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Digital Audio Insider is David Harrell's blog about the economics of music and other digital content. I write from the perspective of a musican who has self-released four albums with the indie rock band the Layaways.

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August 24, 2006

Bandwidth Thoughts Part 1
by David Harrell
Bandwidth Thoughts, Part I:
The Long Tail, the Fat Middle, and Tiny Slices

Note: My original plan was to write recaps of all of the panels I attended at last week's Bandwidth Conference. But Joe Gratz already did a series of posts that pretty much capture that information and I can't see any reason to duplicate his work. So I'm opting instead for a series of more-analytical pieces, based on different issues raised at the conference, not recaps of individual panels.

On Friday afternoon, Chris Anderson moderated Nouveau Niche, a panel that -- as you'd expect -- was built around the concept of the Long Tail. (For the uninitiated, the basic premise is that as new distribution systems provide more and more choices, consumers will become less focused on hits, reaching out to previously unavailable options in an unexpected way.)

In his book, Anderson provides plenty of examples (Netflix,, eCast, etc.) showing that even relatively unpopular choices still enjoy consistent sales. For example, on the Rhapsody streaming service, the 100,000th most-popular song still receives hundreds of plays each month. And right out of the gate, panelist Tim Quirk of Rhapsody gave the following statement:
48.5% of sales at an offline retail environment are generated by the top 100 artists. That goes down to 28% on P2P. For Rhapsody, it's 24%. Everybody becomes a music geek when they can explore.
Of course, not everyone is convinced that the potential Long Tail effect is as great as Anderson believes it will be, at least in terms of creating a major shift in consumption patterns. The Wall Street Journal's Lee Gomes thinks that some more-recent numbers paint a not-so-rosy picture. (Here's Anderson's rebuttal and Gomes's rebuttal to the rebuttal.) And in a later Bandwidth panel, Napster's Matthew Adell took exception with the name itself. He considers it somewhat misleading because while a shift in music consumption habits will benefit some musicians, it's not going to extend to everyone. Adell suggested "the fat middle" as a better moniker, as some artists in the middle of the curve might see some real income at the expense of the former hit-makers, but there is a definite limit to how far down the curve it would travel.

That assertion was backed somewhat by a Bandwidth attendee (a record distributor and label owner) who asked the Nouveau Niche panel about when (if?) income from streaming services might actually amount to something for his labels and artists. He said he sees thousands of streams for his labels and artists in a given reporting period, but minuscule revenue. (I heard this complaint from several folks at the conference, that streaming income was negligible.)

continue reading "Bandwidth Thoughts, Part I"

Quirk countered that while the income from streaming might be minimal for some labels and artists, there was a promotional value to it -- that streaming leads to increased sales of actual downloads. He also said that when they turned off the streaming capability for one artist for several months, downloads sales plunged.

And despite his enthusiasm for the Long Tail effect, Anderson has never claimed it would result in a living wage for every musician in the world. Nouveau Niche panelist Ted Cohen thought the effect might allow SOME musicians to quit their day jobs. In the book itself, Anderson talks about the rise of the amateur and in this Long Tail conversation he says "most artists aren't expecting to quit their day jobs." (Plus it doesn't seem reasonable to expect that some interesting statistics about consumer choices within a couple streaming services will lead to real income for all participants.) There are, of course, a handful of examples of individual writers and musicians that have benefited greatly from new online distribution channels and opportunities. But these examples (The Artic Monkeys, Clap Your Hands Say Yeah) are always going to be the exception -- they can't be the rule.

In the end, perhaps what really matters most is a different type of graph -- a pie chart of revenue, not a distribution curve of consumption -- and two questions: How is the pie sliced and is the pie getting bigger? While there are more opportunities for distribution than ever before, it also means that content producers in any field (music, writing, film, etc.) are all forced to compete with a greater number of producers. Hence, the pie is being cut into more and more slices.

There is, of course, the possibility that aggregate consumption is actually growing because of greater consumer choice to create a larger pie, a point raised in the Long Tail book. There's also the idea that total music consumption might be increasing, because iPods and other portable players create more listening hours each day for music fans. But eventually you reach a limit, in both the number of dollars music fans will spend and the total number of available listening hours.

From a top-down view, it's interesting that market share has shifted away somewhat from hit-makers, but with so many slices being cut, the smaller ones are going to be pretty damn thin. Especially for those producers without any marketing muscle and dollars behind them.

My own band, for example, is one of those producers FAR out on the curve. At one point last year I logged onto our CD Baby account and was thrilled to see a three-digit number for one song for a single month of digital distribution. But it wasn't download sales, it was 388 streams from MusicNet. Which was great news -- MusicNet subscribers were streaming the track more than 10 times a day for month. But the payout rate we received was only 2/10ths of a cent per stream, translating into a 78-cent payment. (The streaming rate for MusicNet has increased since then.)

I'm not complaining -- I think it's absolutely amazing that my non-touring, self-released band is at times seeing hundreds of streams and downloads a month from paid online music services, in addition to thousands of unpaid mp3 downloads every month from our own website and other music sites. It's a level of exposure that never would have happened a decade ago. Yet it seems unlikely to turn into any substantial income for us.

The Long Tail effect, whatever it turns out to be, is likely best seen in the aggregate and, as Glenn at Coolfer noted, by the aggregators, not in the pockets of the smallest producers of content.

related: A Little Is Enough (a guest post I wrote for Shake Your Fist about the increasing competition for the time of music listeners), The Wrong Tail


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