COMMENT: The Long Tail Theory

Last month, Licensing.biz sought the opinions of the industry about the state of the retail market for licensed goods - and the findings made depressing reading.
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Retailers have finite shelf space, defined profitability targets and a hatred of leftover inventory. It means that they exercise caution when ordering licensing merchandise, relying upon proven evergreen properties like Winnie the Pooh or sure-fire movie hits like Spider-Man.

Licensed merchandise sales are driven by television, but broadcast schedules are different in every country and the time devoted to children's programming is shrinking.

The majority of sales people working for licensors or licensing agents go through the grim daily experience of offering properties to licensees and retailers who do not really want them. Even the most determined and enthusiastic sales person realises eventually that there is something wrong with the business model, not them.

The Long Tail analyses the internet economy and, although it was not written with the licensing industry in mind, it offers hope and salvation for licensing personnel, just as they may have been thinking of looking for a new job in a different, more vibrant business.

Chris Anderson of Wired magazine devised The Long Tail theory and published it in a short article, with compelling examples. It crystallised what many people were thinking and has led to a huge and expanding blog with many contributors and also now a book with many more case studies.

The Long Tail states that it is possible to supply a very large number of niche markets with goods and service profitability, whereas traditionally the Pareto 80:20 Rule applied, in that everything was either a 'hit' or a 'flop', with nowhere in between.

Retail shelf space and TV schedules are limited. Therefore, retailers and broadcasters only focus on the 20 per cent of hits.

Yet, among the 80 per cent of licensed properties remaining, many are not simply flops, but do have an audience of consumers who want merchandise, yet cannot get it on the High Street.

Anderson provides many case studies to prove his theory. For example, Amazon.com stocks 2,300,000 different book titles in the US, compared to the 130,000 available in all Barnes & Nobles stores. 57 per cent of Amazon's total sales come from those books that are unavailable in Barnes & Nobles. What is more, that is the fastest growing segment of Amazon's sales.

Ty Simpson of Kentucky USA is the licensing industry's own example of The Long Tail in practice. He started a booming online store called Ty's Toybox.com because his daughter loved The Wiggles but none of the US retailers stocked the merchandise. His site today specialises in licensed merchandise which has a lot of target consumers, but not enough to convince retailers like Wal-Mart to stock it.

New company TAYMAI shows licensors how to benefit from the new freedoms and to avoid the old constraints.

So, what does The Long Tail mean to the licensing industry?

It means:

1) Rather than rely upon cramped TV broadcast schedules separated by country, reach a worldwide audience through internet broadcasting;

2) Rather than be excluded from retail, serve a global audience profitably with limitless online merchandising space;

3) Rather then depend upon your property becoming a blockbuster, profit from niche markets.

Steve Manley is CEO of TAYMAI. For more information, contact him at steve@taymai.com or call 0845 363 7152.

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