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Radiohead Cashes In
When Radiohead released In Rainbows one year ago, they let people pay whatever they thought it was worth. Now, the profit numbers have been released. Turns out Radiohead had it right.
An economic apocalypse is old news in the record business—the sky started falling years ago, and the industry’s been contracting and going gray or bald over continually depressed sales for quite some time. In 2001, $34 billion of physical music was sold, including CDs, cassettes, vinyl; everything but digital MP3s. In 2007, just over $18 billion of physical music was sold. The industry would have you believe that illegal downloading is the entirety of the problem, and obviously having millions of customers virtually stealing product is a malignant cancer for any industry. Top execs now say that the habit of paying for music has been broken for an entire generation. Forget about Gen Y, they say, they’re already lost—start thinking about Gen Z and how to get them to buy music one day. But a recent study found that nowadays more downloaders pay than steal. Illegal downloading is not the industry's biggest problem anymore and just as Wall Street swallowed time-release poison caplets called subprime mortgages and derivatives, so too did the music biz drag the knife across its own throat.
In the past artists have gotten 10 cents for every dollar made by their music—according to the Freakonomics guys, prostitutes do better. Artists should consider cutting their pimps loose and selling or giving away their music through self-generated websites.
In the 80s and 90s, millions of catalog CDs were sold to consumers who were updating their old LPs or rediscovering the great music of past generations. This boom was like a license to print money for the music industry and many thought it would last forever. This windfall covered up many of the problems in the business, especially the dearth of artist development which was needed to create the next generation of stars who could sell for decades, not minutes. Did anyone really think N’ Sync, Britney, and Xtina would last for the ages? But with so much money coming in from the likes of Marley, Miles, Stevie, Elvis, Sinatra, the Beatles, and the Stones, it was possible to throw darts at a wall. Russell Simmons once told me that one hit artist could fund ten flops. Fine, but when your approach to A&R is like gambling instead of developing, like playing craps instead of molding people like Berry Gordy did, then you don’t have a good long-term strategy. And when MTV slashes the amount of videos it plays and fewer people listen to pop radio then it becomes very difficult to create those megahits that absolve all the mistakes.
As a result, consumer confidence in the music biz has eroded. People came to expect that most albums would have one or two great songs and ten filler songs, and they became used to basically buying one or two singles for $12-$15. But in the era of iTunes, they are now able to avoid that trap by purchasing individual songs for 99 cents—massive deflation. Also, somewhere early in this decade, people decided they’d bought all the old school CDs they needed and the money printing press stopped working. With MTV no longer a major way to promote artists, and the Internet evincing a crippling deflation, the metaphoric sky had fallen.
Last year there was great curiosity about the experiment attempted by Radiohead, (what I’d call the greatest rock band of this era) when they released their album In Rainbows. It came out first as a digital download available on a pay-what-you-wish basis—on the website’s checkout page you could input whatever price you wanted in pounds, including zero—and then months later as a CD at a high, set price. Just last week, the band’s publishing company finally revealed how things panned out.
The album sold three million copies—1.25 million as a download and 1.75 million as a physical CD. (Why did more people choose to buy it later at a fixed price instead of earlier at whatever price they chose? Is that the digital download at work, older fans who can’t change their buying habits? Wouldn’t pay-what-you-wish motivate you to change your habits? And anyone who put the physical CD on a credit card and therefore paid the highest possible price, needs to start watching Suze Orman immediately.)
Three million is very impressive for any group, and definitely for Radiohead. They made more money before the album’s physical release than they did on their previous, traditionally released album Hail To the Thief (which stands for me among their best ever, certainly better than In Rainbows). Radiohead’s three previous albums sold in the low hundreds of thousands so this is an unfettered success for them, the industry, the fans, the Internet, and for the concept of variable pricing, or at least a new look at how much fans are willing to pay for music. I bought In Rainbows for eight pounds because I thought that was fair. No one has said how much the average price per unit was, but management was watching the average price each day and would’ve ended the experiment if the price had dropped too low.
