Listener Determined Download Prices?

Radiohead

Interesting story about Radiohead’s new release, "In Rainbow’s."

Their pricing scheme for downloads is designed to give the Music Industry — especially major labels — fits. According to their website, IT’S UP TO YOU.

Notes Salon:

"This weekend the band announced that its new album, called "In Rainbows," will
go on sale on Oct. 10. They still haven’t signed with a label, and the album
won’t be available in record stores nor on iTunes or any other online music
shop. You’ll find it only on the band’s site, and if you’re looking for a
digital version, the price is very attractive: Whatever you’d like to pay.

You can pre-order the new album here.
Click to purchase the download and you’re presented with a simple screen at
which you’ve got two boxes to fill in, quantity and price (in pounds). "It’s up
to you," the site says."

For those of you who, like me, prefer the physical media, you have a high priced, rpemium option:

"If you’d like something physical, the band is also selling "In Rainbows" in
something it calls a "discbox," a beautiful package that includes a CD, two
vinyl records, digital files, album artwork, and lyrics booklets. It sells for
40 pounds, about $81 (the price includes shipping anywhere in the world). If
you’ve got a Radiohead superfan in the family — and who among us doesn’t? —
your holiday shopping just got easier."

(Additionally, I see a lot of other Econ bloggers have weighed in on this natural experiment:  Free Exchange, Mankiw Blog, Truth on the Market, Freakonomics, Long Tail & Marginal Revolution . . .)

Its an interesting experiment. The WSJ was curious:

"By letting consumers dictate what they will pay for a
digital copy of the album, the band will test theories of online
pricing that have been the subject of much speculation in recent years
— most notably, the notion that fans will pay a fair price for
downloads if given the freedom to do so on their own terms.

At the same time, the digital-sales setup goes against
the grain of the standard set by Apple Inc.’s iTunes Store, where music
is generally priced at a uniform 99 cents a song and $10 or so an
album. Radiohead hasn’t made its music available for sale on iTunes,
apparently because the band wants to sell only full albums and not let
users pick and choose songs."

I am very curious to see how much the average fan thinks an MP3
download is worth, given my longstanding thesis that the music industry
has priced themselves out of competitin with DVDs, gaming, and the
‘net.

Of course, we can always count on Bob Lefsetz to give us the postal-version of the straight shit:

"What if RADIOHEAD is giving the major labels the middle finger? What if they’re saying WE’RE RICH ENOUGH! That the Net allows you to go straight to your audience. FUCK the middleman who says he’s so necessary.

R.E.M. went for the cash They could have gone indie. Turns out re-signing with Warner was a good move, for they never sold tonnage again, despite getting PAID for selling tonnage. Springsteen went for the check. As did Neil Young.

But none of the foregoing acts are in their prime. They’re riding off into the sunset. They don’t have a hold on the younger generation. Boomers in Bimmers are the fans of these acts, none of whom can sell big numbers anyway. They’re all on victory lap tours, raking in the dough for retirement. Radiohead doesn’t have their dough…shouldn’t they be going for the CHECK?

Isn’t that the majors’ advantage, they’ve got the money, they can write the CHECK?

Who leaves money on the table. Certainly not the agents. They don’t want StubHub to steal a single dollar from their bottom line. Fuck image and credibility, THAT’S MY MONEY! I’m gonna make a deal with Cadillac. I’m gonna whore my product out on TV. Radio won’t play my music, I can’t get it on the Top Forty, MY HANDS ARE TIED!

It’s not like Radiohead’s living in a different world. But they’re playing by a different rule book. One that says the money flows from the music, that people have to believe in you, that you’ve got to treat them right.

Shit, you can barely get a ticket to a Radiohead show. The venues aren’t big and the demand is incredible. They’re doing it all wrong, don’t they see??

Well, obviously they don’t.

This is big news. This says the major labels are fucked. Untrustworthy with a worthless business model. Radiohead doesn’t seem to care if the music is free. Not that they believe it will be. Because believers will give you ALL THEIR MONEY!

