Digi-distribution revolutionizes the world of entertainment

Via Marginal Revolution: Making money from niche demand, Chris Anderson writes in the Wired Magazine:

Forget squeezing millions from a few megahits at the top of the charts. The future of entertainment is in the millions of niche markets at the shallow end of the bitstream.

The traditional channels like bookstores, retail stores (such as WalMart) meanwhile have high fixed costs and hence can afford to keep only few "hit" items. The digital distribution of music and books do not require high-level of fixed costs. Plus online retailers such as Amazon.com have done a fine job of utilizing the interactive nature of the web to guide the customers to the items that they might like. Customer recommendations and comments, features such as "People who bought this also bought:" and so on, allow customer to discover the items of their liking. Customers are not forced to buy entire albums if they just liked a single track. The low-fixed costs and ease of discovery makes it easier for Amazon and other online retailers to carry huge inventory of even non-hit items. The profit from selling many non-hit is comparable to selling a few hit items.

Read the whole article. It is full of good analysis of the revolution brought by Amazon, Netflix, iTunes and others. I cannot even begin to summarize so many good points and many many excellent examples given there.