I followed a link from Due Dilligence to an excellent article in Wired on how media-based business (music, books, movies, etc) is fundamentally transformed by the ability to keep *everything* in stock and deliver it for almost nothing. When you can aggregate all of that demand, there is some demand for virtually everything. In fact, it turns out that there is more money to be made on the low-demand things than on the high demand things, in aggregate. This demand has previously gone unmet because it was never possible for physical stores to meet that need conveniently.
I have long suspected this was the case — but this article makes the case very compellingly and backs it up with real world examples of the long tail in action.
Ironically, this is a business that P2P can’t touch. P2P networks are great at finding things common within the network. When the thing you want is rare, the chance that a peer that has it will see your request is fairly small. And the chances get slimmer when you remember that many P2P clients are only occasionally connected, many are freeloaders that don’t or can’t serve their music, or and many don’t have enough bandwidth to give reasonable service. While P2P is a convenient way to get popular things free, it sucks for obscu re stuff — in theory and in practice.
So, it’s not that there isn’t big business to be had in digital media on the Internet, it’s just that it’s fundamentally a different business. In the physical world, media companies are star makers. They select an artist from the talent pool, then invest heavily in production and promotion to turn that artist into a popular phenomenon. The promotion is key — it’s what boosts demand to a level where WalMart can get the inventory turnover it needs to justify giving the album shelfspace.
On line, the business is knowing your product and knowing your customers, so that you can match customers to products that match their tastes, no matter how quirky. It’s a different business, but the rewards are bigger than ever.
In fact, if you can make money on the long tail, you don’t have to worry about losing the demand that P2P is good at meeting — the demand for the popular stuff.