This is the industry’s worst nightmare. Superstar band, THE superstar band, forging ahead by its own wits. Proving that others can too. And they will.

This is what happens when you sell twenty dollar CDs with one good track and sue your customers for trading P2P. This is what happens when you believe you’re ENTITLED to your business. This is what happens when music is a second-class citizen only interested in the bottom line."

Ouch. I’m not sure if Radiohead is THE band to prove or disprove this. If it were Coldplay, that might be more definitive.

Regardless, this should be interesting . . .

>


Sources:
Radiohead
http://www.radiohead.com/

Radiohead’s new album: Choose your price
Farhad Manjoo
Salon, 2007.10.01 • 13:49 EST
http://machinist.salon.com/blog/2007/10/01/radiohead/

Radiohead to Let Fans Set Price of Downloads
ETHAN SMITH
WSJ, October 1, 2007
http://online.wsj.com/article/SB119120381206844378.html

Radiohead In Rainbows
Bob Lefsetz,
2007/09/30
http://lefsetz.com/wordpress/index.php/archives/2007/09/30/radiohead/

 

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What's been said:

Discussions found on the web:
  1. Denis Pitcher commented on Oct 1

    Great concept, I like the idea of knowing every dollar I give goes direct to the band with no Copy protection. Worth me giving them what’d normally go to a cd or itunes.

    The only prolems are,
    1. I don’t want to preorder a digital download so hopefully I’ll still remember this on the 10th

    2. The website sucks. Images don’t load and the design is poor. This should have been fixed up before launch.

  2. tim commented on Oct 1

    Its a very basic website (which is a plus) and the images loaded for me just fine. The thing that stuck out for me is that the price is listed in Pounds Sterling. How many Americans even know what the exchange rate is? [grin]

  3. Francois Theberge commented on Oct 1

    “How many Americans even know what the exchange rate is? [grin]”

    How many Americans even want to know what the exchange rate is? [evil grin]

    Francois

  4. Adam commented on Oct 1

    I also believe this is a turning point in the music industry a looong time in the coming.

    However, Coldplay would be a more definitive turning point?? Coldplay was born from the combination of Travis and Radiohead. Coldplay is basically the RIAA’s wetdream of Radiohead. :)

  5. Schnauser commented on Oct 1

    I know what the exchange rate is, but its still a conundrum. I believe a new single CD should cost $10 period. Should I sent the equivalent of $10? (<5lbs) or should I send 10 lbs? maybe I should look up the big mac index at the back of the economist and figure out the PPP and send the "right" amount. the band just might appreciate that. now, if only the entire financial industry could do the same to the Fed, now there's some disintermediation that I would like to see!

  6. David commented on Oct 1

    Coldplay would be the test if you wanted to prove that people wouldn’t pay for “music”

    Radiohead is way better, dude. And one of the few bands I’d still pay to listen to.

  7. Christopher Laudani commented on Oct 2

    So what happens if you’re not famous already? Prince can give away his album for free and still sell out. Radiohead already has a loyal following. They sell out every gig. Those guys made their bones years ago -all with the help of big labels.

    What happens if you’re not already famous? You build a website and put up a myspace page and hope someone downloads your songs?

    You hope the net makes you famous enough to sellout a venue so you can make some real cash?

    50,000 downloads of the song you made in your basement ain’t going to make you rich & famous. So you collect the whole $0.68/download from iTunes, big deal.

    Maybe you can fill a club with 300 people, but you’re not going to fill a stadium, because that’s where the real money is.

  8. Frazier commented on Oct 2

    Radiohead is brilliant to do this. They have a strong fan base that would support them. This is a band that refuses to play Clear Channel Corp venues, but can still play 50,000 person shows.

    And as someone else said, Coldplay is pop radiohead, and I could never see them as the first band to successful do something. There may be plenty of Coldplay fans, but Radiohead fans are hardcore.

  9. reason commented on Oct 2

    I think they should have charged a minimum fee (1 GBP).

