Long tail response

Reading Chris Anderson's "The Long Tail" has given me a glimpse of the evolution of a market that is of paramount importance: music, videogames, books, and movies (amazing how college student priorities seem so strange when put into writing). As noted by Anderson, the primary limitation on movie theatres, rental stores, music stores, etc. is the profit margins of their products. In order to have such products available, the products have to pay for shipment, staffing, space and other random costs. Online stores have started to eliminate the need for Blockbusters, GameStops, and other related stores because they simply cannot keep up with the low costs of online business.
Being able to carry everything by everyone has shown to be profitable as well. As Anderson points out, half of Amazon's sales come from non-top sellers. More important, however, is the ability to market those non-top sellers. The system of suggestion of related likes multiplies business by tremendous amounts. Searching for a single movie, say Apocalypse Now, can lead to Platoon, We Were Soldiers and the countless other Vietnam movies, which will eventually lead to the entire war movie genre. Suddenly one online rental is three in the blink of an eye. Having a mountain of forgotten movies available simply isn't good enough because movies no one remembers won't sell.
This brings up another point: how those related movies are selected from the abyss of movies that bear some sort of resemblance. If producers are paid based on how many times their movies are bought online, isn't it possible that a competition will start over which movie is top on the list? Bribery aside, movie producers will most likely start asking for less and less money from each download. This will either raise the online company's profits while keeping the movie at the same price, or increase sales due to market elasticity if the price drops, both to the same end: higher likelihood that the movie will be somehow related to whatever movie you were looking for in the first place. While lower prices are obviously a blessing for consumers if things stay under control, there will come a point when movies are simply made to get on the top of the related list on Netflix, making a possibly mediocre movie immensely profitable simply because it might be related to everything and dirt cheap. The $3.99 bin at the carwash suddenly went online with unlimited stock.
On another note, how far does the online train go? What would happen if movie theatres suddenly lost their rights to show movies first? What if Netflix released new movies at the same time as your local movie theatre? No doubt the theatres would not be empty. There will always be a need for movie theatres, at the very least for middle school kids to get some awkward private time or for an old couple to have a night out (hopefully not too close together). But most people want to see that new hit movie now and the movie theatres currently have a monopoly on the right to give the viewers what they want. What happens when a company like NetFlix gains the right to release those movies is anyone's guess.
That leads to the ability of trends to spread like cancer throughout an economy. If music stores are going out of business, what next? Hardware stores? Car dealerships? Grocery stores? History has proven, at the very least, that online bubbles have a way of bursting (along with online grocery stores not working, although I did see one of those vans… once). More likely however, companies will evolve and find even smaller niches that still require that human touch everyone loves to talk about. Blockbuster has seemed to one up NetFlix in services as now you can return online rentals to the store. Video game stores boast of "experts" in the store who can show you how to get to level 30 by spewing non-sense at you at lightning fast speeds.
My take home message from "The Long Tail" is that the market is evolving. But evolution of this type doesn't happen overnight. Blockbuster will continue to find ways to compete with Netflix, places like Barnes and Noble will continue to sell books despite Amazon's success and movie theatres will continue to be giant reminders of our younger years when holding hands was a big deal. Here's to hoping that the related products program continues to be a blessing for both producers and consumers (and I think it will), and that the action-adventure-romantic-comedy-horor-drama-documenary genre doesn't get too far off the ground. In the mean time, I think I will see what Limewire has to offer.

I'm particularly interested here in the question you ask about what would happen if movie theaters lost their rights to show films first. There have been a couple of experiments recently in simultaneous theater/DVD release, but I'm not sure how they've gone. I'm sure there's going to be more experimentation, particularly on the part of "indie" producers. There's lots of similar kinds of experimentation going on in the TV realm, including the networks streaming their shows over the internet, but the one I'm most interested in right now is the "OnDemand" phenomenon -- season 5 of The Wire is currently airing right now on HBO, with each new episode airing for the first time on Sunday night, but that episode is made available via OnDemand beginning the previous Monday...