Article by David Sim
English band Radiohead have hit the headlines in recent weeks following their decision to offer their new album, “In Rainbows”, on the Internet. It is the first time a major artist has allowed consumers to name their price; to pay only what the album is worth to them. In some cases, consumers have paid nothing to receive the music.
The album has had some critical success and will still be sold in traditional online and offline music stores in due course.
Just how has the experiment gone?
Similar Models
The model is already being mimicked. Trent Reznor is founder and primary creative force behind the successful Grammy Award-winning industrial rock band Nine Inch Nails. He is releasing his new collaborative album with Saul Williams on the Internet for free, with an optional $5 contribution to “directly support the artists involved in the creation of this music”.
It will be interesting to watch this one: Williams and Reznor are not nearly as well known or played as Radiohead, and therefore their sales and exposure will be driven less by newspaper articles and more by Internet word of mouth.
Financial Success
$5 is also, perhaps not co-incidentally, the estimated average amount paid for the Radiohead album so far. While much less than its likely retail price, it represents roughly the figure a band could expect to receive from an album sale through a record label. Given sales have been around the 1.2 million mark, we can conclude they made around $6m in the first week. Not bad, even given a likely advance of around $5m from a record label for such a major band, and particularly given the implied creative freedom which has come as a result of this project.
Birth of the Free Music Model?
One thing the Internet has taught us is that it’s possible to make money giving things away. Linux is a computer operating system – a rival to Microsoft Windows. It can be downloaded freely, yet this single product has spawned a related software and support industry worth more than £30bn. Google allows free access to its search engine and services, because it makes big money on advertising.
Most of the money made by bands of all sizes comes from live concerts and tours. Could free music be the route to promotion and exposure, shared from iPod to iPod with the full support of the bands?
In the past Prince has given away music to everyone who attended his concerts. Madonna’s recent tour netted $200m, several times the net revenue of her successful Album, “Confessions on a Dance Floor”. Small bands have realised a t-shirt costs less to make than a CD yet can sell for twice as much – so why sell CDs at gigs?
Already thousands of independent artists have signed up to offer their music for free to podcasters to play on their radio shows through the Podsafe Music Network, simply to gain exposure. Record labels, meanwhile, have threatened to prosecute podcasters who play their music as they can’t afford royalties, missing a key market where listeners hang on their presenters’ choice of music.
Taste of The Future
Consumers have been wielding their power against the music industry. Music, technically just being small electronic files, has driven peer to peer file sharing networks.
Music industry estimates of the amount they’re losing through filesharing is wildly pessimistic – assuming that every track shared is a song which would have been bought. Nevertheless, it is clear that a thirst for unlimited, low cost, accessible music is out there.
Recently Universal and BMG have announced plans for subscription services – as much music as you can handle for a fixed monthly fee. It makes sense: research suggests that, on average, portable music player owners only buy 10 tracks of music during the lifetime of that product. Any recurring subscription – possibly built into mobile phone fees – has to better that.
The music industry won’t die, but it must evolve. Bands and fans are getting closer; the labels must decide where they fit into the relationship and add value.
