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Is Radiohead's "In Rainbows" a flop or a blockbuster?

Politically-fueled Indie/Alternative Rock band Radiohead stood up to DRM and record label's campaign of terror against music listeners when they offered listeners the ability to name their own price and receive their new album via an Internet download.

The band broke headlines in early October when it announced that fans can get the new album two ways.  First, they can go online and download it at whatever price they want -- from free to 99.99 GBP.  Downloads began October 10th.  Serious fans could also elect to purchase a box set, with a CD version of the album, vinyl copies, art books and bonus tracks for a mere $81.75 USD.  These box sets will ship on December 3rd.

So nearly a month later the record industry, tech-observers, politicians and music lovers are scratching their heads collectively and trying to figure out whether Radiohead's album was a success or a failure.  The basic problem is that the band itself hasn't released any information on sales figures yet, so it is hard to tell what is real and what isn't since all sales are done exclusively by the band's website.

In the U.S. and the U.K., a 12 percent royalty to the CD artist about the best an artist can expect, and typically the artist is hit with many additional fees of various sorts by the label.  This means that on the average CD, which costs around $12 to $14 USD at major retailers, the band will make around $1.00-$1.50 USD.  On the other hand, little bands find it hard to "make it big" without a label, as labels are willing to front bands large amounts of recoupable expenses if they think the band has significant ability to make it big. 

A very good read on this topic, is "The Problem With Music" by Steve Albini, independent and corporate rock producer, who is most famous for producing Nirvana's "In Utero".   The article, which can be found here, reveals that on a typical "hit" rock CD, the label might make around $710,000 USD, while a member of the four-member band would only make about $4,000 USD in net income.  Of course, some artists obviously wildly surpass these figures, but these are typical numbers given by someone very entrenched in the music industry.

To top it off, record companies have adopted draconian tactics in using upstream takedowns on torrent sites, spies and massive lawsuits against individuals and groups which share music.  Several bands, including Nine Inch Nails, headed by Trent Reznor, and Radiohead have thrown in the towel and said the record labels have simply gone too far and are no longer necessary.

The real quandary is, as idealistic as these statements sound; do they make economic sense for the artist?  This has left many holding their breath, waiting to see what happens.

Well, the first news has been from internet research firm comScore.  comScore reported that only about 38 percent of people downloading the album paid for it.  Among paying fans, Americans on average paid the highest amount, at $8.05 USD per download.  Fans from other countries average $6.00 USD and 17 percent of paying foreign fans paid only a penny to $4.00 USD.  Finally, comScore found that on average (including non-payers) the album sold for $2.26 USD.  A source close to the band was referenced in a Wall Street Journal article as saying that 1.2 million copies of the album were downloaded on the first day of release.

If accurate, it would mean that Radiohead made nearly $2.7 million USD before expenses, during its first day of sales, an incredible figure.

Some observers were pessimistic about these results though and state that the band could have done much better with a traditional business model. Average profits of $2.26 USD, they say, is nothing to cheer about.

Radiohead released a statement countering these comments and also disputing comScore's figures.  Radiohead said:

"In response to purely speculative figures announced in the press regarding the number of downloads and the price paid for the album, the group's representatives would like to remind people that, as the album could only be downloaded from the band's website, it is impossible for outside organizations to have accurate figures on sales."

This is true --  comScore did not get information directly from Radiohead's site; rather it used voluntarily installed information gathering software that allowed music listeners who bought the album to respond about how much they paid.  While comScore has a solid user base over 2 million voluntary users, many feel that certain kinds of internet users may be drawn to comScore, skewing demographics. 

So if comScore is wrong, did "In Rainbows" fall below its estimates or did it beat them?  Some see Radiohead coming out to deny the statements as an indication that "In Rainbows" exceeded the estimates.  It’s all speculation until the real data comes out from Radiohead.

However, despite the uncertainty, many music figures are already weighing in on the band's success or lack thereof.   Nine Inch Nails' Trent Reznor congratulated Radiohead for bravely fighting the system, but he feels their business strategy was flawed. 

Reznor is following a different business strategy on his release of Saul William's album, "The Inevitable Rise and Liberation of NiggyTardust."  He is offering fans only two options:  either download the album for free or buy it for $5 USD.  Furthermore, all options are not created equal; the $5 USD version will be in 320 kbps MP3 or FLAC lossless audio tracks, while the freeloaders will only get lowly 192 kbps MP3.  Reznor hopes that the improved track quality will lure many audiophiles to pony up five dollars for the paid option.

