to do this other stuff once they’re in a position to get someone else to do it for them in exchange for money. That could be the case even if, in some sense, the numbers “don’t add up.” The simple added convenience of outsourcing functions outside one’s core areas of interest/competency has value. More likely, you’ll just see the nature of services that bands get in exchange for a chunk of their earnings will shift as the structure of the music industry shifts with it.
I think this is obviously right. Division of labor is a good thing. The guy who’s good at playing the guitar is probably not the same guy who’s good at writing press releases, booking shows, or handling media inquiries. Labels have traditionally handled those functions, and clearly there will be continued demand for people to do that.
Continue reading →
The Long Tail has an interesting example of the phenomenon I described a couple of weeks ago, in which bands are increasingly finding fans without the labels as intermediaries. Anderson tells the story of Birdmonster, a band fronted by a former Wired staffer. He describes their climb through the ranks of the indie music scene:
Birdmonster courted Internet radio stations, which have none of the constraints of traditional broadcast. As it happened, it was “Ted,” the owner of San Francisco’s BagelRadio.com, who convinced the booker to give Birdmonster its first big break, an opening gig for Clap Your Hands Say Yeah. That (and a batle-of-the-bands contest) led to an opening for the White Stripes, which was at that moment the pinnacle of indie rock. Birdmonster had arrived.
Continue reading →
The Washington Stock Exchange (WSX) has successfully launched! Because it uses market processes to predict electoral and legislative events, WSX promises to make political news more accurate and fun. Soon, reporters might routinely sprinkle their stories with statements like, “Traders on the Washington Stock Exchange still predict that Republicans will hold onto to the House, but the odds just got longer.” As an alternative to polls or talking heads, WSX offers the virtues of blogospheric decentralization plus hard numbers.
Continue reading →
Quick plug: I have a new article up at Tech Central Station in which I argue that reports of TV’s demise at the hands of the Internet are greatly exaggerated. A teaser: “The success of the iTunes Music Store and the iPod has not spelled the end for radio broadcasting or CDs, and the same is likely to be the case in the video market. Satellite radio, iPod and iTunes have shown, however, that consumers are hungry for new ways to access and consume media. The telephone companies’ efforts to roll out robust broadband networks in order to compete with cable, helps get everyone closer to a competitive market. Not only will these networks offer new services and increased broadband capacity, but the burgeoning competition will also spur cable companies to make upgrades of their own, as well as lower their prices.”
If you’re a video game fan then by now you’ve heard the troubling news that Sony has announced there will be yet another delay in the eagerly anticipated launch of its PlayStation 3 gaming console. As a headline in the London Times read: “This year’s must-have toy is cancelled for Christmas.” (Needless to say, that’s about the last headline you want to read if you’re in the Sony marketing or PR department!) The new delay will mostly impact European customers, but North American customers will apparently see fewer boxes shipping our way during this holiday season when the box is set to launch here.
As a video game fanatic and former business school student, I must say that this entire episode has turned into quite an interesting case study of how three major competitors go about launching major new business technologies / platforms. Microsoft has taken the “KISS” (keep-it-simple-stupid) approach with their new XBOX 360 and offered a unit without any digital HDMI connections or a built-in high-def disc drive. (A HD-DVD “sidecar” player is scheduled to be offered later this year but the price has not yet been announced). And MS even offers a bare-bones “core” model of the XBOX 360 without a hard drive for just $299, $100 less than its premium $399 unit.
As a result, the company was able to get its system on the market back in November of last year, a full year earlier than Nintendo and Sony’s new systems are due to hit store shelves. Millions of consumers, including some like me who grew tired of waiting for Sony’s PS3, have made the plunge and purchased a XBOX 360. This constitutes a huge advantage for MS in the platform wars. Some predict that 10-15 million XBOX 360s will be sold before Sony finally gets around to pushing out the PS3 in some markets.
Continue reading →
I realize this is not a gadget blog, and that I probably should not be using it to seek out personal advice but…
I’m about to upgrade my cell phone and to get one with better multi-media capabilities, especially so I can avoid carrying around both a cell phone and my MP3 player everywhere I go. I’ve been looking at this new Verizon “Chocolate” phone made by LG.
