The pressures are extraordinary.  Coke is still more profitable  than Pepsi, but Pepsi has pulled even with Coke in market value (at $103 billion).  Ten years ago, Coke was three times bigger.  The value of the Coke brand has declined 20% since 1999. 

Superficially, the problem for the Coca-Cola Company looks like a long tail one.  In the beginning, there was a one cola, and it’s name was Coca-Cola. Now the CSD (carbonated soft drink) category has differentiated within and exploded without. 

Consumers are flocking to a new breed of coffees, juices, and teas — all categories where Coke has historically been weak. For the longest time, Coke seemed in denial, more fixated on reversing the stagnation in soda than investing in the alternative beverages that consumers were clamoring for.

Clearly, the Coca-Cola Company (TCCC) needs to be more things to more people, but not many more things.  The trick is to be each of these things with ferocious intensity.  So when they did  Fruitopia, it would have been better not to do it in that half hearted "if only this were a soda" way.  Fruitopia needed to be sold as if it were a tiny start up not an obligation. 

Fragmenting markets do not, in this case, demand the product and management of long tail diversity.  It just looks that way.  (And it must look that way to corporations that spend a lot of time selling one or two brands millions of times a day.)  The real problem is not extensity, it’s intensity.  The problem is not the new diversity of the marketplace.  It’s the old single mindedness of the producer. 

Yes, a new culture is upon us.  But the real challenge is the old cultures that still prevail within the corporation.  It may be possible to cultivate lots of diversity within the corporation but I suspect that "skunk works" strategies will be called for.  The corporation will have to multiply itself.  The most deeply rooted "we are one organization" models will have to be denied.  In order to muster that ferocity of committment from which great brands spring, it will be necessary to engage in new acts of disorganization.  Yes, the marketplace is more various.  But this does not require long tail strategies.  It only means that the corporation becomes more various, too.

References

Anonymous.  2006.  Queen of Pop: Meet Mary Minnick.  BusinessWeek. August 7, 2006.  here.

Yesterday, Lee Gomes of the Wall Street Journal weighed in on behalf of chunky marketing. 

He says,

Wired Magazine editor Chris Anderson’s hot, new best seller, "The Long Tail," is causing a sensation with its eye-opening claims about the way the Web is rewriting the rules of commerce. But I’ve looked at some of the same data, and some more of my own, and I don’t think things are changing as much as he does.

Gomes complains that Anderson’s vaunted 98 Percent Rule is without foundation, that the Ecast data no longer makes the point Anderson says it does, and that the the "misses outsell hits" notion will not actually apply at Netflix and Amazon at least for another decade. 

Gomes says that 2.7% of Amazon’s titles produce 75% of the revenues, at Ecast 10% of the songs produce 90% of the streams, and at Rhpsody 10% of the songs produce 86% of the streams. 

[W]hile every singer-songwriter dreams from his bedroom of making a living off iTunes, few actually do, mostly because so many others have the very same idea. And to the extent that Apple is making money off iTunes, thanks go to Nelly Furtado and other hitmakers. Indeed, you can make the case that the Internet is amplifying the role of hits, even in relation to misses, not diminishing them.

References

Gomes, Lee.  2006.  It may be a long time before the Long Tail is wagging the web.  Wall Street Journal. July 26, 2006.  here.

McCracken, Grant.  2006.  More on chunky marketing.  This blog sits at the intersection of anthropology and economics.  July 19, 2006.  here.

Acknowledgement:

Thanks to Ennis of  SepiaMutiny for the head’s up. 

Poor Hollywood.  It is being hollowed out.  Some companies flee to the high ground of the block buster.  Other descend to the indie market.  The tradition stamping grounds of the market place, the $50 million picture, is being abandoned. 

We learned yesterday that Disney has taken to the high ground.  Anne Thompson surveyed the industry and finds those who believe this is an indication of things to come.