    They will definitely maximise their sales, which given that the marginal cost is very, very low from their side is sensible (they almost certainly will not maximise their revenue however, since they only have moral suasion to minimise the downside on marginal revenue). Plenty of people I’m sure will copy the songs and SELL them.

    But if it ensures more people hear of them, they may win in the end (concerts?). Interesting experiment.

  10. 12th percentile commented on Oct 2

    Sweet. I remember back during the big downloading issue when Metallica were suing their fans, Jonny Greenwood of Radiohead said, “if you only have one good song on an album, why would people buy the album? Perhaps bands should focus more on making good albums and people would pay for them”.

    And unlike about 99.9% of the people in this world, looks like Jonny and the lads are putting their money where their mouth is.

    I am enjoying thinking of all the record industry honchos cursing radiohead these days. And now a word from Hunter S. Thompson


    The music business is a cruel and shallow money trench, a long plastic hallway where thieves and pimps run free, and good men die like dogs. There’s also a negative side.

  11. Charles commented on Oct 2

    I did not see it listed on the page, but how much I’m willing to pay for a digital download depends on the quality of the encoding. If it’s 256 (VBR or otherwise) like Amazon offers, I’d be willing to pay more than if it’s 128 like iTunes’ DRM’d files.

  12. wnsrfr commented on Oct 2

    An fun scheme would be to use the Little Rascals “Pay as you Exit” approach introduced in their timeless “Talent Show” episode.

    You provide a valid Email address in order to download–each download is validated using a key sent to your email…not intended to be hack-proof, just intended for ease-of-tracking for both seller and buyer.

    Three days after your download, you are sent a payment request as an HTML email, with a link to the payment page, where you enter your payment info along with the amount…pay as you exit :)

  13. Jeff D commented on Oct 2

    I agree with Christopher above, Radiohead is doing this because they can. A new band would not have the established fanbase to pull it off.

    Perhaps it fortells a new model. Sign with a label and use them to get your first few albums out. Build a base and then go out on your own.

    I hope that the band releases some statistics on both the % of downloaders who paid and the average price paid.

    I agree with the $10/CD value stated above, but I think the number of songs available is larger than your standard single album so I think $20 (10 pounds) is a fair price and it is what I will pay when I download the album.

    I will say something else. I would not be comfortable ripping this music and giving it to friends. I’d direct them to the website and let them decide for themselves how much they should pay.

  14. Robert commented on Oct 2

    A totally new, totally green, unknown band would not have the ability to pull this off, but therein lies one of the powers of the internet, specifically Web2.0 – If their music is good, people WILL find out about it, and it WILL become popular enough for something like this to work. All you need to do is look at sites like digg, reddit, or a new one – stumbleupon to see that. There could even be a social website devoted solely to the discovery of new musicians… Damn, I’m surprised there isn’t one already, actually. This basic model is where I think the music industry is headed – The music middleman will become a thing of the past – and in my opinion, it cannot happen fast enough. As long as the internet stays deregulated, many amazing things are possible, things which most people have not even considered. As long as the internet stays deregulated, it has the potential to REALLY change things. It is the last bastion of truly free ideas and information exchange – It is a breeding ground for revolutionary ideas, and as long as the government keeps it’s corrupt fingers off of the internet’s self-evolved mechanisms, it will turn out some of the most remarkable technologies of the next few centuries. Remember, the internets is still in its infancy…

  15. Jason Rasp commented on Oct 2

    I paid 7GBP. That’s expensive in american terms, but probably reasonable if you’re a Brit. If they did a good production job, had a decent amount of studio time, they’ll probably have a base cost in the six figure range. Unless they pulled what Thom did for his independent album–where he laid out all the tracks on his laptop. Unfortunately, it created a very flat and compressed sound. But it was electronica… Anyhow, I would bet that a “fair” price over time (meaning not just this little experiment) would settle out at 3-5 of whatever the local currency is of the band. Unless this album is fantastic (so it is more than just us rabid fans), I am willing to be it prices to the higher side. I was willing to pay 7 b/c I felt it was being directed almost totally to the band–and that makes me feel good. A big middle finger to the RIAA and majors!!

