In A Nutshell
In 2007, well-known UK band Radiohead announced their new album "In Rainbows," was available for download on their website and fans could decide what they wanted to pay. Radiohead got massive media coverage and went on the sell some 3 million of the albums. Despite this success, the "experiment" hardly constitutes a "new paradigm" in music marketing in the "digital age," but is rather a one-off gambit that worked well.
Introduction
British band Radiohead tried an interesting experiment in 2007. Having just parted with their label, EMI and not yet signed to a new label, they decided to release their new "In Rainbows" album themselves and initially, only digitally. They also tried the grand experiment of allowing "purchasers" to name their own price. We decided to give this gambit its own page at StopMusicTheft.com because we believe a proper analysis of it leads to the inescapable conclusion we have reached in developing this site and that is that "free" doesn't work!!
Our Analysis
In our view, Radiohead's decision to release a record digitally and allow fans to pay what they want was a brilliant one-off marketing ploy. It garnered them attention in the world-wide press that they otherwise would never have gotten (Forbes, Financial Times, New York Times, Advertising Age, etc.)1. Moreover, as the Radiohead Wikipedia entry makes clear, the gambit seems to have paid off for the band in subsequent chart successes, awards2 and in subsequent physical sales of the album (some 3 million units in digital and physical sales combined)3.
But, is it a roadmap for the future? Is it the way all bands should market themselves? Of those that downloaded the album, 62% choose to pay nothing. The average of those that opted to pay was $6.004. Do the math and the average for all digital sales works out to $2.28 each. We don't really know the total units sold, but assuming a million (which we think is probably quite high), total revenue is $2.28 million. Divide that by the iTunes album download price and you get a little over 200,000 albums sold. A respectable indie showing (appropriate because at that point, Radiohead did not have a major label deal.)
Another way of looking at this is that Radiohead spent almost $8 million (average itunes price of $9.99 minus the $2.28 average "In Rainbows" digital download price realized times a million albums) to sell 3 million total albums. Our experience tells us that a marketing budget of $8 million is far beyond what would normally be spent on a band at Radiohead's "level" or in fact just about any band in 2007 when the album was released.
Given though that Radiohead had no major label to spend the "normal" $1 million or so on marketing, their ploy was brilliantly conceived and executed and probably kept the band from relatively speaking, fading into obscurity at that point.
But, is one band's marketing gimic an industry's panacea? If you are an unknown band—could you use this approach? Hardly. First of all, it's been done so you won't get the worldwide attention Radiohead did. Further, it took the fact that Radiohead was already a well-known and successful band (brand) to attract the buzz about what they were doing. We couldn't put it better than this:
While the band, its fans and artists alike are celebrating what looks like a success for Radiohead's bold move in releasing their new album using the ‘pay what you'd like’ model, I think everybody has overlooked one very important aspect of this, and it doesn't bode well for the future of the music industry,” says Michael Laskow, CEO of TAXI, the world's leading independent A&R (Artist and Repertoire) company. “Radiohead has been bankrolled by their former label for the last 15 years. They've built a fan base in the millions with their label, and now they're able to cash in on that fan base with none of the income or profit going to the label this time around. That's great for the band and for fans who paid less than they would under the old school model. But at some point in the not too distant future, the music industry will run out of artists who have had major label support in helping them build a huge fan base. The question is: how will new artists be able to use this model in the future if they haven't built a fan base in the millions in the years leading up to the release of their album under the pay what you'd like model?5
