Chris Anderson, editor-in-chief of Wired Magazine who wrote a bestselling book outlining his theory of The Long Tail, spent an hour in Second Life today answering questions of in-world journalist Wagner James Au (aka Hamlet Au) and the crowd gathered at The New Globe Theater.

Chris Anderson’s avatar talked about the effects of the long tail on media, the future of 3D printing, the incentives behind niche content production, and the implications of the recent YouTube-Google deal. Below are the highlights of the somewhat eerie conversation taken from meeting’s transcript and edited for clarity.

Hamlet Au: If “The Wisdom of Crowds” was the cocktail buzzword of the last few years, then “The Long Tail” is the term for today. When Chris Anderson coined it, he was describing an Internet-driven economic phenomenon, but since then it’s been applied to various pursuits, from foreign policy to education. His book on the aggregation and acquisition of stuff via the Net is particularly apt to discuss here, because if there’s one thing Second Life has, it’s stuff. Terrabytes of user-created content from more than 3 years of this world’s existence, sitting in thousands of Residents’ inventory. So hopefully he’s able to help us understand the Long Tail of the metaverse, too.

And with that, ladies and gentlemen, and aliens, mythical creatures, and furries of indeterminate gender, please join me in welcoming Chris Anderson’s avatar!

LongtailChris Anderson: This is the coolest thing I’ve done all morning.

Hamlet Au: To start off, give us the “elevator pitch” for *The Long Tail*.

LongtailChris Anderson: The Long Tail describes the world beyond the blockbuster. Our economy and culture is shifting from mass markets to millions of niches. The rise of distribution methods with unlimited capacity or “infinite shelf space”, of which the Internet is the foremost (but not only) example, have made it finally possible to offer consumers an incredible variety of products and other goods that were previously suppressed by the economic and physical limits of traditional retail and broadcast.

The Long Tail refers specifically to the “long tail” of the familiar fast-falling demand curve in economics—we’ve usually looked just at the high part of the curve on the left, where the hits are. But the tail of smaller-sellers is incredibly long, and when you can offer everything, all those niche products can add up to a market that rivals the “head”.

The most dramatic — but by no means only — examples are in the media and entertainment businesses… That’s where there is a huge amount of variety and cultural diversity that has been obscured by the very narrow focus on blockbusters in traditional distribution channels, from retail shelves to radio stations. For example, today, around 40% of the music downloaded on digital music services such as Rhapsody are tracks not available at Wal-Mart, America’s leading music retailer. For Netflix (DVDs) and Amazon (books), about a quarter of their sales are for titles not available in the largest bricks-and-mortar retailers in their industry. Products that aren’t for everyone–but may really suit some people–typically don’t pass the economic test for traditional retail. But because each of us has some niche interest somewhere and we now have distribution methods with “infinite shelf space” and near-zero marginal costs, we can now aggregate all these minority tastes. This new market of a million niches is adding up to a big new opportunity and the fastest-growing one around.

Hamlet Au: Don’t the realities of corporate management make the Long Tail fairly irrelevant? Take the film industry. When a big budget movie is a huge hit, the parent corporation’s stock goes up, and the executives get rich. So executives have incentive to finance out-the-gate hits, but do they really have an immediate, next quarter incentive to foster the long tail of their back catalog, where profits are slow to come?

LongtailChris Anderson: But hits are unpredictable. Why risk your career on the toss of a dice when you can spread the risk over a larger portfolio of smaller investments? The profits in the back catalog (which is just one form of the LT) aren’t slow–they’re *steady*!

Hamlet Au: Wired.com just reported about a Second Life project that can take in-world objects and fabricate them in the real world. Assuming this 3D printing becomes a widespread and affordable procedure, what Long Tail applications do you see coming out of it?

LongtailChris Anderson: I saw a great quote the other day that 3D printing “makes complexity free”. Moore’s Law made transistors free, which is why we can “waste” computing as extravagantly as we’re doing right now. 3D printing makes complicated objects as cheap as simple ones. So the question is what’s the physical version of something like the Mac UI? I suspect that it will be things that are “unnecessarily” detailed and beautiful–because we can. That would be cool.

Hamlet Au: Obviously the purchase of YouTube by Google is the big Internet news this week. Reflect on it for us. What does it say about the Long Tail phenomenon?

LongtailChris Anderson: It’s a huge vote of confidence. Media learned how to compete with the LT in the 90s, because the bandwidth of the time made text work online. Then the music industry learned to compete with the LT around 2000, when the bandwidth made sense for MP3s. Now TV is going to have to compete with web video. They thought we wanted 30 min and 1 hr dramas and high production content that only they could created. The truth is that we do, but we also want more. YouTube offers us more, and what’s great about it is that’s it’s unbounded in supply, diversity and source.

Ariel Spoonhammer: If long-tail revenues of any significance are spread over time, what are the short-term incentives to producers who can often get a higher short-term return on investment?

LongtailChris Anderson: Yikes. Okay, I’ll try to answer that one. There are two LTs in content. One is broad appeal down to narrow appeal. The other is new vs. old. So the LT revenues that you describe as being slow mostly refer to the second, the monetization of archives over time.

The other big point to make is that we’re not just talking about a monetary economy. Most of the content created in the LT these days –from blogs to web video — is done for free, with no expectation of financial return. There are plenty of business opportunities in *aggregating* that content, but the money doesn’t necessarily accrue to the creators.

Rodica Millionsofus: Icon Serpentine wants to know how the long tail affects small business and independent artists.

LongtailChris Anderson: Well, it’s a very good thing, but I wouldn’t expect the rewards to be loads of money. Basically, the democratization of the tools of production and distribution mean that it’s easier to make and distribute products, which means that there’s more variety out there and that it’s easier to tap *distributed* demand and not just the usual geographically concentrated demand. That means larger audiences, for a start. How to turn that into money isn’t always clear, although in music at least there’s a clear shift from selling music as a product to using free music as an advertisement for the live show, which is an experience that can’t be replicated well online (SL aside!). For other small businesses outside of entertainment, the opportunities lie in being more efficiently aggregated in global markets. Like the eBay effect, but in more markets and for more goods.