Data On Radiohead Experiment: 38 Percent Of Downloaders Choose To Pay

21 Comments

The first concrete analysis of Radiohead’s innovative pay-what-you-like plan for latest album In Rainbows shows thirty-eight percent of those who downloaded the title indeed chose to pay something, while 62 percent kept their change in their pocket. ComScore (NSDQ: SCOR) data (via release) shows 1.2 million people visited the site in the first 29 days of October (it was launched at the start of the month).

The average price paid was $6 on a globalized basis but Americans were more generous, coughing up $8.05 – factor in the freeloaders, however, and it’s more like an average $2.26 on a worldwide basis and $3.23 from Americans. The most common amount offered was below $4, but 12 percent were willing to pay between $8 and $12, around the typical cost of an album from iTunes. More at our sister site paidContent.co.uk.

EMI-RadioHead: Meanwhile, Radiohead continues to mesh tech with music and marketing. In addition to a new boxed set, the band and EMI label Parlophone are selling the full back catalog on a 4Gb USB stick in CD -quality WAV files with digital artwork — and the stick is in the shape of the Radiohead bear. It’s an online exclusive. Also, the box set comes with streaming rights for special footage.

21 Comments

Noboru Wayata

Perhaps they think they have enough money and just want to try something different. And, as long as the peanut gallery is wondering how much this record cost to make, consider this: how much money is it worth to Radiohead to not have to work with record executives?

Frank

Just realize that for social norms to apply to any situation Mark, the "social" part of the equation must be present. The impersonal nature of the internet is the reason that arguments for "tipping" ultimately fail. There is simply no social pressure (the frown of your server for instance) to prompt the action.

Eli

At one point, a long time ago, record companies served a purpose. We now live in a digital society where the cost to produce and transfer media has been greatly reduced. The record companies, which previously served as a womb to the artist, are now merely the afterbirth. Radiohead is simply cutting the umbilical chord and discarding the unnecessary sack of overhead and greed that fuels the generic mediocrity of our airwaves.

mark nadel

I think that this voluntary payment (or “tipping”) business model could work if the music (and film, etc.) industries worked to create a social norm: that creative artists DESERVE a fair payment for their creations, just as restaurant servers deserve a tip. The most recent estimate in the academic literature of total tips annually by restaurant patrons was over $40 Billion. While creating the social norm would not be easy, one would expect that fans of an artist would be more primed to tip and tip a greater amount than the average restaurant customers, who generally tip even if they do not feel they received good service, they never expect to return to the restaurant, and even when the tip is paid on a credit card receipt that no one accompanying the tipper will see and which will not be seen by the server until after the patron has left the restaurant.
I reference some of the significant empirical research on tipping and how it can be applied to finance the output of creative artists in a 2004 article in the Berkeley Technology Law Journal.
http://aei-brookings.org/publications/abstract.php?pid= 302
See pages 837-45.

Jennifer

Had Radiohead not gone forth with this experiment, I never would have bought or heard the album. Since I was able to pay what I wanted (I gave them enough for an American latte), I now listen to their music, admire their innovativeness, and want to see them in concert. If their pricing model had been old hat, I probably wouldn't have gone in for the album–even for free–but the novelty of the format drew me at least as much as the idea of cheap music.

kris

Just because some people didn't pay for the download doesn't mean that they are cheapskates. They may not have bought it at any price, but would partake in consuming a free sample.

In the end, this is not a viable pricing model, but I think the experiment fulfilled it's purpose. Radiohead claimed that they liked the idea because they wanted people to think about what music is worth to them. Some people certainly did do that, although I don't think there is any doubt that in the end, the intersection of supply and demand will revert back to normal, and in most cases people will eventually play closer and closer to nothing for these products that are in seemingly infinite supply. True, doing so may not be in the long-term interest of the consumer, considering most bands wouldn't be able to sustain themselves given such a model, but in the end it will just prove that the supply is not really unlimited. Artists who would like to pursue this model would eventually raise the price to the point where profits are maximized. There will be those, of course, whose profits will be maximized given a $0 LP price tag, but then LP product becomes little more than a marketing expense.

This brings up another concept, though. Since bands that can't afford to give there LPs away will be in competition with those that can, does the future of music one in which profits will be derived almost exclusively from touring? And if so, is this a bad thing?

EC

Radiohead has no worries about concert attendence. The last time they played in the Bay Area, their 2 shows sold out in 2 minutes flat.

GLK

At least Radiohead had the brains to embrace the Internet music download community rather than fight against it. I hope this business model gets refined to the point that it becomes status quo because I'd love to see what happens when Metallica has to get in on it.

adam

Personally, I see this venture for the band as a success. but I do not see it as a sustainable business model. What you have to factor into the equation is that there was a lot of hype for this album, and for this new idea. Because of this, more people were willing to pay more, or at least something because they thought "Oh wow, what a great idea!" If this model is adopted on a larger scale, people will get used to it, and pay less, if anything.

Antonio Lopez

There is a way to pay for the album after the fact. Just order it again and now you have two digital copies– you can delete the other one.

On another note, I don't consider the a failure. Of course most people will react selfishly and not pay anything because they are used to a different model. If more groups start trying this, it may be more acceptable, and might even become a social norm. Given the circumstances, I think the figures are actually high. I would expect fewer people to pay for. In the end it will average out for the band because standard loyalties are so low. Anything do undermine the traditional recording business model is good in my books.

Alex

Does this take into account the people that paid the $82 for the discbox or just people that paid for the digital download?

ER

I think JS is making a very good point here. Also, lets not forget that not all of the 1.2 million people who downloaded the CD would have necessarily bought the CD if the option to download was not available. Chances are that if they aren't willing to pay anything to download they also wouldn't be willing to pay for the CD.

JS

Nevermind, I found the answer at the bottom of this article:

http://www.rollingstone.com/news/story/6558540/walmart_wants_10_cds

$1.60 in royalties for every CD sold. So even if all 1.2 million people shelled out $15 for a store-bought CD, the band would still be getting less than $2 million from the sale.

(Of course, this isn't taking into consideration any "record deal" they might've gotten money from, and the promotional advantages, advertising, etc. But when you're Radiohead, do you really need that anymore?)

JS

Let's not overlook the fact that they have very little overhead (fees from the credit card companies and the cost of running the web site), and they're keeping 100% of the profits. If every one of the 1.2 million visitors downloaded the album, they still made well over $2,000,000. I wonder how that compares to what they'd make with a label.

EC

I would have paid for the album if their website took AmEx, which offers excellent fraud protection. I didn't feel like inputting my vulnerable debit card number for an online transaction.

Staci D. Kramer

For Erin … if they gave you an option to pay after the fact, would you? Maybe this is another model to try .. pay after you listen.

paw

As Erin says, it's more about laying the groundwork for the real payday – live show and merch sales. The music itself is really a promotional tool at this point, structured to incentivize the listener to see Radiohead live and buy something of theirs at the show. Brilliant formula.

erin

i downloaded their album for free… Gotta say, I love their album and sort of regret somewhat i didn't pay for it. If they ever come to town, i'm definately gonna go see them.

Jeff Rensch

No way to return the product if unsatisfactory (i.e., if you don't like the music) — could be one small factor in consumers' underpayment?

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