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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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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)

"Folks that want porn can buy an Android phone." -- Steve Jobs
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