Heads, Long Tails, and Light Consumers

I'm currently reading Blockbusters by Anita Elberse and wanted to summarize a few thoughts on the book. Blockbusters, by Anita Elberse (Henry Holt and Company, 2013).

Elberse talks about the general effectiveness of blockbuster strategies, or the idea of a company focusing most of its resources -- including its marketing and talent funds -- on just a few products or services, whether it's movies, music, books, or electronic hardware. She makes a strong case for focusing on the "head," or sales driven by a few blockbuster products that are expensive to develop and market, versus focusing on the "long tail," or sales from targeting multiple niche market segments with a range of specialized products. Big profits are driven by the head and not the tail. Id.

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Citing William McPhee's Formal Theories of Mass Behavior, Elberse also makes the interesting point that "light consumers" who buy less frequently and know less about product alternatives tend to opt for the most popular choice. Companies with blockbuster strategies naturally monopolize light consumers. Id. "Heavy consumers" who buy a product frequently are more aware of their alternatives and are typically the ones who choose niche, long tail products. Id.

Ironically, McPhee found that heavy consumers tend to appreciate popular products more than the obscure products they often buy. Id. This suggests that heavy consumers of obscure niche products are prime candidates to eventually switch to more popular blockbuster products.

Elberse notes that YouTube and Netflix formerly seemed interested in pursuing long tail strategies, trying to provide a niche offering to every market segment. This strategy was enabled by the negligible transaction and search costs associated with digital goods. YouTube and Netflix initially seemed to believe that long tail sales would widen and lengthen because consumers would value niche offerings more than blockbuster offerings, leading to declining sales in the head and growing sales in the tail. This apparently hasn't occurred. Id. YouTube has since shifted its focus to premium "channels" from well-established stars/brands like Jay-Z, while Netflix is spending big on premium content produced in-house, like the House of Cards series with Kevin Spacey. Id.

The implications for companies like Apple seem pretty clear. Focus your resources, including your marketing and talent funds, on just a few blockbuster products, thereby monopolizing light consumers while also attracting heavy consumers. Heavy consumers may start with a niche product but they're likely to appreciate the blockbuster product more, making them prime candidates for product switching.

Addendum (added 8/26/2015):

The effectiveness of blockbuster strategies versus long tail approaches should also be good news for premium content producers like Disney, ESPN (a Disney subsidiary), and HBO. Regardless of whether consumers get this content through cable providers like Comcast or over-the-top services like Apple TV or Roku, premium, blockbuster content should remain a healthy source of profits.

The author owns stock shares of Apple.