Thursday, November 08, 2007

Radiohead Effort A Failure?

Ezra Klein doesn't think Radiohead's sale of their new CD online for any price the fans were willing to pay went over so well:

Results from the Great Radiohead Experiment of Ought-Seven are out, and they don't look particularly good. Radiohead, you'll remember, offered their new CD, In Rainbows, as an online download, and let fans choose what they'd pay. And 62 percent of the downloaders paid...nothing at all. Now, maybe the 38% who did pay was still larger than the 100 percent who would have bought the album, and when you factor in the absence of overhead, Radiohead did better than traditional distribution channels would have allowed. But I wouldn't bet on it.

Adam sent Nat-Wu and myself the same article, appended only with the word "assholes." But Nat-Wu, replying to that email, said we shouldn't be so quick to jump to conclusions. I quote him in full:

Well, there's quite a bit to talk about here. 1.2 million visitors to the site: is that the number of people who downloaded the album? If the number of people who actually downloaded the album is anywhere near that, you know this has been a huge success. Why? Think about it this way, averaging in the people who didn't pay with those who did, Radiohead just made $2.28 per album download. Now don't most bands see a return of maybe $1 per cd? And how many of them sell 1.2 million copies in a month? Radiohead may have made a substantial outlay on the product to begin with, but they also cleaned up! I'd call this a smashing success.

Another point, payments online require some kind of payment other than cash or check. If they charged even 1c per download, how many people would not be able to pay it? So did they open their album up to a lot of people who otherwise would never hear it?

Furthermore, unless all 1.2 million of those visitors were hardcore Radiohead fans, naturally there were a lot of people downloading just because the album was free. I'd say the fact that 62% of people who downloaded didn't pay doesn't necessarily indicate that many actual Radiohead fans didn't pay. Rather, I'd say they got a lot of listeners they wouldn't ordinarily get if they had to pay for the music (especially since Radiohead never gets a lot of radio play anymore). And for all that, they still seem to have made a good bit of money.

Now maybe in the future what they can do is offer the low-fi for free and a high-fi version for payers (charging them 6$ apiece) to do the same thing, but perhaps tempt more paying customers with a better product.

Oh, and as far as outlay, if 100 other bands and artists would get with the times and get onboard, technology companies are going to spring up overnight to host these albums. That'll eat into the revenues, but also save individual bands and artists from having to invest in the technology. There's no reason Radiohead should own, lease, or run the servers that have their music on them.

So the great Radiohead experiment has hardly failed. Expect more of the same from other bands in the future, with further refinements of the process.

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