Opportunity Costs and the Long Tail
It is now week three in my journey of teaching Principles of Economics to the new batch at the Gokhale Institute undergraduate program, and if that doesn't get me back to writing here, nothing will.
We've finished two of the six (or is it seven, and when will I ever finalize this?) principles that I think lie at the heart of economics, and the second one was opportunity costs.
And this year, The Economist has chosen to help us understand and internalize the principle by talking about music festivals. Nobody goes to them anymore, apparently, and here's why:
Festivals have also been hurt by changes in listening habits. Algorithmic recommendations by streaming platforms like Spotify have funnelled fans into niches, making the market more fragmented than in the days when everyone listened to the same radio charts. As listeners divide into tribes, from K-pop to hip-hop, it becomes harder to organise a festival lineup with broad appeal, says Will Page, a former chief economist at Spotify. Events focused on a single musical genre are doing better than general-interest ones, he says: today’s fans “go to echo chambers, not festivals”.
There's really two different ideas nestled in one treat of a paragraph over here, and to tease out the second of these, we need to go over the first in some detail.
Consider the phrase "as listeners divide into tribes". Why are these listeners dividing themselves into tribes? Because of a phenomenon called "The Long Tail". The long tail is a concept that I learned about for the first time while I was studying statistics in college, but the modern phrase has a rather specific connotation, because of a book by the same name:
The book argues that products in low demand or that have a low sales volume can collectively build a better market share than their rivals, or exceed the relatively few current bestsellers and blockbusters, provided the store or distribution channel is large enough. The term long tail has gained popularity as describing the retailing strategy of selling a large number of different items which each sell in relatively small quantities, usually in addition to selling large quantities of a small number of popular items. Chris Anderson popularized the concept in an October 2004 Wired magazine article, in which he mentioned Amazon.com, Apple and Yahoo! as examples of businesses applying this strategy
There was a time when everybody listened to the same songs, watched the same movies, read the same books, and watched the same series on TV. Not because we wanted to, but because there was no choice. There were a limited number of distribution channels, and producing (and distributing) content was mind-numbingly confusing. Hardly a few people were rich enough, or talented enough (and in some rare cases, both) to produce and distribute content at scale.
But the internet, and the plummeting costs of cutting edge technology have changed the game. You'd have laughed, if in the 1990's a skinny little kid came up to you and said I'm going to be a multi-millionaire by shooting and uploading videos about tech. But if you haven't already, say hello to MKBHD.
Here's the truly weird bit: if you haven't heard of MKBHD, that proves my point too! He's got more than 22 million subscribers to his YouTube channel, and Wikipedia informs us that his videos have more than 4 billion views(!). He's - at the same time - both immensely popular among certain circles globally, and a relative unknown to many other people.
Have you heard of Pramod's Life? Don't blame you if you haven't, there's no reason for you to have heard of him, unless you are into watching videos about tractors in rural India. Does the idea of watching tractors being washed in a river in Madhya Pradesh excite you?
If your answer is no, well, 187 million views on this video disagree with you!
Scintillating stuff for some, no doubt, and hey, who am I to judge? I used to be excited about listening to econometrics lectures that went on for hours. There's no accounting for taste.
There's no way I would have chosen to watch this over an MKBHD video, but that's the point of the concept of "The Long Tail".
But hey, there's no such thing as a free lunch. If YouTube (or streaming services for music, or Kindle for books, or whatever other category you want to think about) allows people the world over to watch tractors being washed in the river, it also comes at a cost: Pramod can never get all of those geographically distributed folks to assemble at a spot to watch him wash those tractors live. Or something like that:
The fragmentation of listenership also makes festivals trickier for mainstream artists, who can no longer rely on a rapturous reception. In June Rita Ora tried to get a crowd at the Mighty Hoopla festival in London to join in with one of her songs, but no one knew the lyrics. In April, when a Coachella crowd was unmoved by a performance from Blur, its frontman, Damon Albarn, scolded them: “You’ll never see us again so you might as well fucking sing it.” Enthusiasm for festivals, it seems, is waning all round.
So which world would you prefer to live in? One where only a few artists become popular, but all of their concerts are always sold out? Or one in which many artists become popular, but mega-concerts become a thing of the past?
You want both, you say?
Ah, now what to do? There is, alas, no such thing as a free lunch.
But hey, maybe you want to see chocolates being unwrapped instead?