Certainly every band can’t do what Radiohead did, but many groups could, and there are important lessons here about variable pricing—we don’t pay the same amount for a Honda that we pay for a BMW. Why expect us to pay for a rookie what we’d pay for Radiohead? New CDs tend to be priced between $12 and $17, but perhaps that needs to be rethought. More than that, there are lessons to be learned about properly using the Internet to sell music. The music biz has been unable to come up with a peace accord that would put all the music there is for sale on one site, so iTunes remains the monster of Internet music retailing. Now, a recent dispute about royalties may force the price per song above 99 cents and Steve Jobs says he may shutter the iTunes store. If that happens, the music biz may be looking for its own bailout package and none will be forthcoming.
Indeed, the future may be the end of the label system. In the past artists have gotten 10 cents for every dollar made by their music—according to the Freakonomics guys, prostitutes do better. Artists should consider cutting their pimps loose and selling or giving away their music through self-generated websites. The free, legal music and some blogging from the band (written and photo) would keep the site well-trafficked by fans and the curious. (Kanye already has a hot blog through which he shares music, photos, and ideas.)
A band could border the site with hi-priced ads and also promote those things that have always been the prime revenue generators for recording artists: their tours, their merchandise, and their commercial sponsorships. That’s right, ho’s, I’m saying it: Be your own pimp.
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Lloyd Grove is editor at large for The Daily Beast. He is also a frequent contributor to New York magazine and was a contributing editor for Condé Nast Portfolio. He wrote a gossip column for the New York Daily News from 2003 to 2006. Prior to that, he wrote the Reliable Source column for the Washington Post, where he spent 23 years covering politics, the media, and other subjects.
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I think you are skipping over some very important points:
First of all, a big name artist that releases their album online has their name and fame to help. In Radiohead's case, since they were the first, the international media also helped tremendously with free publicity. No CD gets that sort of attention. By the time five bands have tried this, the media loses interest and other bands are left on their own to try to promote their discs. This promotion is incredibly expensive.
Similarly, this system will only work for famous artists. A small college band with a lot of potential will never make a buck. Producing a professional record is still very expensive and requires good producers. That will not get cheaper. In the mean time, they have no way to introduce new people to their music.
All media enterprises (from book publishers to modern media moguls like YouTube) receive the vast majority of revenues from a small number of products/artists. The industry is dead if this Radiohead model leads to the system A. Studio finds and develops band. B. Label aggressively markets band and makes them big. C. Band goes off on their own internet adventure.
The final result will be a move towards amateurism/ democracy (half empty/half full). Occassionally an Esmee Denters will break through, be developed by Timberlake sell a bunch of records and go self-release and be forgotten in no time. What you propose is not the way to create a new Rolling Stones, your ideas will lead to a new generation of Britney's and N Syncs. Fun for a year or two and then forgotten.
I wonder how many people downloaded it for very cheap or free and later bought the physical disc when they fell in love with the album?
There is a rap group called the Insane Clown Posse who have made millions upon millions of dollars by starting their own independent record label. They've been around since the 90's, and have multiple artists signed to their label. The artists on their label get paid far more than artists on other labels. Look them up, and do an interview with them.
For better or worse there's still only a couple of ways for a new act to gain enough fame to sell an appreciable number of "records." This has changed very little in the last 60 years.
1. Get played on the radio. Radio exposure is purchased through radio promotion professionals, and it isn't cheap. It also usually requires a label/management company to front the cash.
2. Tour constantly. This is very hard as well. getting a good booking agent is often tougher than getting a record deal.
for all the power of the Internet, musical artists still don't break in big ways though it. There are a few exceptions, like the Arctic Monkeys, who use myspace to become well known, but if you look at the top 40 acts on the charts...they almost all came to be well known because of touring or radio.
I don't buy the argument that albums today are inherently worse than they were a generation ago, prompting music downloading. Aside from a few rare examples, most albums run the gamut from Two Good Songs and Lots of Filler to No Good Songs and it's always been that way. Sgt. Pepper's and Wolf in Sheep's Clothing and Nevermind are so noteworthy because they are the exception, not the rule. The ease of free downloading has just created a mindset of rationalization. Meanwhile, why did I buy a physical copy of In Rainbows? Same reason people shop at their local stores instead of Wal-Mart or Target (at least sometimes) - to support that local merchant.
