It depends on who you ask.

Chris Anderson, editor-in-chief of Wired Magazine and author of The Long Tail: Why the Future of Business is Selling Less of More explains “The theory of the Long Tail is that our culture and economy is increasingly shifting away from a focus on a relatively small number of ‘hits’ (mainstream products and markets) at the head of the demand curve and toward a huge number of niches in the tail. As the costs of production and distribution fall, especially online, there is now less need to lump products and consumers into one-size-fits-all containers. In an era without the constraints of physical shelf space and other bottlenecks of distribution, narrowly-targeted goods and services can be as economically attractive as mainstream fare.” Anderson predicts that over time, the cumulative demand for all these niche products will cumulatively exceed the demand of mainstream products.

But ”Should You Invest in the Long Tail?” , a just-published article examining the Long Tail theory in the Harvard Business Review by Anita Elberse, an associate professor of business administration at Harvard Business School comes to a different conclusion:

“Although no one disputes the lengthening of the tail (clearly, more obscure products are being made available for purchase every day), the tail is likely to be extremely flat and populated by titles that are mostly a diversion for consumers whose appetite for true blockbusters continues to grow. It is therefore highly disputable that much money can be made in the tail. In sales of both videos and recorded music—in many ways the perfect products to test the long-tail theory—we see that hits are and probably will remain dominant. That is the reality that should inform retailers as they struggle to offer their customers a satisfying assortment cost-efficiently. And it’s the unavoidable challenge to producers. The companies that will prosper are the ones most capable of capitalizing on individual best sellers.”

Elberse provides advice on leveraging long-tail demand that’s applicable to producers of media and entertainment goods, online retailers and content aggregators as well as manufacturers and retailers of physical goods. Visit here for the full article. Subscription may be required.

Sources:
”Should You Invest in the Long Tail?” Havard Business Review, July-August 2008
“The Long Tail,” Wired Magazine, October, 2004
The Long Tail Blog

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The Long Tail Blog

See Also:
The Long Tail: Why the Future of Business is Selling Less of More, Amazon Books
“The Long Tail”, Wikipedia