Just when I think I'm really getting way too theoretical here, the world suddenly proves that if anything I'm behind the times. Thanks to Mayhem and Chaos for pointing out that while I've been proposing the idea of fine-sliced (niche) music aggregators, Audiolunchbox (and, presumably, CD Baby soon) has been building them.
I finally realized that CD Baby is the perfect example of long tail -- a large chunk of the CDs at CD Baby sell only a few copies in their life-time, yet CD Baby makes them all available. The idea to create focused smaller stores that serve specific genres, are essentially tails within tails.
For instance, a micro store "louisianabeats.com" might focus on zydeco and other Louisiana centric music. Anyone who loves Zydeco and heads to CD Baby, might not be able to find the right CDs in the vast CD Baby catalog. Instead, CD Baby does the work of identifying all the zydeco music and focusing it on louisianabeats.com. This site in itself will have a long tail effect -- some CDs will sell much better than others. And because of this specific focus, these better selling CDs are getting another shot at becoming popular.
In the grand scheme of things, CD Baby is on the long tail side and Amazon is on the short head side. Inside of the long tail "louisianabeats.com" creates another tail, "ohiobeats.com" another and so forth. This could even go on to "calibeats.com", which in turn could have smaller "norcalbeats.com" and "socalbeats.com" tails within tails.
And to prove [CD Baby] is totally on the right track, online MP3 retailer audiolunchbox.com today [July 20] announced the creation of "7 genre specific digital music stores": themdirtyblues.com, pureclassical.com, punktracks.com ...
The others are CountryTracks.com, TheLoveOfMetal.com, DownloadPop.com and AudioFader.com, "which will encompass electronic, dance, house, trance and more." They're not up and running yet, but promise to launch this summer.