Power Laws Have More Power Than You Think

10-second summary:

• In an apparent contradiction, the internet both fragments and concentrates attention.
• The reason for the former is intuitive: more stuff, less attention per unit of stuff. The reason for the latter is not. It happens because networks are subject to powerful positive feedback loops. On a network, people’s choices are influenced by others’ decisions, amplifying “hits.”
• There are two underlying mechanisms: information cascades (when people treat others’ choices as signals of quality) and reputational cascades (when people conform with the group decision). As choice has exploded on the Internet and it has become easier to both observe others’ choices and share your own, these mechanisms have become more powerful.
• Consumers also rely heavily on recommendation algorithms to make choices, intentionally and unintentionally. Depending on how they’re constructed, these systems can either boost or dampen the social signals arising from the network.
• The result is that the distribution of consumption in almost all media persistently, and in some cases increasingly, looks like a power law: a few massive hits and a very, very (very) long tail. I provide a framework for thinking about the “extremeness” of the distribution and show a few examples: box office, Netflix original series, Spotify streams, and Patreon patrons.
• There are a number of important implications for media companies. The good news is that there will likely always be big hits, even in a world of practically infinite content. The bad news is just about everything else: the lucrative middle is being hollowed out; the randomness—and therefore risk —in producing hits is climbing; the tail is become more competitive for hits; more economic rent will likely shift to talent; content producers are increasingly at the mercy of curators’ algorithms; and paid media is being devalued.

Almost 20 years ago, Chris Anderson published The Long Tail, which accurately predicted that the Internet would fragment attention and consumption would shift into the “tail.” But Top Gun: Maverick generated over $700 million at the domestic box office, Bad Bunny had 18.5 billion streams on Spotify last year, and 142 million households reportedly watched Squid Game in its first 28 days. Why are there still hits in a fragmenting world?

I obsessively think about the future of the media business—I’ve been in and around it for almost 30 years, including about 15 years as a Wall Street analyst and 12 years at Time Warner, where I headed investor relations and held a variety of strategy roles. I recently published an essay about what I call “infinite TV,” in which I made the case that over the next decade, video will follow the path of text, photography, and music, and the quality distinction between “professionally-produced” content and “independent/creator/user-generated” content will increasingly blur. The result will be a practically infinite amount of quality video content. Will there still be hits then, or only personalized niches?

Have you ever wondered why so many blockbuster movies are about superheroes? Is Hollywood lazy, or are consumers’ tastes becoming dumber and more homogenized? Or neither?