Its your blog so you can write what you want but your ideas are very subjective and based on your love of the band that you think succeeded in its experiment, but I see as failed IMHO. Triple platinum for a band like Radiohead is not a huge success in an era of Diamond sales for mediocre artists like Britney Spears and NSYNC.
Dutch Crunch has summarized what I think but I want to add that iTunes-type or web-based online digital marketing is not the answer to 1) Preventing illegal downloading and/or 2) Increasing independent music sales.
The only way to prevent illegal up/downloading is to shut down the sites that make it possible - Limewire, Kazaa and any P2P and conversion site that high tech people - and not just kids - can interface and up//download for free.
But who needs to download when you can listen to your favorite songs on MySpace and Imeem and/or watch the videos for free on YouTube and other sites? Sites that enable copywritten material to be uploaded and distributed freely through embeddable html codes and syndication options - with the majority of advertising revenue going to site owners and shareholders.
I don't know ANYONE who makes a living as a YouTube Partner.
While sites like YouTube are doing major damage to artist copyright and ownership standards, iTunes has created a singles music marketplace, which may be good for Steve Jobs and his investors, and possibly the labels that support this practice, but it devasting artists who write and release albums, and who make their livings from ALBUM sales.
As Dutch pointed out, media enterprises receive the vast majority of their revenues from a small number of artists, and new media sites like YouTube and iTunes are manipulating this model and trying to force the Esmee Denters of Internet on the music consuming world.
They build up their online profiles and/or or allow the use of social marketing sites like this http://myspaceplays.com/ and this http://www.webvideopromoter.com/ by a select few to get viewers to 'buy into' the hype and hopefully buy their music.
This may be a cheap (and dirty) way to develop new 'talent', but the practice will not necessarily translate into record sales or single sales even with a Timberlake or a Ryan Leslie at the helm. YouTube Star - Mia Rose - was recently signed and then shelved (dropped?) in her deal, according to her blog, even before getting to the production stage.
So I am hoping the recording industry will continue to lead the way or at least do damage control to turn this devastating trend around by developing true ARTISTS with staying power.
The artists and labels need to work together in this way to take back ownership of their music on these online sites and control how their music is being used by comsumers through continuous sanctioning of illegal uploads
If you ask any serious musician or singer-songwriter/solo artist in development, they will tell you that they DO NOT WANT TO BE INTERNET STARS. They do not see it as a legitimate forum. They do not wish to be marketed among a legion of novice bedroom singers, some of whom have knowingly (and in some cases unknowingly) cheated their way to the top. They do not jump at the chance to have their music sold on iTunes where 'anybody can be placed these days'.
The music business is just that - an established industry that has brought generations of serious artists and their music to the people, and the people have benefited by it. This online pyramid game has few corporate winners among millions of star-struck singers/rappers who threaten the livelihood of established artists competing for limited consumer dollars.
If the record companies won't step up, the artists themselves need to take action to protect and control their best interests, and bands like AC/DC - not Radiohead - are leading the way by NOT licensing their music for sale as singles on iTunes.
Established artists need to stick together and following AC/DC's lead would not be shortsighted.
I agree with everything.
But on a side note: You think "Hail to the Thief" is one of their greatest? For shame! "In Rainbows" may not be either, but ... "Hail to the Thief?" Really?
"Dutch Crunch has summarized what I think but I want to add that iTunes-type or web-based online digital marketing is not the answer to 1) Preventing illegal downloading and/or 2) Increasing independent music sales.
The only way to prevent illegal up/downloading is to shut down the sites that make it possible - Limewire, Kazaa and any P2P and conversion site that high tech people - and not just kids - can interface and up//download for free."
Yes! More government. Waste time shutting down these pirate sites instead of something a little more productive with ourselves. That is the idea! Instead why don't we rid the music industry of the the 'industry' part, and let the artists distribute their own music. The artists are the ones creating the music, not the record executives. They obviously have no interest in the quality of music if they are consistently producing the NSYC and Brittany Spears' of the world. Let them go find a job making money off their own ability. They do nothing but complicate and manipulate the free creation of music.