Ultimately the success or failure of this movement rests largely on two factors -- how well optimal distribution mechanics can be developed and, most importantly, on the average music listener's attitude and level of altruism.  Obviously, acts such as Radiohead and Nine Inch Nails are unlikely to totally flop in their efforts, due to a large, loyal fan base.  Whether their efforts will lead to surprising success and catch on with smaller acts nationwide, though, relies heavily on these factors.

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Reznor getting it right
By FITCamaro on 11/12/2007 10:20:00 AM , Rating: 5
I definitely think Reznor's idea is better. If you want to download it to try before you buy, then you download the free, crappier version. Then if you like it and want to pay, you pay $5.00 and get much better quality tracks. And $5.00 to me is a perfectly acceptable amount of money to pay for an album you've already gotten to listen to.

RE: Reznor getting it right
By Samus on 11/12/2007 10:28:05 AM , Rating: 2
Considering how hard Trest was getting raped on fees HE was paying for to get special packaging for 'With Teeth' I'd be hard pressed to hear anything in favor of record labels from him. He's experienced 'draconian' first-hand.

RE: Reznor getting it right
By 16nm on 11/12/2007 11:21:27 AM , Rating: 3
Trest was getting raped on fees ... I'd be hard pressed to hear anything in favor of record labels from him.

Absolutely. From the article:
on a typical "hit" rock CD, the label might make around $710,000 USD, while a member of the four-member band would only make about $4,000 USD in net income.

$4,000 of $710,000! That is only one half of one percent! It's no wonder so much of today's music sucks so badly. No talented musician in their right mind would ever persue a career in music with income like that. How many hours does it take to produce an album? I would like to know how much their time is worth.

RE: Reznor getting it right
By BladeVenom on 11/12/2007 12:07:12 PM , Rating: 2
Most of them do it because it's what they love. Most bands can't live off of record sales that's why they go on tour, play at clubs, teach music lessons, or have a part time job.

RE: Reznor getting it right
By Oregonian2 on 11/12/2007 2:24:11 PM , Rating: 2
Yeah, I read a book about the music business, written by an insider (might have been the same person, I don't know). It's definitely very hard for the band to make anything even if the record company has large revenue totals. Only band-person who'd get anything would be the writer of the music (if they didn't write any, then they get pretty much nil after all the fees are deducted). Once a band/entity becomes famous and has met previous obligations, they can then negotiate a better deal. That of course makes one-album (or even three) wonders 100% out of luck.

As to Radiohead, having heard the first 30 seconds of some of their work on one of the websites with previews, I'd say that if they get anything at all, they're doing good. :-)

RE: Reznor getting it right
By RubberJohnny on 11/13/07, Rating: 0
RE: Reznor getting it right
By Oregonian2 on 11/13/2007 3:38:38 PM , Rating: 2
So you read the whole book and never took in enough of the details to recognise/remember the author? way to skim read!

Sorry, I read it a few years ago, and perhaps unlike you, I read more than one book a year, so I just don't remember the authors's name. I've read thousands of books over the years and I probably only recall the author's name on a minority of them. Their name is usually only on the cover and I'm usually reading the innards, so I don't see it very many times to make an imprint unless I like the author enough to want to read another one (like Evanovich for instance, read hers like popcorn).

I can understand that radiohead's music might not be everyone's cup of tea but if this is the way you decide what constitues good/bad music you need your head read by someone with better comprehension skills than your own.

Yeah, I'm a radical outsider. I judge whether music is good or bad by listening to it. Just call me unconventional. Oh yeah, and I'll speak my opinions too. That we seem to have in common.

RE: Reznor getting it right
By RubberJohnny on 11/13/2007 8:59:31 PM , Rating: 2
Yeah, I'm a radical outsider. I judge whether music is good or bad by listening to it. Just call me unconventional...

But 30 seconds of it? Then you dismiss it as crap? Maybe Eminem is more your style where he's thrown 20 catchy "hooks" at you in that first 30 seconds? Here's a hot tip for you, the best music is not always the most accessible! Some artists material take 3-4 listens before they "grow" on you enough to make you want to purchase the album, most of the time these end up being the albums with the most longevity.

Alot of radiohead songs go for around 4 mins and don't follow a simple chorus/verse structure. The end portion of the song can be completely different to the start. Since the album is essentially free why didn't you download the whole thing and give it a decent go? Then i might respect your judgement a little more.

Can you tell i'm a radiohead fan? Then again i'll listen to pretty much anything...

RE: Reznor getting it right
By Oregonian2 on 11/14/2007 3:34:11 PM , Rating: 2
But 30 seconds of it? Then you dismiss it as crap?

