Off the beaten Tracks

Among the most recent ideas about the future of digital sales for information goods is the “Long Tail Theory” proposed by Chris Anderson in 2004. This theory claims that in a digital world, hits and superstars will cede space to niche products. Therefore, for the future of the music industry and other industries such as books and video, niche products could be more important than selling millions of copies of a hit product. There are relatively few studies concerning the long tail theory. Evidence found still remains contradictory and the theory as a whole remains somewhat untested. This thesis aimed to explore the long tail hypothesis by studying the Dutch music market. The market was divided into CD's and digital albums. In the market for CD's, when looking at concentration, there is no evidence that the growth in online distribution has had an effect into the overall sales' distribution. In the digital albums' market, the market size does not allow to speak of the long tail as a profitable business model. Nonetheless, it is argued in this thesis that the long tail should be studied beyond the profitability of the tail. The hypothesis touches many other aspects such as the importance of niche content online and differences in the composition of sales online, aspects that cannot be measured looking only at concentration. If the relative importance of niche content is taken into account, then, the ideas behind the long tail are supported by the data used in this thesis. Different comparisons were drawn between CD's and digital albums, the outcome of these comparisons points towards a better performance of niche content in the digital market. The mixed results obtained showed that there are still areas to be researched. This thesis provided with evidence for some of these areas, for example the performance of niche content in a digital market and how e-tailers might price niche content in order to profit from the tail.