How much would you pay for something you could legally get for free?
This may seem like a ridiculous question to ask, but on October 10, music fans everywhere had the chance to witness – and participate in – the changing landscape of the music industry, and especially how we purchase our music.
Last month, British based band Radiohead released its seventh studio album, In Rainbows, over the Internet. The album, held tightly under wraps until then, was, for lack of a better term, leaked by the band onto the Internet. However, this leak was not some pirated version uploaded onto a popular download site that anyone could download anonymously (and illegally). Rather, this was a form of artist-licensed distribution. Radiohead provided its fans the opportunity to pay whatever they wanted—including nothing at all—before downloading their new record. Also available, for a fixed price of forty pounds, was a “disc-box,” a collection that includes the In Rainbows album on vinyl and CD, as well as second bonus CD, artwork, and a lyric booklet.
All of this seems to fly in the face of simple economics. What could possibly motivate someone to pay for something that they can easily obtain for free? Radiohead’s albums have sold remarkably well in the past, when they have cost the same as any other CD, so why would the band risk their bottom line? After all, common sense would dictate that it is irrational to pay for any product or service you can easily, and legally, attain for free.
However, unlike many bands, Radiohead is not strictly concerned with their bottom line, at least not on the surface. Johnny Greenwood, a guitarist for Radiohead, said in a recent interview with Gothamist Magazine “It’s just interesting to make people pause for even a few seconds and think about what music is worth now…to ask people to…compare it to whatever else in their lives they value or don’t value.”
Regarding the true “value” of a CD, consider this. Most CDs sell for about $16, and cost, according to The Wall Street Journal, about $6.40 to “manufacture, distribute, and sell in a store.” Yet, Radiohead is able to circumvent this pricing schemed due to the fact that they aren’t tied to any record label, having split from their former label, EMI. By releasing In Rainbows online, the aforementioned costs are essentially zero. Additionally, once you subtract the shared profits and record label overhead, it would be feasible to produce the same CD for only $3.40 per copy.
So, if Radiohead’s costs were dramatically reduced by releasing their album online, what did fans actually pay for it? According to a survey conducted by TimesOnline, only about one third of the first three thousand fans to download the album did not pay anything. That means that a majority of people paid for something they could easily obtain for free. Not only that, but they paid an average of 4 pounds, or about $8, for it. Some paid even more – PureButtons LLC, a company specializing in custom made buttons, purchased several copies of In Rainbows for approximately $1,000. Sure, figures like this may just seem to be promotional stunts, but the fact remains: people are paying for something when they don’t have to.
This practice, while unseen on such a scale in the music industry, is not completely unheard of in other businesses. In fact, it is called tipping, and most people do it whenever they dine out in a restaurant. While patrons are charged for their food, some sort of tip for service is never explicitly required, but is certainly expected. Diners are not forced to tip their waiters and waitresses, but it would certainly be in poor taste not to do so. In the end, then, music listeners are simply tipping Radiohead for their services.
So, can the In Rainbows and Radiohead change the face of the music industry as we know it? Other well-known acts are moving away from the traditional major record labels as well, choosing somewhat unorthodox alliances with the Internet and concert promoters. The Wall Street Journal reports that Trent Reznor will leave his label, Interscope, to sell Nine Inch Nails’ music over the Internet. Madonna left Warner Bros. Records for a deal with Live Nation, the concert promoter. Prince has long been free of the major labels. Most recently, The Eagles have chosen to release their new record only through Wal-Mart.
While a few artists have spoken out in support of Radiohead’s experiment, members of the more mainstream music scene are not as impressed. For example, in an interview with TimesOnline, singer James Blunt remarked “I definitely think there is value in music. I don’t think they should devalue it. I’ve got to pay a band and a producer and a mixer.”
However, even more troublesome than Mr. Blunt’s payroll worries are CD sales figures. The Recording Industry Association of America has reported that last year, CD sales revenues dropped 13%. Clearly, the current system is collapsing. Radiohead’s approach, if not a cure for the music industry’s woes, certainly is admirable. By allowing the individual to set their own price, the band is giving total freedom to the consumer, and placing a great deal of importance on the quality of one’s work. Good service at a restaurant merits a higher tip. Similarly, a quality album should merit a higher price. Unfortunately, the culture of the music industry and the attitudes of listeners have a long way to go before everyone will accept this sort of meritocracy.
In the meantime, though, Radiohead has done its part to make music fans all over the world question the true value of what they buy—the first step in a move towards increasing market efficiency that will always result in the best product for the cheapest price.
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