Radiohead's direct sales experiment and test of their fans

By now, many music fans have read Eduardo Porter's op-ed piece in last Sunday's New York Times about Radiohead's experiment distributing their most recent album, "In Rainbows", independently.  The band posted the album for download on their website and are allowing fans to pay whatever price they choose to type in the box before checkout.  In an era when a lot of music is being obtained illegally, downloaded for free through P2P services or shared amongst friends and record labels are scrambling for solutions, this was a brilliant test to see how fans of a band really feel about paying for music.  As it turns out, while many did download it for free, many others paid $20+ and the average price paid was $8, less than a CD would sell at retail, but more than a band would get from a typical unit sale of an album distributed with a record label.  Porter takes an economic perspective in analyzing this phenomenon, comparing it to the phenomenon of tipping, but I think it simply shows that music fans do appreciate artists' work and are willing to pay for it, particularly when they feel close to the band as Radiohead accomplishes in this case by communicating directly with their fanbase.  My biggest takeaway here is that this is just one more reason why record labels should be fearful of their future in the artist-production-distribution equation.  With this exercise,  I think Radiohead has proven they can be a more profitable enterprise while connecting more effectively with their fans by leaving the record labels out.  Scary stuff for Sony/BMG, Universal, EMI and the rest.....

By Josh Guttman