Radiohead Online Album Crushing Success

By Richard Menta 10/4/07

Radiohead is one of those few artists who have developed that huge and loyal audience that sustains long after their record contract expired. Bruce Springsteen, U2, Prince, and Madonna are members of this elite group, artists who don't need a hit single anymore to fill arena seats. Heck, the Rolling Stones are still a hot ticket after 40 years. But, these are no oldies acts. Unlike Chuck Berry, who last month drew 15,000 fans to see him perform his old hits at a music festival in Cranford, NJ these artists continue to make new music. Springsteen just released a new album and is back on tour and Madonna's next release is due out early next year. The Stones made a mint this summer as they wrapped up their Bigger Bang tour, in support of their same-named 2005 release.

And it is these artists who have the best chance of leveraging the Internet to sell music without the need of a label. They already established their name as a strong brand. For years we have heard about how the Net will empower the artists, but for artists still trying to build a name for themselves no one has yet come up with the secret sauce that will truly allow them to profit handily from digital self-promotion. Meanwhile, you don't have to be a loyal U2 fan to know who they are.

So it makes sense that these are the artists who should experiment with new distribution methods. Prince's album giveaway through a London tabloid turned out to be a huge success for him. Meanwhile, Madonna may follow Paul McCartney's lead and release her next album exclusively through Starbucks. In those deals of physical medium it is the artists who stamps out the CD, sells it to whatever distribution outlet they have selected, and keep all the profits for themselves.

Richard Menta
But Madonna and Prince still had to work with Starbucks and the London Mail to distribute these works. Radiohead's latest venture to sell its upcoming release In Rainbows looks to cut out all the middlemen via a digital release through their own website. Most interestingly, rather than set a price for the record Radiohead asked its fans to name the monetary number. As I have written many times before - most recently here and here - the key word when it comes to selling digital downloads is value. What is a digital single worth? Before you answer $0.99, because that is what iTunes sells a track for, bear in mind I think that number is overpriced. So do a lot of iPod-toting consumers who on average only have about 20 paid iTunes tracks among the thousands on their player. Radiohead is allowing consumers to bid as little as one pence for the digital album, though a 45 pence delivery fee is added to the order. The digital version of the 10-track album will be released October 10th. A special edition physical set called Discbox, including the CD and two vinyl versions of the album plus "goodies" will ship December 3rd for eighty bucks.

If there was any group in the best position to make this experiment work it is Radiohead. In 2000 I wrote about how Napster was the force that drove Radiohead to its first number one album here in the US. Now, Radiohead is taking it to another level where they build and control the distribution mechanism.

Well, the initial results are in and Radiohead fans came out in force. They came in such force that they overloaded the website, bringing it down for a short period. That's just for the making the orders, think of the bandwidth the downloads themselves will require when they become available.

And the price of the album? We don't know yet, but the dollar amount per album is just part of the story. As I wrote in another article several years ago the high prices of CDs limit us to just purchasing six CDs a year. Low prices, on the other hand, stimulate volume purchases. If that volume is high enough the overall revenue generated is higher. Let's say Radiohead ships the entire album for only $0.50 or half of what iTunes charges for one track. That is usually the artist's cut from traditional album sales. If Radiohead sells 6 million digital albums they make $3 million. But what if fans agree to buy In Rainbows for $2.00, still far less than you can purchase major label acts as an album download? Then Radiohead will make far more money than any label deal would pay them.

This, of course, is scary to the major labels who realize that once their biggest acts become big, they can build on Radiohead's experiment. Radiohead may again provide the proof of concept that brings major change to how music is sold and delivered.

We'll have to wait and see what the final price per album is and the total sales generated. The number could be quite large. At minimum radiohead's experiment may become the new industry standard for long-lived acts like the ones I mentioned earlier. It also might be the best thing to happen to artists whose last hits were over a decade ago, but whose music is still in heavy rotation on the radio. Artists like the Gin Blossoms and the Smithereens are two good examples. Let's see what October 10th brings us, but from this vantage point it looks like it already is a crushing success.

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