The British alternative rock band Radiohead caused a sensation when they announced on their website on October 1, 2007 that the new album In Rainbows was completed and would be released in 10 days for free. Fans were instructed to obtain a registration code in order to download the new album in MP3-format. Music consumers were left to determine the price on their own – ranging from US$ 0.00 to US $ 99.99. The response was overwhelming, and within a few weeks more than 1.2 million downloads were counted. According to the Internet market research firm comScore, 38% of the fans paid an average of US $ 6 per album, which resulted in US$ 2.4 million in revenue. Is this business model really as revolutionary as it appears at first sight?
Since its emergence in 1989, Radiohead was able to attract a global fan base with a record deal with Capitol Records, the U.S.-subsidiary of EMI. Before In Rainbows was released, Capitol had already produced six studio albums and a live album. The label had built up a well-known and valuable brand with millions of marketing-dollars. In an interview with the Chicago Tribune, Bert Holman, manager of the Allman Brothers, puts it in a nutshell: “Radiohead’s developed a pretty good brand name over the years. There’s artistic merit, but they also had a major label doing a lot of marketing for them.”
Holman also expresses what the “pay-what-you-like”-campaign ultimately was: A clever marketing concept of a band that had fulfilled its contract with a major company and that now wanted to take marketing into their own hands. The ultimate goal was to do PR for the release of the deluxe-CD-version for US$ 81 two months later. No wonder that the free download option ended with the release date of the CD. In addition, the download was possible only at a bit rate of 160 kilobytes per second, instead of the usual 192 kb/s or 256 kb/s. Nevertheless, despite the free download option, fans bought more than 100,000 copies of the CD within a year and put US$ 8 million into the band’s coffers. Lead singer Thom Yorke in Wired Magazine: “In terms of digital income, we’ve made more money out of this record than out of all the other Radiohead albums put together – in terms of anything on the Net.”
So, was Radiohead revolutionary in undermining the very foundations of the music industry or not? The answer has to be ambiguous. No in the sense of a new business model, since the download campaign simply replaced the PR- and marketing-initiatives that are still necessary for the traditional business model. But in the end they were very successful. And in this respect, Radiohead was revolutionary. They have shown that the free download option is not the end of all music sales but can, on the contrary, stimulate them. Radiohead had merely the courage to put this idea into action.
The secret of their success was that Radiohead had already experience with unauthorized downloads via filesharing networks. As early as 2000, the band had witnessed that even before the official release date of its album Kid A, song files had become available on various Internet platforms. At first, Radiohead was upset and feared a steep decline in regular CD-sales. But their worries were unfounded because Kid A entered the U.S. albums chart at #1 with 210,000 sold records. This fact changed Radiohead’s mind. The band members recognized that the Internet and especially filesharing were not detrimental to regular sales, but could function as a perfect promotion-tool. With its album Amnesiac (2001) and the final album for Capitol Records, Hail to the Thief (2003), the scenario repeated itself and convinced the band to break with the majors and their traditional business model. The result was In Rainbows.
The lesson that can be learnt from Radiohead’s experiment is that a free download option should be integrated as a PR-activity into a modern marketing campaign. However, the music download should not be offered by itself but, instead, should be combined with other products and services of value. This could be a special CD-edition, an MP3-offer with a higher bit rate, concert tickets, hardware devices for music consumption (mobile phones, MP3 players, etc.), or products and services unrelated to music.
The “pay-what-you-want” campaign has in itself already led to the interesting insight that despite the possibility of accessing music for free, fans were willing to pay for it Such a campaign can thus be used as a form of price discrimination by user’s self-selection (see Strube, Pohl and Buxmann 2008: 191-193). And finally, online registration before the actual download yielded a large database that can be used to target specific audiences for future record releases and concerts.
In the end Radiohead continued to work within the old business model of the recorded music industry but combined it with a revolutionary PR and marketing strategy, making them a forerunner of a development that makes traditional marketing methods appear obsolete. This should give the majors cause for pause, as their former market power, which was based on distribution and marketing, is no longer needed. And this change is irrevocable.
Strube J., Pohl G. und Buxmann P., 2008, „Preisstrategien für Onlinemusik“ in: Gensch, Stöckler, Tschmuck (eds.), Musikrezeption, Musikdistribution und Musikproduktion. Der Wandel des Wertschöpfungsnetzwerks in der Musikwirtschaft, Wiesbaden: Gabler Edition Wissenschaft, pp 187-203.
Interview with Bert Holman in the Chicago Tribune on October 5, 2007 http://leisureblogs.chicagotribune.com/turn_it_up/2007/10/radioheads-cust.html
Interview by David Byrne with Thom York in Wired Magazine, Issue 16-01, 2008. http://www.wired.com/entertainment/music/magazine/16-01/ff_yorke
Press release by comScore on November 7, 2007: http://www.comscore.com/press/release.asp?press=1883