2010-02-16dated from the article

The Anatomy of a Hit Record

Written February 16, 2010. Platforms and services described here have changed. This is kept as a record, not as current advice.

I just read this headline: 2% Of Albums Released Last Year Accounted For 91% Of Sales. Instinctively, we all know that “hits” are huge successes, but looking at those figures made me realise just how many albums aren’t. It made me wonder what sets that 2% apart from the rest. How does it happen? What makes a song or an album a hit? Who Buys Hit Records?

My starting point was revisiting an Economist article published late last year – A World of Hits (behind a paywall now) – which highlights a few interesting aspects of a hit. A disproportionate share of the audience for a hit was made up of people who consumed few products of that type. By contrast, the audience for an obscure novel is largely composed of people who read a lot.

That means the least popular books are judged by people who have the highest standards, while the most popular are judged by people who literally do not know any better. An American who read just one book this year was disproportionately likely to have read “The Lost Symbol”, by Dan Brown. He almost certainly liked it. Let’s call this the “Simon Cowell effect”. For a current music-distribution reference, see Amuse.

Almost everybody I know who loves music dislikes the x-factor (it’s my guilty pleasure!), but almost every song it produces is a hit. This is because, the Economist argues, people who buy x-factor singles aren’t music connoisseurs – a point the brilliantly shameless Cowell knows all to well. So there’s the first bit of information I learned about a hit – blockbusters happen when people who don’t normally buy CDs, go buy that CD.

A hit draws people out of the woodwork. And that makes perfect sense – I can think of plenty of people who wouldn’t normally go to the cinema but went to see Avatar because it’s “just one of those you have to see on the big screen.” Or, as Seth Godin puts it: In order to have a bestseller, you must reach the unreachable. Most of the people who buy a bestselling book buy no other book that month, or even that year.

The Future of Hits The Economist article also said (in slight contrast to Chris Anderson‘s The Long Tail ) that the future for hits looks bright. Even though people have more access to more content than ever before, this doesn’t mean that the hits will become smaller. In fact, the opposite seems to be true. The best explanation I’ve seen of this comes from Google’s CEO, Eric Schmidt.

In this video interview (below) he reminds businesses that although the tail might be getting longer, the vast majority of the revenue remains in the hits. It’s probable that the internet will lead to larger blockbusters, more concentration of brands [....] because it’s a larger distribution medium and when you get everybody together they still like to have one superstar – it’s now just a bigger superstar.

It’s now no longer a US superstar, it’s a global superstar. So that’s how Google sees it – for the music industry to remain as profitable as it can, you need the long tail of special interest offerings, but you really need the superstars and big hits, because that’s where the huge bulk of the revenue is. What About My Music Business?

As you’re reading this you’re probably wondering how this knowledge might affect your own strategy for your music business. From our perspective, that depends on the size of your business. Larger record labels can afford to follow a hit-based strategy because they have mathematics on their side. The likelihood of an individual artists having a huge hit is slim to none, but larger labels can diversify and spread that bet over a whole portfolio of artists.

Add in big marketing budgets and well established routes to market and the odds that one of their vast catalogue of artists will have a hit becomes increasingly more likely. But if you’re a small artists or an indie label, these odds aren’t stacked in your favour. This is why we always recommend a well planned long tail strategy. More specifically, we say aim to be the head of the tail (you could call it a ‘torso’ strategy if you’d like!).

The software firm 37signals are evangelists of this approach. They openly state that they don’t try to be the next Google or Microsoft, because the odds of that happening are just way too slim. They don’t aim for selling big projects to the Fortune 500 (i.e. the ‘hit’), they aim to sell reasonably priced products to the fortune 5,000,000.

How’s that working out? They’re a 5 person team earning millions of dollars in profit each year. With a regular, loyal and profitable customer base they spend their days creating new products to sell to their existing customers, which is a very cost effective way of doing business. Kevin Kelly’s concept of 1,000 true fans is an example of a similar approach applied to music.

Big In The Tail = Hit? It’s important to note that dominating a niche is quite different from aiming for a hit. If you fail at becoming a hit, dominating the niche isn’t a “fall back” position, you’ve already lost because of the amount of money, time and energy you spent trying to have a hit. Dominating a niche, being big within the long tail, is something you plan for and work towards.

As Seth Godin reminds us, Bruce Lee set out to be the best kung fu star in histroy, not the best movie star. Had he aimed for the latter, he would have failed at both.