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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: This will set a precedent for arguments in the future
By MPE on 11/12/2007 12:18:32 PM , Rating: 2
Uhm yeah you must have ignore the rest of the article where they state a large portion did not pay for it. Even with the average paying customer in the US spent $8, the ENTIRE average was $2. Even if you go conservative on the estimate, I doubt Radiohead can state statistics that would counter the idea that a lot of people we want to admit, downloaded the album for free. Not $2, not $1 and not even a $.01 - but for free.

Your argument is myopic and selective.

And regarding the 'equally pathetic' sorry about that. I did not notice yours was equally powerful. Oh wait... you dont have one except quoting one specific statistic.

By Veraiste on 11/12/2007 12:47:07 PM , Rating: 2
Well, considering most people get it for free as it is (p2p), and that a $2 average is more than an artist normally gets per cd, isn't this good for them? Sure, some people didn't pay, maybe lots, but a better statistic would be how many paid that wouldn't have normally.

By fleshconsumed on 11/12/2007 1:07:58 PM , Rating: 3
Uhm yeah you must have ignore the rest of the article where they state a large portion did not pay for it.

You miss the point. Who cares how many people chose not to pay for the album? As long as their bottom line is better than dealing with labels it is a success. And so far, by all indications it does appear to be a success.

RE: This will set a precedent for arguments in the future
By MPE on 11/12/2007 1:26:51 PM , Rating: 2
I was talking about the part about 'BEFORE expenses'.

Until Radiohead actually opens the book, how great or a bomb it is would be hard to judge. But the amount of people getting it free... that is a whole different story.

And second, how much they earn does not justify anyone downloading it for free. So instead of the labels ripping them off, the general public should? Wow, people do care about musicians.

By fleshconsumed on 11/12/2007 2:05:09 PM , Rating: 2
Until Radiohead actually opens the book, how great or a bomb it is would be hard to judge.

Agree, it is still uncertain, but from what I've read it is a success. At the very least they won't go starving for another couple of years before they release next album.

And second, how much they earn does not justify anyone downloading it for free. So instead of the labels ripping them off, the general public should? Wow, people do care about musicians.

And who appointed you to protect their interests? The fact is you don't get a say in how Radiohead chooses to distribute their albums, if they want to let people have a choice to pay whatever they want, including nothing, let them. It's their band, it's their music, they don't need you defending them. That's why I said bottom line is all that matters. If I were radiohead, as long as the new method of distribution got me more than what I would have gotten by making contract with labels, I couldn't care less about how much general public is ripping me. And I suspect that is what Radiohead is thinking. Face it, piracy is part of life, no matter how much labels try to control it, they never will short of implanting chips in our brains. So why not capitalize on people's hatred for RIAA instead? That is what Radiohead is doing, and like I said, it appears it is working for them. Sure, most of the people are downloading their album for free, but their bottom line appears to be better than dealing with labels, and that's the only thing that matters. Radiohead managed to maximize their profits without alienating old fans, they also managed to get free publicity and get new people to try their music for free. It's a win-win situation for them, they are making good money, possible more than ever and who cares that people are downloading their album for free?

By FastLaneTX on 11/12/2007 4:17:30 PM , Rating: 1
Sure, lots of people downloaded it for free. I wonder how many would have gone back and paid after sampling it, which their site wouldn't allow? How many would never have bought the album if they'd heard the tracks before they had to decide what to pay? There's a reason stores these days have "listening stations" -- so you can decide whether an album is worth the money before you have to shell out your money.

I think Radiohead's music sucks (just a matter of personal taste), so I didn't bother downloading the album in question. There's lots of other bands I'd happily give money to even if their music was available for free. If Radiohead managed to pull in millions of dollars in a single day just by letting people name their price, how is that worse than going on a grueling tour for several months to make a tenth as much?

I think Reznor's got the right idea: let people sample the music for free and then decide if they feel like paying for the high-quality version. If they don't like the music enough to pay, what's the harm in letting them have the low-quality version (which they wouldn't have paid for anyways) for free. Best case, their friends hear the free version and decide to pay themselves, so the band actually makes money on the "free" downloads.

Also, the point about how much bands get can't be overemphasized. Even if their revenue is something like $2 per download, that's a shitload more than any label would give them even when customers are paying $10-15 per CD.

"This is from the It's a science website." -- Rush Limbaugh
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