  16. David Reilly CBQ not WSJ commented on Oct 2

    Re Robert’s “A totally new, totally green, unknown band would not have the ability to pull this off, but therein lies one of the powers of the internet, specifically Web2.0 – If their music is good, people WILL find out about it, and it WILL become popular enough for something like this to work.”

    No people won’t – not without PR and marketing which costs big bucks which small unknown artists don’t have…

    Radiohead (whom I love) built up their reputation on the back of EMI’s substantial marketing Dept..

    No-one ever got famous by purely word of mouth on the net…

    Or prove me wrong in this experiment – go to http://www.crispycat.co.uk and buy my new album for £5 ($10) and tell all your friends to do so too…

    I’ll get back in touch once I’ve had 500 orders…

    Go on – prove me wrong…

  17. Tom commented on Oct 3

    @David Reilly
    David, I wanted to prove you wrong, I really did. I thought “I wonder what his music is like. Maybe he has a point. Maybe he’s actually good”. So I went to your website crispycat.co.uk and I tried to listen to a selection of your music. But of course I couldn’t. You have 1 song for each album that you can listen to. 1 song. In frikking RealAudio. Talk about shit.

    What about snippets of all songs like iTunes? What about streaming flash like Bleep/Amazon? What about the odd full length MP3?

    Maybe you’ll get further when you’ve sorted your self-promotion out.

  18. Troy commented on Oct 3

    It’s a heck of an idea. After poking around on Radiohead’s album site, I wondered whether this is the first mass market use. Google turned up Songslide.com, which has a slider that’s a lot more usable than Radiohead’s un-priced checkout page.

    Music seems like the sweet spot for this, where exposing how much the band does (or doesn’t) get can make all the difference.

  19. steve commented on Oct 3

    “No-one ever got famous by purely word of mouth on the net…”

    individual interest leads to peer group interest leads (eventually) to national media interest… it just depends on the act. if you think nobody gets a shot at their 15 minutes via the web, you haven’t been to youtube, myspace, etc.

    sure radiohead is different. but there’s no reason why a talented new artist couldn’t post free samples of songs online, enlist their friends to spread the word, link to a variety of social sites to build interest, then sell digital direct to users. maybe the honor system wouldn’t work a la radiohead, but they could still undercut the majors while eliminating the middleman.

  20. ef commented on Oct 4

    From the net, to late night talk shows, day time talk shows, prime time, to now everywhere… If it is truly “unique” or truly good, it will bubble up.

    I too like the idea of true musicians getting paid for their music without the music industry BS (“This is what happens when you sell twenty dollar CDs…”) and radio play big politics. There are a lot of very good musicians that have real talent. It is about time they stand up for themselves and avail themselves to a growing free market.

    On a similar topic, people still play vinyl records today, as well as other physical media. But what does it mean to the art form if it is downloaded only in an electronic format. Will people still be playing it 30 years from now? Will a mp3 player bought yesterday still play anything in the coming years?

    And, didn’t Stephen King already do a similar exercise? He’d continue to put the chapters of his book online if 75% of the people who downloaded also paid for it.

    Certainly the music business model is changing for the better, and it is an awesome time to be a true musician, rather than a manufactured untalented clone that looks good in tiresome “fashion”.

  21. CBQ commented on Oct 5

    To Tom

    Sorry my offering was so shit Tom. A major embarrassment and I am discussing improvements with my webmeister…

    I’m also sorry to hear it’s not about the music – it’s about the promotion…

    However, if you go to my myspace site you can download 3 MP3s for free – there’s a link on the homepage at crispycat…

    Mail me at david@crispycat.co.uk with your details and I’ll send you a free CD…

    Thanks for your advice…

    PS are you really the TomTom the GPS manufacturer?

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