To summarise the main argument: if you no longer have to worry about paying a lot of rent on display-shelf space in a shop, but instead you have cheap warehouse storage and your customer interface is a website (with virtually unlimited, cheap display space), you can make profits from things that don't sell very many units per month--from niche markets, in other words. In fact, you can make as much, or more, from selling lots of little niche items as you can from a handful of the old-style "Best Sellers." This interests me as a writer, because I find many "Best Selling" novels and films to be bland and generic (as you'd expect, given that they're designed to appeal to as many people as possible). In the book, Anderson gives examples of profit ratios for businesses like Netflix, Amazon and iTunes to illustrate his point, showing that they make a third or more of their income from the niche sales. It's very convincing.
I don't know enough about business to see the flaws/weaknesses in the argument (I'm sure there are at least a few problem areas), but I'm definitely liking some of the flow-on implications.
For a start, the emergence of the "long tail" explains some things I've been puzzled over for a while. For instance, the rabid vitriol of many of the mass-media companies, especially in the music industry, a decade ago when they were first cracking down on internet piracy. Anderson explains that in mid-90s the music industry faced their first major drop in profits in decades, so they blamed piracy, and tried to drum up support with things like "pirates are stealing money from the artists". This stance was problematic for a number of reasons, but I'm sure you've heard many of the counter-arguments already, as it's something we discuss often as fans. What Anderson argues, however, is that while some of the loss of sales was due to piracy, a portion of it was also due to direct sales which cut out the middle-men, largely because customers were using the internet to find niche music that wasn't in the Top 40 or on the shelves in major chain stores.
If this is an accurate analysis (if the day of the "Best Seller" is pretty much done, while the market for niche product really is growing and growing as net businesses move to fill/create the demand) then I think it suggests that the fiction mid-list might make a return in the next decade or so. By "mid-list" I mean all those competently written books, especially in the popular genres, which used to get one small print run on cheap paper because they were worth publishing but not expected to be hits.
I'd like it very, very much if the mid-list returned! I have really fond memories of finding great mid-list genre books in bargain bins in the 80s, and those kinds of books have all but disappeared. That makes me sadder than I can say. It was through those mid-list books that I fell in love with SF, and it was also where I found a lot of great authors for the first time--I was ready to give new people a go because the books were cheap to buy. I can only imagine how exciting it must have been in the 30s and 50s when the pulp magazines were thriving, and you could have found a new author every week. Probably something quite a lot like LJ and fanfiction! I've long thought there are strong parallels between the two cultural moments, and I wouldn't be at all surprised if the LJ era spawned a new golden age of SF, just as the pulps did.
Of course, the mid-list isn't entirely dead. Some of the slack has been picked up by specialist publishers like Baen (who publish space opera), and I don't think it's any coincidence that they have been working hard to grow their web-based business, with strategies like their online library.
Some of the slack has also been picked up by fanfiction, I think. It's certainly signalled the re-birth of the short story which has almost died in print-published format.
Even so, there's room for a great deal more original "mid-list" fiction, especially in the genres. I see it every day with people who come into the shop looking for something new and different. It's clear I'm not the only one who misses the sense of excitement that comes from maybe finding a bargain in the cheap books box, and I want it back. I want to read those experiments by new writers who are still finding their feet--full of great ideas and unusual stylistics, even if they are sometimes slightly clumsy in execution.
I'd love to hear from those of you with a firmer grasp of economics. What do you think of the "long tail" idea? And do you think it'll revitalise niche markets in the arts, to the point that primary producers might actually be able to make a living, and readers will have real choice?
Talk to me.
If there are a lot of comments, please understand that while I read everything, I can't respond to everyone, so I've decided that it's fairest to answer first those who have offered the most thoughtful/detailed replies. I've discussed why here.