Follow Up to Radiohead's Music Model

We reported on Radiohead's move to put their latest album online for "pay what you want" prices. Early results are streaming in from comScore, which show that about 6 in 10 downloaders, rode the free gravy train, and didn't pay a thing for the album since it was made available online on Oct. 10. Looking at this worldwide, 1.2 million people visited the album's Web site last month, which is a pretty good amount of traffic but nothing what I would have thought for the amount of publicity this move got and the fan base that Radiohead had. A "significant percentage" downloaded the record on the site. This is all according to comScore estimates.

Looking closer, 38% of all downloaders worldwide paid something for the album, bless their generous hearts ;-), while 62% downloaded it for free. Rock on Freeloaders. Paying downloaders forked over an average of $6, with U.S. consumers paying almost twice as much ($8.05) as those from other countries ($4.64).

Between the "freeloaders" and paying downloaders, overall revenue came to an average $2.26 per album. If you figure that the band most likely would have gotten between $3 and $5 per album through their label it doesn't look that good monetarily but what were the intangibles.

Success or Failure aside, we have to look at the intangible factors that could translate down the road into increases in ticket sales, a new audience who downloads the music for free to test against their taste preferences, more publicity due to this move, increased goodwill from consumers and other revenue brought in down the line. We will just have to wait and see but this is really a great case study for how to sell your own media online when you have an audience.

Radiohead's "pay what you want" model

Seems like the music industry keeps taking it on the chin when it comes to monetizing their artist's work while at the same time trying to grasp what the emerging business model will be for music distribution online. Just this week, Radiohead released their new album for a "pay what you want" online purchasing price, which amounts to basically a donation. A fan could pay $1, $5, $20 or download the new songs for nothing if they chose. This "pay what you want" approach is very unique and something we have started to see sprouting up on the internet in other fields but this is the first time I have seen this within the Record Industry.

Radiohead has "always be known for being technology proponents, both in their creative aesthetic and band business," according to HM Wollman of Reccenter, a music sharing community, in a recent email exchange I had with him. To those that know the industry and the band, it doesn't seem like it is something out of character for Radiohead to push the boundaries of promotion and monetizing their content.

Will this model become one that is widely adopted by the recording industry? Probably not ;-) Are the consumers now finally in the ultimate drivers seat and have the labels valuation been completely reduced by the prospects of other musical acts doing this depending on the outcome? Maybe, but with the Radiohead case study, they surely will have some results they can follow and imitate if Radiohead is successful.

It is widely believed that releasing albums is becoming the least profitable part of the record industry, at least for the artists themselves who can sometimes find themselves in debt after the deal. Many artists aren't lucky enough to own their publishing rights and some artists make very little revenue from their albums. Most rely on touring and merchandise sales. 40 years ago, the labels brought more to the table for an artist by providing manufacturing and distribution services. But do musical acts need that as much today when all you need is a Mac and ProTools and you can distribute online for free or build your own ecommerce platform. Is it possible for someone like Reccenter replace a label?

"If you are a brand with a fan base, the world is your oyster. I was not shocked by the move," says Wollman, who has worked with bands like My Chemical Romance and Muse. "It's a win-win for them hands down. The economics of what they would have sold compared to the visibility and extra tickets they can now count on for such a stunt, evens things out in my opinion. Plus, they will make some loot once the special box set is released and eventually the cd on its on, so it becomes a wash."

Are there different price points for different people and can you maximize your revenues by creating the right product and price points for each segment? This question transcends businesses and opens opportunities where no one thought there was a market. We will have to wait and see if fans come in and buy the box set with all the premium features come this December.

By having a built in fan-base, its obvious that Radiohead is more likely to pull this off. Thom Yorke, the lead singer, isn't going broke anytime soon from this stunt. But whether a "pay what you want" model will live on longer than Mr. Yorke's business stunt is yet to be seen. Congrats to Radiohead for taking this step and leading us into some interesting times for monetizing your content online.