Much better, the Economist!

Last week’s Economist featured one of the best articles on the new media landscape in a good while. Backed by solid statistics, for once, this article observed a tendency that I and many others have suspected for a long while now: Digitization benefits niche content and blockbusters, rather than the middle category of “near-hits” or “mid-list” titles. What is booming in an Internet-driven marketplace are the two extreme ends of “the long tail”, not the middle bit.
There has been an established term for this floating around on the Net for a while, actually. “The Death Valley problem” refers to how big actors are flourishing and small actors are flourishing while the ones in-between struggle:

Big companies have marketing muscle. They survive by bending the world to their will. Small companies are nimble. They survive by adapting to the world’s dynamism. In between we see a “Death Valley” filled with mid-size companies too small to bend the world, too big to adapt to it.

The colossal corporate producers cope. The small, niche producers as well. But in the conventional mass media-based model (symbolized below by a straight, red line) a field of producers who used to capitalize on the relative lack of choice we saw in the past, “the fat middle” (in gray) are now at a disadvantage, for a number of reasons.

The Economist begins by outlining the current situation at hand:

• Blockbusters are bigger than ever.
• Marketplace choice is also bigger than ever (for books, music, as well as film).
• In other words, the “tail” is not the only end of the market that is thriving.

“Both the hits and the tail are doing well,” says Jeff Bewkes, the head of Time Warner, an American media giant. Audiences are at once fragmenting into niches and consolidating around blockbusters. Of course, media consumption has not risen much over the years, so something must be losing out. That something is the almost but not quite popular content that occupies the middle ground between blockbusters and niches. The stuff that people used to watch or listen to largely because there was little else on is increasingly being ignored.

• The very top end of TV shows (e.g. “American Idol”) is doing well, while semi-popular shows (e.g. “Cops”) fare much worse.
• Music albums in the top 5 are actually performing better than before, while all other music albums on the chart are suffering lower sales volumes. Albums ranked between 300 and 400 suffered the greatest proportionate losses.

Reasons for this, The Economist speculates:

• Young music fans don’t buy CDs, they download either illegally or legally, or listen to streamed media. This, while “safer” albums make the charts, as the 40 year-olds remain faithful to predictable blockbusters like Michael Jackson, “Mamma Mia!” and the like.
• In the online world, we are overwhelmed by choice. The most popular 5% of tracks on Spotify account for 80% of all streams. Millions of tracks are actually never touched at all.
• People cluster around popular products. The “water-cooler factor” is important, as a shared culture begets imagined communities and common reference points.

Even enthusiastic pirates will still buy CDs of music that they love, in order to get the cover art or simply to express their devotion. And what people love, it turns out, are hits.

• Blockbusters get better ratings from the people who have watched them than more obscure ones do, as blockbuster audiences tend to be comprised of people who consume few products of that type. (Here the article refers to a classic study, William McPhee’s Formal Theories of Mass Behaviour, 1963)

A lot of the people who read a bestselling novel, for example, do not read much other fiction. By contrast, the audience for an obscure novel is largely composed of people who read a lot. That means the least popular books are judged by people who have the highest standards, while the most popular are judged by people who literally do not know any better. […] The hit is carried along by a wave of ill-informed goodwill.

• Further, the media corporations’ marketing and distribution muscle has become both bigger and more effective recently, as films are released simultaneously over the whole world and in an increasing range of channels and formats too (video-on-demand, download, stream). The domestic US market is less relevant, as many blockbusters see bigger and more concerted revenues abroad.
• Also, the media corporations invest more heavily in making their blockbusters as spectacular as possible, drumming up as many resources as they can on predictable hits: between 2004 and 2008 films costing more than $100m to produce consistently returned greater profits to the big studios than cheaper films did.
• The urban consolidation of multiplexes and shopping malls play their part too, The Economist notes, and I would add media consolidation here too, as more and more journalistic content hovers around upcoming blockbusters, and generates even more buzz. This buzz is generated by non-professionalised fans as well, in the vein of what Henry Jenkins describes in Convergence Culture (2006).
• High-street record shops and book shops are increasingly being replaced by online retailers, which offer vast selections of obscure titles – but they are also being replaced by supermarkets, which only sell a tiny selection of hugely popular titles. “Amazonification” contra “Wal-Martization,” if you like.
• In newspapers, the leading outfits are faring best, while second-tier metropolitan papers are losing both subscribers and ad revenues. Meanwhile, small-town papers are doing fairly well, as their advertising model isn’t afflicted so much by online advertising.