Just to radio and television for revenue advice. Advertising is the answer.
Terrible reporting. It doesn't answer the question: "How much money did they make?" 1.25 million copies at 0 is hardly the same as 1.25 million copies at $10 each.
Notice how everyone has been very coy with the average selling price? That's likely because the average is in the pennies and not the dollars.
When given the opportunity people will take things for free when they can.
You seem to forget that CDs offer benefits that digital downloads don't: printed art and inserts and, of course, much higher quality sound. I would certainly pay more for that.
Hey filmaker13: Who said anything about government? What I am calling for is industry regulation of infringing sites and more ownership // self governance of the industry by the people that comprise it - the artists.
Seriously tho, if you have ever tried to launch an artist to industry standards WITHOUT a recognized label/A&Rproducer/agent/manager/publicist .. well, you wouldn't try it twice. The industry is very necessary to maintaining the standards that the public AND musicians have come to expect and they need to keep the gates closed fairly tight in this regard. These new media sites have wide open policies where 'everybody can be a star - just record some audio/video and upload it.'
I am seeing a trend where consumers (or freeloaders, however you choose to look at it) are spending a lot of time on Internet/webs looking for cheap amusement - not necessarily music - but more interactive forums that new media sites provide. That is why the Radiohead experiment is so interestiing: consumers could pay what they wanted, which gave them some control or say in the exchange.
MySpace and YouTube are important in this regard: fans can interact with their favorite artists through friend adding, leaving comments, buying merch, requesting songs. They can respond to questions posed in blogs, sound off, and generally let people know if they think something is good or sucks hard.
My biggest complaint as a songwriter/manager other than the copyright issue, is that these sites are lowering important standards that are required by the lables to sell a product - the stand-out recording artist and his/her music. Too much free crap gluts a market and will kill that market. And if everything sucks, this becomes the standard.
Is this is the true purpose of these new sites? To eradicate the established music and entertainment giants including record labels, by glutting the market with user-generated crap?
Hmmm. I sincerely hope not.
As one who is often accused of being a professional level 'musician', I must confess watching the entire music industry disintegrate has made life worth living.I could never have survived the lifestyle and excess which was the sine' quo non of being considered a,'success',as a player/producer.Back in 1986 when we released "hit and Run" under the idiotic aka of "Johnny Avalanche".Hugh wyatt,in the daily news, gave me a substantial review in the friday, july 26th 1986 morning edition.It took me years to realize how great it was to want to create music,and to have evolved with the process devotionally, for 32 years.The thought of selling music is quite the same as charging for air by my experience.I do not enjoy playing live but never stopped reaching for an instrument and recording device.It is a great privilege to create music or re-arrange personally deeply moving songs that apply to a total perspective of living and experiencing life;Always available to anyone free of charge..copyright information is important and essential but for a dyslexic person it is always a challenge to present the re-arranged song correctly.If one hundred people hear my little cover or original downloed for free;This,obvious to all,gives the industry artist free promotion.Clearly lack of inventory is the reason why the music industry can't survive.Years of warehousing bands that interfered with pre-existing a and r projects was a wasteful destructive and selfish anti cultural practice.The music industry should have doubled in sales.Unfortunately,all the wrong people are in the decision making positions while those who have minds that think outside the box prefer to stay there.My main point is terrible mismanagement of inventory and product diversity and adaptability ignorance resultant of jaded out of touch management is to blame.Seven years ago ,in my opinion, a large increase of inventory would have changed the numbers we see today.By utilizing bands with internal promotion management and co-opting the newly signed bands in house presence on line,the music industry could have been profitably integrated with our new democratic media tools.We all get our 15 minutes just as Andy Warhol predicted.I love it myself.As to my "amateurism", I have had some fairly professional results as well as responses to prove it.I also produce Amateur recordings.If a musician decides not to work that does not make them any less than the working musician. a lill food fur thought!
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