That's what I have available, and it's those site's intention that I see how good or bad it is using that clip. That's the limit on many sites I've run into over the years. If it can't "hook" me in the first thirty seconds (much like if the first fifty pages of a book can't get my interest up) my opinion is likely to be negative. May just mean that it's not terribly commercial in nature (where an upfront hook would be of great benefit). Being non-commercial would sufficiently back up my original comment that I'd be surprised that they'd sell much without a lot of record company support (at least for their initial work before working up a fan base). Although my huge CD collection may not seem to back me up on this point, I don't try to buy any/all CDs in order to listen to the whole pieces multiple times in order to prove to myself they are indeed crap. I've a few that I think that way about now, but didn't have that expectation when I bought them.

RE: Reznor getting it right
By Vanilla Thunder on 11/12/2007 10:29:39 AM , Rating: 3
I agree. I would gladly pay $5 for the 320 kbps MP3 or FLAC lossless audio tracks from any band that I'm a fan of. I think this system works, but not every band could simply "give" the music away. Smaller bands would have to set a minimum price point to make this a successful business model. I hope it happens.

RE: Reznor getting it right
By splint on 11/12/2007 12:09:27 PM , Rating: 2
Actually, Radiohead’s model is a more profitable one. Basing a price on what people are willing to pay more accurately fills the area under the demand curve. This is the same model that airlines use to sell tickets. You don’t know what the guy next to you paid and the airlines intend to keep it that way in order to maximize profits. (Although in that model the seats are a finite resource.)

Radiohead’s big flaw was pointed out in another forum – you can’t try-before-you-buy. You decide to pay or not and then they sent you a link to the album. They ensure one download per user because you cannot redownload using the same email address. This way, if you go back and pay with a different email address their statistics get screwed up. (Maybe they can filter by IP…)

RE: Reznor getting it right
By Ringold on 11/12/2007 1:36:06 PM , Rating: 2
Basing a price on what people are willing to pay more accurately fills the area under the demand curve.

Lol*, firms do that by offering what they think is your maximum willingness to pay, not saying "Please pay your maximum, but here is the option to pay nothing instead!". When faced with that option, and this should be obvious, the overwhelming economic incentive is to free ride. Public goods face the same problem; we'll all watch PBS, but who donates?

It ends up being an act of charity. How much you pay for something you can as easily get for free depends on how good you want to feel about yourself or what impact you suspect paying up may have on your social status by admitting to having either paid up or paid nothing.

* My first time starting a DT sentence/post with Lol. May it be the last. But I was lol'ing..

RE: Reznor getting it right
By AmbroseAthan on 11/12/2007 10:35:00 AM , Rating: 2
I might not even offer the free version for download. Just let people stream the entire album using something silimiar to PureVolume (or any of the players to let them do this), to listen to it at 128Kbps. Then, let people buy it $5.00 for the high quality album.

I don't see much of a problem paying for albums if the whole album is good, or it just has a good price/volume ratio. I think the $5-10 mark is the prime area for an album depending on how many quality tracks (or extras) are on it.

I tend to buy everything I listen to (not used p2p in the last few years), and I recently bought Flyleaf's "Flyleaf" album off iTunes for the $9.99. Is it a perfect album?, no. But it came with the original 11 songs, 5 more redone acoustically, and 6 or 7 of the music videos. All-in-all, $9.99 seemed like a great deal to me, IMO, for the album.

RE: Reznor getting it right
By maverick85wd on 11/12/2007 10:51:28 AM , Rating: 3
download the free, crappier version.

I'm not sure I'd call 192kbps crappy, tho it's definitely not as good as 320 or FLAC.

I would probably offer the free album as 128kbps just to sample and then offer the better version as $2-however they want to give you as Radiohead did. If a person is willing to give you more than $5 because they feel it's worth it, why wouldn't you give them that option? I gave Radiohead $6 because, even though I'm not a particularly huge fan, their album was worth $6 to me... and I was supporting their cause. At least in this way I bought it from them, I would have never bothered if it was a regularly-priced $10-14 CD

RE: Reznor getting it right
By Lonyo on 11/12/2007 10:57:41 AM , Rating: 2
It's similar to what Nettwerk (Canadian record label) have for some of their srtists.
You pay some money for 256kbps or so mp3's, or you pay a bit more (like $1 or $2) for flac of the same music.
Quite nice to have the options, and both mp3 and flac are priced reasonable, and DRM free :)

RE: Reznor getting it right
By Moishe on 11/12/2007 11:05:30 AM , Rating: 2
I think Reznor's idea was good, but I think he gave away too much. I think fairness is as simple as allowing people the option to try before you buy. You can easily hear a 128 or even a 64kbps mp3 well enough to "try" but it's low enough that most people will want better quality.

