2024-06-18 17:59:54
More on Anderson’s Long Tail economics/market data

On WSJ.com

Lee Gomes has posted a critique on Chris Andresons The Long tail by the title: “It May Be a Long Time Before the Long Tail Is Wagging the Web”. His crucial point is whether data supports Anderson’s claim that with availability the aggregate demand for less popular goods is comparable to those of the hits.
“Ecast told me that now, with a much bigger inventory than when Mr. Anderson spoke to them two years ago, the quarterly no-play rate has risen from 2% to 12%. March data for the 1.1 million songs of Rhapsody, another streamer, shows a 22% no-play rate; another 19% got just one or two plays.”

“By Mr. Anderson’s calculation, 25% of Amazon’s sales are from its tail, as they involve books you can’t find at a traditional retailer. But using another analysis of those numbers — an analysis that Mr. Anderson argues isn’t meaningful — you can show that 2.7% of Amazon’s titles produce a whopping 75% of its revenues. Not quite as impressive.

Another theme of the book is that “hits are starting to rule less.” But when I looked online, I was surprised to see what seemed like the opposite. Ecast says 10% of its songs account for roughly 90% of its streams; monthly data from Rhapsody showed the top 10% songs getting 86% of streams.”

In his reply Anderson is not very convincing.

“Let’s say you have 1,000 items and the top 100 (10%) account for 50% of the sales. Then you add another 99,000 items to the catalog, and the sales of that top 100 fall to just 25% of the total, while it takes another 900 items to make up the next 25%. I would say that demand has shifted down the tail, because those top 100 items have dropped from half the market to just a quarter of it and the rest of the demand is spread over more items.

But by Gomes’ math, we’ve gone from a market where 10% of products make 50% of the revenues to one where 1% of the products make 50% of the revenues–in other words, it’s become more hit-centric. I think this is simply a misunderstanding of basic statistics, and I’m disappointed that Gomes, despite many emails from me and at least one economist to him on this point, chose to simply say that I don’t agree with that approach (but not why).”

Battle of giants.

Anderson: “I think this is simply a misunderstanding of basic statistics! And I have an economist to support this!”

Gomes: “I don’t agree with that approach!”

You know, the joke about the rabbi who listens to the complaints of two feuding congregants. One explains why the other guy is wrong, and the rabbi answers, “You are right!” Then the other guy states his case and the rabbi says, “You’re right.” Then a third man who was listening asks, “Rabbi, they are at odds, how can they both be right?” The rabbi then turns to the third man and says, “You’re right, too.”

Because this is not the real question. Erik Brynjolfsson, Michael D. Smith, Yu (Jeffrey) Hu has an article titled “Consumer Surplus in the Digital Economy: Estimating the Value of Increased Product Variety at Online Booksellers” (MIT Sloan School of Management Working Paper 4305-03 June 2003) in which they estimate that the increased product variety of online booksellers has resulted in $1 billion consumer surplus. Battling over the market concentration is a dead end. Measuring the consumer benefit is the real issue here i guess.

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