Where Disney is going is the future of the business.  The future will bring fewer movies, more niche and art movies at lower budgets, a concentration on tentpoles.  People won’t be making any films over $20 million or under $100 million.  [Tom Pollock, Partner, Montecito Pictures]

The culprit?  The capital markets.

It’s been proven over and over again that the returns on invested capitol over the life of films in that budget range [$50-$80 million] just isn’t good enough to justify the costs. 

All seven studies are cogs in the wheels of public companies.  The way the town is going is a mix between tentpole movies with super-duper blockbuster appeal to everybody and quadrant movies aimed at a niche audience.  The studio indie subsidiaries will stay around.  It’s a capital allocation decision.  [David Miller, Sanders, Morris, Harris Group]

The middle of the Hollywood market is being hollowed out.  That $30-80 million range.  This is why, as we noted yesterday, Disney is deemphasizing Touchstone.  There are a few studios still working the middle, 20th Century Fox and Universal among them, but, as Anne Thompson wonders in her intelligent way, how much longer?

Hollywood has found its devil and its deep blue sea.  On the one side stand the marketers who have always insisted on mass appeal and the tent pole picture.  (The appointment, announced yesterday, of Aviv as president of production at Disney is a harbinger here.  Aviv used to be the head of marketing there.)  On the other, the capitalists who insist they know makes make a good investment in this industry. 

Now, I believe that Hollywood should make movies that make money.  Hollywood might still be an orange grove (and America an unrecognizably different country and culture) if it had ever been otherwise.  But I am not so sure that Hollywood should be deferring to the marketers or the finance people. 

As a marketing guy, I happen to know that the marketers are almost always talking through their hats, and that it is guite wrong for Hollywood meekly to accept their bullying.   Marketers never really came to grips of marketing to mass markets.  This means they are unprepared to reckon with the realities of more minor ones.  (I mean, in some cases, they are spectacularly off the mark.)

I am not a finance guy, but I know enough about the profession to reach for my wallet when someone says that something has been "proven over and over again."  I believe it is time to ask David Miller to stand and deliver.  What are these proofs of which you speak, sir?  Let’s see em.    Some of your creative types may be intimidated by this sort of thing but those of us who loiter at the intersection of anthropology and economics are made of sterner stuff.  (I mean of course Steve Postrel and Peter McBurney.  The rest of us are total creampuffs.) 

There is an alternative.  It’s called chunky marketing.  Somewhere between the long tail of the indie market and the tent-pole blockbusters, there is a lot of money to be made. 

This is, after all, when culture and commerce flourish.  This is where creativity and capital are happiest with one another.  This is where the antinomies of our culture learn to accomodate one another.  I mean, creativity by itself?  Good lord, it is art school naive and avant garde pretentious.  Capital by itself?  Why, I believe, it looks a lot like Connecticut, and no one, not even the capitalist, thinks that’s a good thing. 

So before Hollywood decides to hollow out the middle, perhaps we could interrogate our "experts" a little more closely.  Thank you, Anne Thompson, for getting the process started.

References

Thompson, Anne.  2006.  Risky business: Changes at Disney signal ‘strange tides.’ The Hollywood Reporter.  July 21, 2006, pp. 5-6. 

Disney is moving briskly away from long tail and chunky strategies. Yesterday, it appointed its president of marketing, Oren Aviv, as president of production.

So how mass is Aviv?  Completely, by the looks of things.  He has been assigned the task of slimming down the number of Disney movies from 18 to 12.  He will reduce the edgier, more adult, Touchstone to one or two pictures a year.

Disney and Aviv are now looking movies "four quadrant" films, like Pirates, that appeal across what Adage calls "the broadest demographics."  When Aviv was asked by the Hollywood Reporter what constituted a Disney picture, he referred to G to PG-13 ratings, movies that speak to the "whole family," and movies "have appeal across the board."

