'Long-Tail' Theory Faces the Music
A tiny company in Sacramento, Calif., with a pittance in revenue caused an outsized stir this month when it filed for an initial public offering. The buzz started when a few tech blogs crowned the company, Digital Music Group, as the first "long-tail" IPO.
But even if DMG, essentially a digital music wholesaler to online music stores, is a clearly undercooked IPO candidate now, it's worth considering simply because it represents a business model that investors will be confronting more and more in the next few years.
But what is long tail? Because it's still a new, if influential, idea, there's no clear consensus on it. But most agree that it's a gradual reshaping of the demand curve for digital music and other media -- in this case, from an overweening "head," comprising a handful of music megahits, into a growing "tail" of niche-catalog properties, whether hits of yesteryear or new works from garage bands.
In other words, new technology is bringing about changes in media commerce that allow songs, books and movies to keep selling -- modestly, but in aggregate, profitably -- long after their shelf life.So what's the effect of this new technology? First, there are more tools to produce content, such as Apple's
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