Reuters’ Jeremy Pelofsky has this gem about a cranky Microsoft investor who is pushing the software giant to hold a shareholder vote forcing the company to explain why it endorses net neutrality. (While Microsoft has joined coalitions that advocate net neutrality regulations, it doesn’t stand out as a big proponent).
The Free Enterprise Action Fund is trying to push a proxy vote that would require Microsoft to prepare a report examining “the business and economic rationale, regulatory impacts, legal liabilities and any effects on product development and customers” of net neutrality regulations.
“We feel they should be worried about innovation and competition rather than perhaps running to the government for regulation,” said Tom Borelli, a portfolio manager at the fund, which has about $5.5 million in assets and more than 4,000 Microsoft shares.
Microsoft, not surprisingly, doesn’t want to do that. It has asked the SEC for permission to ignore this request because the company’s position on network neutrality falls into the realm of “ordinary business” and is therefore not subject to a shareholder vote.
Posted by Cynthia Brumfield at 1:26 PM | Print | Comments (0)A thought-provoking debate has cropped up in the blogosphere today, and no matter which side you’re on, it’s an overdue airing of the by-now accepted wisdom of the long tail. Wired magazine’s Chris Anderson has a top-selling book “The Long Tail: The New Economics of Commerce and Culture,” and it’s basically a more thorough analysis of his groundbreaking thesis that the multitude of “non-hit” choices on the Internet can combine into a big economic and social force, collectively more important, perhaps, than the “hits.”
The Wall Street Journal’s Lee Gomes knocks down Anderson’s basic arguments in his column today, sparking a lot of very healthy debate. Gomes argues that hits are as important as ever.
By Mr. Anderson’s calculation, 25% of Amazon’s sales are from its tail, as they involve books you can’t find at a traditional retailer. But using another analysis of those numbers — an analysis that Mr. Anderson argues isn’t meaningful — you can show that 2.7% of Amazon’s titles produce a whopping 75% of its revenues. Not quite as impressive.
Another theme of the book is that “hits are starting to rule less.” But when I looked online, I was surprised to see what seemed like the opposite. Ecast says 10% of its songs account for roughly 90% of its streams; monthly data from Rhapsody showed the top 10% songs getting 86% of streams.
Anderson responds to Gomes in a well-reasoned rebuttal. He makes an excellent point when he says that Gomes misinterprets the Amazon/Ecast/Rhapsody examples.
Sigh. Gomes was determined to make this point, even after I and others pointed out the statistical fallacy at the core of it. As I wrote in this post, trying to define “head” and “tail” in percentage terms is meaningless in a market with unlimited inventory, because the denominator can grow infinitely large. Let me give you an example of why this doesn’t work:
Let’s say you have 1,000 items and the top 100 (10%) account for 50% of the sales. Then you add another 99,000 items to the catalog, and the sales of that top 100 fall to just 25% of the total, while it takes another 900 items to make up the next 25%. I would say that demand has shifted down the tail, because those top 100 items have dropped from half the market to just a quarter of it and the rest of the demand is spread over more items.
But by Gomes’ math, we’ve gone from a market where 10% of products make 50% of the revenues to one where 1% of the products make 50% of the revenues—in other words, it’s become more hit-centric. I think this is simply a misunderstanding of basic statistics, and I’m disappointed that Gomes, despite many emails from me and at least one economist to him on this point, chose to simply say that I don’t agree with that approach (but not why).
However statistically satisfying Anderson’s response is, it doesn’t quite hit a home run in countering Gomes. Anderson’s example assumes that another 99,000 items have been added to the catalog — but this is precisely what the long tail is, what the Internet does. It adds 99,000 new items for people to buy or read or watch, items that they couldn’t easily consume before the rise of the Internet. Where once you could choose from 1,000 items, now you can choose from 100,000 items.
That’s the long tail, not whether a tiny fraction of items account for the majority of sales. Nick Carr (one of the best writers in the blogosphere) makes this point in another way. Carr, who ends up agreeing with both Anderson and Gomes, says
Only by knowing how big the old Long Tail was can you understand how much larger it’s grown with the Internet. My guess - and it’s only a guess - is that the Internet Long Tail is substantially larger than the pre-Internet Long Tail, but that, in its current form, it amounts to something less than a monumental change in the market.Posted by Cynthia Brumfield at 11:50 AM | Print | Comments (0)
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