It is all very well to start mass.  This was the way that Hollywood succeeded in the first place.  It refused arty and avant garde strategies for movies that played it straight down the middle.  But things have changed.  It is not clear there is any mass now to court. Even if there were, it’s not clear Hollywood could craft the blockbusters of yesteryear.  (As I was pointing out a couple of days ago, Disney very nearly rejected one of the most appealing things about Pirates.)

No, in a perfect world, I think, you want to balance your portfolio. Maybe lay some bets in the long tail world of indie production.  You never know, you might back a sleeper hit.  Certainly, lay some bets on the chunkier world of the mid size film.  This strikes a balance between the big talent that only Hollywood can afford with a certain freedom of topic and treatment that will speak first to a chuck of the market, and then perhaps the whole darn thing.  Let’s face it, it’s much easier to find a sleeper in this terrain than in the long tail world. 

We observe with interest that the woman Aviv replaces, Nina Jacobson, an eight-year Disney veteran, has been connected to some very chunky projects, including The Sixth Sense, Remember the Titans, the Princess Diaries, Twelve Monkeys, Dazed and Confused.  The Hollywood Reporter says that Jacobson was thinking of getting Disney into the horror genre, which is very chunky when it isn’t long tail.

Aviv sometimes makes chunky noises, as when he says that Narnia destroyed King Kong by getting at the "organic elements speaking to specific audiences," specifically kids (with the child actors), teens (with the special effects) and readers of the 70 million Narnia books published. I guess this is a sort of umbrella strategy.  It’s starts mass and reaches down into chunky marketing with specific appeals to particular audiences.  And then it goes after these chunks with very specific, chunky marketing strategies.  And perhaps this is a good way to have one’s cake and eat it too. 

But I think it’s just as possible that Disney has hired a marketing guy at the very moment marketing is demonstrating an inability to deal with the fragmentation of the new marketplace (filmic and otherwise).  This marketing guy has all the old instincts, and he’s acting on them.  He is pursuing the fattest part of the market when most of these sweet spots are ephiphenomenal, simple aggregations of smaller pieces.  You can talk to them, but no one much cares for the blandness that results.  (And let’s be honest, there will come a time not so far from now that Hollywood burns through the children’s book and superheroes on which mass proposition now largely depend). 

Well, we shall see.  Mr. Aviv’s candidacy will be a very interesting test.

References

Crabtree. Sheigh.  2006. Aviv establishes first task: what is Dis?  The Hollywood Reporter.  July 20, 2006, p. 4.  (subscription required)  here.

Stanley, T.L.  2006.  Disney Elevates Marketing Exec Oren Aviv to Head Production.  July 20, 2006.  (subscription required) here.

Hard to tell which of us is Darwin and which Wallace, but my argument outlined over the last couple of days on "chunky marketing" has found unexpected support from Natasha Walter of the Guardian. 

Here’s what she had to say after interviewing Chris Anderson on his "long tail" idea.

But what you are left with, if you’re convinced by this picture of a culture that is all top curve or long tail, is a nagging question about what is happening to what has been called the middle torso. A culture divided between the massive hit and the tiny niche may feel comfortable for retailers and producers of a certain sort, but not so good for others. Many writers do not just want to reach a tiny online community and yet will never follow the formulas that please a massive audience; many film-makers don’t want to go it alone with a digital camera and sell to the teenagers on MySpace, but also don’t want millions of dollars of computer-generated imagery and a first week opening on thousands of screens.

At the moment, there is space to work in this middle ground. There are, say, the distributors who support independent film-makers with a small theatrical release, and independent publishers who take on new writers and help bring them out of the niche without expecting them to be bestsellers. But just as the small independent bookshop is being squeezed both by supermarkets and online retailers, so we may find that if our culture becomes so dominated by the blockbuster on one hand and the long tail on the other, something precious is going to get squeezed out of the middle.

Hear hear.  Or is that, here here. 

References

Walter, Natasha.  2006.  Something is being squeezed out of the middle.  The Guardian. 
here.

Acknowledgments

Thanks to Paul Melton for spotting the Walter essay.