A current example from Sweden struck me the day after reading the Economist article: In an interview with Jonas Axelsson, the literary director at Bonniers (Sweden’s biggest book publisher), he notes that foreign, translated authors who used to sell 4,000–5,000 copies in Sweden now only sell 2,000 copies which is not as economically viable. This, since more people tend to go to the source, reading the (most likely) English original. Similarly, so-called “mid-list” titles who used to sell 2,000–3,000 copies now only sell 700.

This is a story which is replicated throughout the music industry as well, clearly limiting the range of up-and-coming artists, authors and producers. It appears like the big publishers and record companies tend to be less and less prone to risk betting on anything else but the expected bestsellers. The Economist verifies that this seems to be the case in the film industry as well: Studios have shut down or neglected their divisions that specialise in distributing low- and middle-budget films.

Still, there obviously are vast amounts of said creators who are making stuff, but in a field which is markedly niche-based, much more akin to a cottage industry. As Grant McCracken pointed out already in 2005:

As the consumer becomes more fragmented and multiple, the “blockbuster” must achieve new degrees of generality to appeal across these new differences. It must become ever more spectacular.
[…]
What a culture! At one end, we may look forward to spectacle that must be all big name stars and very special effects. Nothing less than $100 million dollars will get the job done. Only movies that really are spectacle: violations of our sense of scale and proportion will speak to all of us.
[…]
At the other, little films that may now be as particular as a novel. Little films that must be as particular as a novel. A world of film makers who are content to live the lives of novelists. No more huge paydays. No more award ceremonies watched by millions. The rewards will have to be intrinsic because, well, you just better like what you do.

Lastly, The Economist points to two possible alleviations:

• Do like the TV channels, let your strong brand carry the weak content. In the right context, a middling product can survive. Many shows eventually find their niche audiences if being presented as part of your overall output. Sometimes, they unexpectedly make success.
• Charge more for less popular stuff. Specialist magazines are often expensive. Less popular books cost more than bestsellers, because the latter are discounted. Even television has a successful model for charging more for shows that a smallish group of people feel passionately about, in the form of premium subscription channels like HBO. Yet, with the exception of live screenings of opera and sport, film tickets all cost the same. This is one thing that could change.
• I would add a third one here: Learn from Shapiro & Varian’s classic Information Rules (1998), or Chris Anderson’s latter-day update of some of their arguments in his new book Free – The Future of a Radical Price (2009). Information is expensive to produce but cheap to reproduce. It is mainly the reproduction – i.e. the distribution – which has become a lot cheaper. But this also means that it is the distribution that has suffered the most severe form of competition: free copying. Two important objectives collide: (1) to maximize the potential profit and (2) to get as many users as possible. These are in conflict with each other, as free dispersal can maximize (2) at the expense of (1). Hence, it is all about building a network of actors that all in some sense depend on your product. As the users have different degrees of dedication, you need to adapt to this and, for example, split your product into different versions, or devise systems that involve different degrees of dependence and lock-in around the product so that those using the free version still might feel the need for logging in your service.

Links in English
The Economist leader/editorial: Middle-class struggle
Grant McCracken: Of long tails and fat middles: plenitude and the production of contemporary markets

Links in Swedish
Magnus Eriksson: Talangfunktionen
Jonas Andersson: Kändiskulturen behöver en sträng S&M-dominatrix och masskulturen en öm bejakare
SvD: Med näsa för storsäljare
Mårten Blomkvist, DN: Stort blir större