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Radiohead - So did the Boot Work?

by David Waratuke — November 08, 2007

Radiohead In Rainbows

Results of Radiohead’s little experiment of life without leeches, I mean record labels, have started to come in. Early on, reports showed that in excess of ONE MILLION people downloaded the album ‘In Rainbows’ from Radiohead’s site.

Radiohead remains quiet about actual sales numbers and price paid. All the numbers being quoted at this point are estimates based on polls, market analysis, and inside sources.

Reports are showing that only about one third of the downloaders paid for the album, the remainder did not. When all the accounting and averaging were done, about 2.50 GBP, $5.00USD, was the average across the total of all downloads.

Wired: Early Radiohead Sales Numbers: $5-$8 Per Album

According to UK site The Register, Americans were apparently more generous when deciding the value of the music. You know the people that the RIAA is suing with every possible legal angle they can think of, screaming for the need of revised (sic stricter) copyright laws, and more DRM. Downloads for In Rainbows from the US averaged slightly over $8.00 USD while outside the US, the average was just above $4.60 USD. At 1.2 million downloads, the average number tallies up to around $6 million.

The Register: American Radiohead fans are 73% more irrational - poll

There were also an estimated 500,000 so called illegal downloads from various P2P sites. Here, the term "illegal download" is somewhat meaningless because Radiohead did not require any payment for the recording in the first place. A number of analysts have pointed out the people who used the P2P sites for downloading the album likely allowed convenience and familiarity trump even legitimately free downloads from Radiohead directly where one had to submit personal information for a download account. Other factors at work include that because the album was already effectively free, there would be nothing wrong with downloading it from other free sources and an overloaded, inaccessible Radiohead site on release day may have driven some to these alternate avenues.

The reality is that those who routinely get music through unauthorized downloading are also unlikely to pay for an album if somehow prevented from getting it for free. The RIAA likes to use each and every one of these people when they count up lost revenue before they cry to lawmakers to stiffen up copyright laws. This is a fallacious logic used bloat their purported losses to get more sympathy

Simple economics, marginal utility, says that people will only pay what they believe something is worth; those who hover near zero are unlikely to pay more. If the cost of an item exceeds what they value it at, they will not buy it. Yea the down loaders don’t mind having it if it is free, but they are obviously unwilling to pay much more than zero.

Various music industry geniuses with a vested interest in preserving the present, faltering system have piped up on what they see as questionable success of the venture.

The subtitle on that last one from VH-1 reads:

Music-biz professionals suspect band made out well financially - but caution situation was a 'novelty' unlikely to be repeated.

Various music industry types are trying all sorts of spins to suggest failure: the price paid by downloaders was nowhere near the average CD retail price so Radiohead came up short, that there was any so-called illegal downloading shows failure, they try to suggest that the level of success is a fluke, or that this could only work for a band that had benefited for years by using the recording industry’s generous marketing to build an audience that would allow for such a move.

The answers are that Radiohead had nowhere near the costs of a traditional album release, that the unauthorized downloads were less than legitimate downloads when typically the opposite is true, a fluke situation or novelty is unlikely as the market trend is to download music anyways, hence sagging CD sales, and as to the benefits provided to Radiohead by years of association with the recording industry, well, that needs some further examination.

The people piping up about how this can’t work are the middlemen who are interested in stopping future defections, who would like to hide how little they actually pay recording artists, how they actually take all the costs for producing the record and marketing out of artist royalties, and who want to hide just how much of the difference in retail CD markup verses what people paid for the Radiohead download actually would have gone to the labels instead.

Radiohead has been bankrolled by their former label for the last 15 years. They’ve built a fan base in the millions with their label, and now they’re able to cash in on that fan base with none of the income or profit going to the label this time around.

Mike Laskow, Taxi/Independent Artist & Repertoire
comScore/The Register

This statement is of course record industry BS.

Labels recoup all the money they front any musician in a record contract from royalties before the musicians are paid any money. If an album does not make enough money to pay off the advance and any other production and marketing costs, the money will be recouped from the royalties on the next album and the artist will not be paid any royalties until both albums are paid off, every penny fronted by the label. Such was the case with Frank Zappa whose second album, ‘Absolutely Free’, which according to Frank, is named as such because his first album did not make enough money to pay off label expenses so he was required by contract to record then next album for his label for absolutely free.

Historically, middlemen are expensive. Under typical major-label contracts, musicians have paid handsomely for market access. The luckiest ones receive perhaps 15 percent of what their albums earn after a label's expenses are recouped - as opposed to the 100 percent of revenues that Radiohead is getting from In Rainbows online.

Radiohead: Shaking up the recording industry, with success
International Herald Tribune

Some in the music industry worry that what Radiohead have done will devalue music. I believe that the music industry has done that already for themselves in two ways.

Music overload:

The sheer volume of tepid, uninspired music that the industry pumps out has already devalued music based on simple economics: supply and demand. The supply of music is staggering; we are inundated with it. Now with the Internet, this mass produced dreck costs almost nothing to distribute. No wonder people are downloading it for free. Price goes down with oversupply, simple Economics.

But there is also the quality aspect:

What the recording industry doesn’t seem to get is whenever art becomes an industry, whenever music becomes a product, music loses its soul. The recording industry and all those who willingly participate in it have already devalued music. Marginal utility goes down with a decrease in perceived quality. Most people do not have a passion for music, they want something to occupy the background while they do other things or as a pastime when they can’t do anything else. The music industry supplies this void with mass produced dreck in their constant quest to find the next hit by formula.

Coupled with the advent of the digital age and the Internet, which has turned many an industry on its head, which has made distribution of music almost completely cost free, as economics dictates, people are paying what they think it is worth. The innovative music that those with a passion for music are looking for does not come from the major labels except by accident. Most of the customer base that the labels regularly cater to don’t care about music that much in the first place so the constant rehash of the hit formula is good enough. This is why there is an increasing trend in free downloading.

Imagine Radiohead trying to get a record deal if they went to the major labels with ‘Kid A’ as their demo.

So here is the summary.

Radiohead had no costs for physical production or distribution of discs and with no vested interests dipping into the profits with large buckets, almost every dollar recouped from sales of downloads goes straight to the band. As Clint pointed out in the forums, anything above a $1.00 per copy exceeds what most artists are paid with even the most generous Recording Industry contracts.

So, at an average of $5.00 per copy, Radiohead are literally 5 times better off than with any recoding company.

Sounds like success to me.

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