'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. ...