I think people should pay for things, but that the payment should be reasonable. Free low quality mp3s, $5 for 256kbps files, $10 for lossless seems very fair to me. That way you can buy what you want/need. $10 is not too much for a decent album.

RE: Reznor getting it right
By Drexial on 11/12/2007 11:26:27 AM , Rating: 2
i think $5 is a perfect price for a product with no physical packaging. Free for 128,$5 for lossless Digital, $10 for CDs with a decent standard of artistic quality in the packaging. this is what i feel like would be the best set up for album releases. Vinyl would probably fall into the $15 range as i feel its a bit harder medium and its also completely lossless.

RE: Reznor getting it right
By joemoedee on 11/12/2007 11:40:37 AM , Rating: 2
Personally, if I was an artist, I wouldn't offer it for free.

I have some older mp3s in 128kbps, and whereas you can tell a difference, its not a giant difference to most people's ears. You also have to figure the majority of people listening to mp3s are doing so on a portable media player with the crappy ear buds that came with it, so that makes the difference even less noticeable. Also, figure in the general public doesn't even know what a kbps is, FLAC, or AAC or any of the technical terms. They have an ipod and they want to listen to their itune! ;p

I'd at least charge $1.99 or $2.99 for the full album at 128 kbps. It's inexpensive enough that people wouldn't balk at paying it, but also could mean some decent income to the artist. Offer lossless and CD at more money, and you're covering all bases without spiting your (as the artist) own income.

RE: Reznor getting it right
By Darkskypoet on 11/12/2007 1:30:03 PM , Rating: 4
The problem is that ther is a massive difference in effort when you go from $0 to $0.01. No don't get me wrong, its not hugely difficult, but all of a sudden you require a method of payment, forms to fill out, etc. There is a marked difference between free and any cost. Not that I am saying x isn't worth it, just pointing it out. There are many that would, but don't have / want to use a CC for it, also even with other payment options, there is still those who prefer to limit the exposure of their information on the web. Regardless of magnitude of effect which is hard to get a solid answer about, there will be an effect and insisting on payment would be a symbolic selling out / nod to the man. (banks, business, etc.)

Free at whatever quality ensures those who just want to listen and take do so. Those who want to buy period will more then likely pay $5. I agree that people should be allowed to pay more then $5 as many would, however to ensure wide spread proliferation, and ability to chart dissemination success more accurately, free is the best price floor.

Also, the Radio Head endeavor allowed for near perfect price discrimination, which any company would love to have. The ability to charge what one is willing to pay has long been sought by many including airline companies (as was mentioned).

All in all, one must remember that much of what the record labels do for artists is allow them access to markets / ad space / shelf space that they control. The eventual downfall of large 'imperialistic' sorts of record companies would mean the freeing of shelf space, radio station time, etc. The force from the record companies to promote certain albums, etc. would slowly go away, leaving us and those "virtual / brick record store owners" to discover and push bands with authentic talent and sound, rather then the next great sony/bmg/universal commercial moneymaking scheme.

By controlling the means of distribution, the record companies are able to 'give' this to new and upcoming acts. removing that control is a side effect of their shrinking revenues. I hate to utilize a buzz word here, but the removal of the record companies as the powerful forces they are would give us a much more organic music scene. Perhaps a much less commercialized one as well.

(artists now have the required triumverate: distribution method, production method, and advertising method, to allow for them to succeed. What needs to be brought down are the road blocks to the last piece of the puzzle, an open market)

RE: Reznor getting it right
By Polynikes on 11/12/2007 12:32:56 PM , Rating: 2
For $10, I'd rather have a CD or record in-hand which I can rip my own high-quality digital tracks from.

RE: Reznor getting it right
By fleshconsumed on 11/12/2007 11:55:51 AM , Rating: 2
$5 is an excellent price for a lossless version. Finally a good alternative to traditional distribution methods such as buying CDs or using iTunes. CD's are still expensive unless you buy them on sale or on the release day, iTunes is cheaper, but at $10 an album it costs nearly as much as real CD while missing fancy case/artwork and being lossy. $5 is a real step to bringing what consumers want: now they have a choice at buying real CD and get everything, or forfeit case/artwork but still get lossless version at a significantly discounted (unlike at iTunes) price.

"I want people to see my movies in the best formats possible. For [Paramount] to deny people who have Blu-ray sucks!" -- Movie Director Michael Bay
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