The secret of Radiohead’s “In Rainbows” business model.

Oct 11, 2007

The secret of Radiohead’s “In Rainbows” business model.

Radiohead

Yesterday Radiohead released their new album “In Rainbows”. To stir the pot, the band are no long with a record label so released it independently through their website. The beauty of it, you can pay whatever you like for the album download - yes - that includes $0. I paid £ 4.45 (about $10) because to me, that is what it is worth. I won’t lie, I felt a really odd sense of satisfaction pulling out my credit card. It was like simultaneously donating to a worthy cause and getting a real bargain to be proud of. I felt like I was doing them a personal favour by paying, because I knew I didn’t have to. I admit that if the album came out and was £ 4.45 to buy from their site, I would have hesitated. But because it was a buyers market, I was keen to participate.

Now for the juicy bit. What edge does the direct download pay-what-you-want business model have over traditional music distribution channels? Forgetting the obvious difference in production costs, there is another key component: every person who downloads the album from the Radiohead site provides detailed metrics about who they are, where they live, how old they are and your email address. You don’t get that when a listener buys it from a store, you get the metric that someone in that area bought an album (after you’ve just paid for it to be cut, printed and shipped from who knows where). It is a lot more powerful to have a completely up to date database of listeners that you can easily contact. It would make tour destination planning very easy as well.

Obviously there are few factors at play here before we get all excited and think that record labels are doomed forever:

Radiohead are insanely popular.
They already have money.
They have nothing to lose.

However it might only take a few big profile artists to create some momentum behind this donationware music business model. The concept needs a few cases to study before the idea is truly validated. For the moment I suspect a lot of people like me are participating on a rationale that is dictated partially by the disruptive nature of the idea itself. I sure hope they release some metrics, would be fascinating to know the downloads and average “price”.

Oh, and for the record (pun intended), the album is great - why not download it?

Hamey

The secret of Radiohead’s “In Rainbows” business model.

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