Should You Invest in the Long Tail?

Anita  Elberse

Article | Harvard Business Review | July – August 2008

Should You Invest in the Long Tail?

Abstract

The blockbuster strategy is a time-honored approach, particularly in media and entertainment. When space is limited on store shelves and in traditional distribution channels, producers tend to focus on a few likely best sellers, hoping that one or two big hits will carry the rest of their lists. But online retailing and the digitization of information goods have changed the commercial landscape: Virtual shelf space is infinite, consumers can search through innumerable options, and the marginal cost of reproducing and distributing products is low. What does that mean for the blockbuster strategy? In his 2006 book, The Long Tail: Why the Future of Business Is Selling Less of More, Chris Anderson, editor of Wired magazine, argues that the sudden availability of niche offerings more closely tailored to their tastes will lure consumers away from homogenized hits. The "tail" of the sales distribution curve, he says, will become longer, fatter, and more profitable. Elberse, a professor at Harvard Business School, set out to investigate whether Anderson's long-tail theory is actually playing out in today's markets. She focused on the music and home-video industries-two markets that Anderson and others frequently hold up as examples of the long tail in action-reviewing sales data from Nielsen SoundScan, Nielsen VideoScan, the online music service Rhapsody, and the Australian DVD-by-mail service Quickflix. What she found may surprise you: Blockbusters are capturing even more of the market than they used to, and consumers in the tail don't really like niche products much. Elberse outlines the implications of her research for producers and retailers, and offers strategic advice to both groups.

Keywords: Demand and Consumers; Distribution Channels; Sales; Business Strategy; Online Technology; Motion Pictures and Video Industry; Music Industry; Retail Industry;

Format: Print

9 pages

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Citation:

Elberse, Anita. "Should You Invest in the Long Tail?" HBS Centennial Issue Harvard Business Review 86, nos. 7/8 (July–August 2008): 88–96. (HBS Centennial Issue.)

In July 2016, while on his annual China tour to help promote the sportswear brand Li-Ning, basketball superstar Dwyane Wade and his long-time business manager, Lisa Joseph-Metelus, face a decision regarding one of his other business partnerships—that with the American company Stance, known for its colorful socks. Involved with the young company since 2013, Wade quickly established himself as Stance’s most successful brand ambassador. But recently, several younger players had also come on board as endorsers, and Stance had entered into an overall sponsorship deal with the NBA. With his Stance deal coming up for renewal in October 2016, what kind of deal should Wade and Joseph-Metelus propose to Stance? And how would a newly structured partnership fit into Wade’s overall business portfolio—including his plans for after his active basketball career?

In March 2017, Jason Blum, the founder and chief executive officer of film and television production company Blumhouse Productions, has another blockbuster on his hands with the movie Get Out, produced for just $4.5 million. Remarkable returns for its micro-budget films were nothing new for Blumhouse. In fact, in recent years, Blum and his team were responsible for more such outsized successes than any other producer, especially in the horror genre. The company’s approach to moviemaking is quite different from that of the major studios: it is not afraid to bet on projects that other studios have passed on, it pays its key cast and crew members the minimum salary stipulated by industry unions and only pays out sizeable bonuses if a movie’s box-office reaches certain levels, it gives its directors a great deal of creative control, and it decides on a film’s release strategy only once the first cut is ready. Has Blum discovered a robust formula for success in the film business? And is his approach sustainable, even as other players in Hollywood might seek to copy Blumhouse’s strategy?

Case | HBS Case Collection | October 2019 (Revised February 2020)

Relevent and LaLiga: Bringing Spanish Soccer to America

Anita Elberse and David Moreno Vicente

“Barcelona backs out of proposed LaLiga match in Miami.” It is December 2018, and Daniel Sillman, chief executive officer of sports and entertainment company Relevent, is tasked with finding a way forward after a significant setback. Relevent had found success by convincing some of Europe’s highest-profile soccer clubs to play pre-season matches in North America as part of its annual International Champions Cup (ICC), held during the summer months. Building on that success, Relevent is now seeking to bring at least one official LaLiga match to the U.S. each season—an effort that is a key pillar of Relevent’s new, 15-year partnership with the Spanish soccer league, aimed at promoting the LaLiga brand in North America. However, the match that Relevent had selected to take place in Miami in January 2019, between FC Barcelona and Girona FC, had become a source of tension, drawing protests from the Spanish football federation, the Spanish players’ association, and the president of worldwide governing body FIFA. Today, FC Barcelona’s leadership team had announced the club would withdraw. Would Relevent find success in bringing a LaLiga match to the United States? And, more generally, did Relevent have the right approach to growing the LaLiga brand in North America?

Keywords: soccer; football; superstars; Talent; talent development; general management; Marketing; Entertainment; Sports; Media; Talent and Talent Management; Globalization; Strategy; Sports Industry;

Citation:

Elberse, Anita, and David Moreno Vicente. "Relevent and LaLiga: Bringing Spanish Soccer to America." Harvard Business School Case 520-021, October 2019. (Revised February 2020.) View Details

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