It’s getting mixed reviews, but it has a lot of nice features including expandable memory up to 2 GB, which is important because I want as much room for my music playlists as possible. (I wish cell phones could carry even more memory than that. I’ve already maxed out my 20GB Creative Zen player and looking to upgrade it too).
Anyway, here’s the one question I have not been able to get anyone else to answer for me about the Chocolate phone: Any idea if there is any screwy, ham-handed DRM issues to deal with on this phone? Are there any sites that look into this aspect of cell phone music players? I store most of my music in WMA but have some files in MP3. I just want an easy plug-play-and-transfer experience.
Any advice from TLF readers would be appreciated.
The Register has a sensible commentary defending Google’s campaign to prevent people from using “google” as a generic term:
When the Washington Post reported that “Google” had entered the Merriam-Webster Collegiate Dictionary, it observed that the word has become a descriptor for its sector. Google wrote that it must avoid “genericide” and provided a list of appropriate and inappropriate uses of its name.
Among its examples was this appropriate use: “I ran a Google search to check out that guy from the party”; and this inappropriate use: “I googled that hottie.”
Google no doubt hoped that a light-hearted example would avoid the company sounding oppressive. It has to send letters like this; but its lawyers know that it has only limited powers to dictate how the brand is used. So the letters are seeking support, not threatening litigation.
The risk for Google is that it ceases to become a brand altogether. If it becomes generic, the brand can be struck from the register of trademarks, leaving the owner without rights. This has happened before: escalator, aspirin, pogo, gramophone and linoleum were once registered trademarks that became victims of genericide.
On the other hand, I think it’s harder to defend Apple’s campaign against anyone who uses the letters p-o-d in their products on these grounds. The products in question were not direct competitors to the iPod, and they aren’t even using the whole name.
Google’s plan to let local merchants offer their coupons, for free, via Google’s map interface is exciting news. It’s a step toward fixing one of the most glaring deficiencies of the web to date: online sites do a terrible job of making content geographically relevant.
Case in point: I love Craigslist. It provides apartment rental listings that you just can’t find anywhere else. I found there of my last four apartments via Craigslist. And I love Google Maps, with its snazzy, AJAX-powered interface. But it took a third-party to mash up, the two services into what I really want: a map of apartments for rent laid out on a map, so I can see at a glance which ones are in the neighborhood I want. Unfortunately, that site doesn’t include St. Louis, so it’s not useful to me. Moreover, if Craigslist or Google implemented it themselves, they could doubtless add a lot of additional functionality that a third party can’t provide.
I’ve got the same issue with restaurants: There are a number of sites that provide restaurant reviews, and some of them even break them down by city region. But no one gives me an easy way to zoom into a map and view all the restaurants on a particular city block. I can search for “restaurant” in Google Local and get a reasonable list of restaurants near where I work. But I can’t easily narrow the search down by cuisine, or by price range, to get a list of restaurants with desired characteristics. I don’t think it’s finding all the restaurants, and it annoyingly only shows me 10 restaurants at a time. (I assume this is because the interface grinds to a halt if the map has too many pins on it)
A good way to fix this is by forging more direct relationships with the actual retailers. 20 years ago, having your name in the yellow pages was an indispensable way for your customers to find you. Today, having a pin on Google Local when someone searches for your business category ought to be considered equally indispensable. Hopefully, Google will continue to give content creators more and easier ways to link their information to geographical locations, allowing us to search our neighborhoods as powerfully as we can search the web as a whole.
We refer to TechDirt a lot here on TLF because of the good information and analysis there, and the engagement of its writers on policy issues. I want to throw props to another Tech[Something] blog, though – TechCrunch.
I’ve been reading it for a while now. TechCrunch is very forward-looking in terms of Web apps and information business. I ain’t gonna lie to ya’ – I don’t understand everything I see there. But I don’t understand everything I see on the bus either – and that’s still interesting and entertaining.
I’m particularly pleased with TechCrunch because of the acknowledgement it gave yesterday to WashingtonWatch.com.
I like WashingtonWatch because it translates Bills into understandable costs and allows direct and collaborative feedback before the Bill is voted on. These are new web ideas put to work in a tangible and useful form. I hope our elected representatives are among the readers.
The other day, I blogged about how technology-aided transparency may defeat the twin scourges of rational ignorance and rational inaction in the area of politics and public policy. TechCrunch sees the vision.
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.