Study: Free beats fee for Radiohead's 'In Rainbows'

LAST UPDATE: 3:54 p.m. PT--Those who predicted that Radiohead would see mass financial support after allowing fans to pay whatever they wanted for the band's latest album appear to have been a tad optimistic, according to a study released Monday.

Of those who downloaded Radiohead's digital album, In Rainbows last month, about 62 percent walked away with the music without paying a cent, reported ComScore, an Internet research company.

About 17 percent plunked down between a penny and $4, far below the $12 and $15 retail price of a CD. The next largest group (12 percent) was willing to pay between $8 and $12--the cost of most albums at Apple's iTunes is $9.99. They were followed by the 6 percent who paid between $4.01 and $8 and 4 percent coughed up between $12 and $20.

Last month, Radiohead, one of the world's most recognized music acts, thrilled fans across the globe by giving them the option of paying whatever they wanted to obtain a digital copy of In Rainbows.

Music blogs lit up with excitement. Pundits crowed that the file-sharing crowd would prove that they weren't really just free loaders by happily supporting artists who had walked away from the labels. That appears not to have happened by and large.

But an important question still unanswered is whether the band is making any money. While Radiohead is believed to have had to pay the costs that go with distributing music online, the group also didn't have to share revenue with a record company.

Chris Castle, a long-time music attorney and record executive, cautions that it's way too early to try and assess whether Radiohead's experiment has failed or not.

"I think if (the music industry) had done this kind of thing a long time ago we'd all be better off."

--Attorney Chris Castle

Castle, who has represented singer Sheryl Crow and worked for A&M Records, said that the money-generating lifespan of an album can last as long as two years. It starts when an act releases a record and is extended when the performer goes on a concert tour.

The real question, Castle said, is whether Radiohead can equal the same kind of money it made when it was still making records for music company EMI.

Castle offered an educated guess about what the British band was earning at the label. He figures that in every year a Radiohead album was released, it was EMI's top-selling record. The band likely negotiated a larger royalty rate than most performers earn.

He guessed that when royalties were combined with money earned from publishing, Radiohead saw between $3 and $5 for every album sale.

Castle also estimates that the band typically sold between 3 and 4 million units worldwide. That would mean Radiohead hauled in between $9 million and $20 million per album. An EMI spokeswoman declined to comment for this story.

If Castle is right about the band's cut, then the money it received from letting fans pay may not have been a huge drop. According to ComScore, the average amount spent for all downloads came to $2.26.

Castle also said that not only is it too soon to try and measure Radiohead's success, but that they are not a good band to use as a test case. The group is a phenomenon with an enormous following and not all acts will see the same success by going independent.

"I may not agree with what they are doing but I think people should respect what the artist wants," Castle said. "If they want to give their music away, let them."

Radiohead's experiment with a different business model may benefit the entire music industry if record executives can learn from it, according to Castle.

"I think if we had done this kind of thing a long time ago," Castle said, "we'd all be better off."

Already, Radiohead's promotion has given rise to similar offerings from other bands. Last week, rapper Saul Williams released the album The Inevitable Rise and Liberation of NiggyTardust. Williams gave fans the option of obtaining the music for free or for a $5 donation.

An important difference between the offers of Williams and Radiohead is that those who paid for Williams' music received songs at higher bit rates and thus better quality.

Trent Reznor, the front man for Nine Inch Nails, produced NiggyTardust, and he offered kudos to Radiohead for experimenting with a new business model.

"I think there were some serious flaws with how they executed," Reznor said in an interview with CNET News.com last week, "but it was a good idea."

Coincidentally, on the same day that ComScore released Radiohead numbers, EMI announced that it was releasing the group's first six studio albums and one live album in several formats including uncompressed WAV files.

The WAV files come on a USB drive and goes for $167.

[rdupuy11]

very high percentage

Given that many people were sampling this music as the curiosity it is, this is a very high percentage who liked it, and wanted to buy it.<br /><br />They were in the news for giving the finger to the RIAA, and many people who were not radio head fans, went to look for it.<br /><br />Also, because of the nature of failed downloads, and people having computers in multiple locations...they may download it more than once, but of course, they wouldn't pay for it more than once.<br /><br />Very high percentage. The real question though, is did they make more money overall, than otherwise. Probably.

[jimmyhoops]

Not exactly free market capitalism....

I'm not sure what Radiohead was thinking in letting the masses <br />determine the value of an artist's work. It would have been a <br />more sound business model to offer the downloadable only <br />tunes for a price far below what the record companies would <br />price a comparable cd at. Perhaps a price of $4.99-6.99 would <br />have provided a more realistic approach to generating notable <br />income off of a new release. That is still more then 5 to 7 times <br />what they would have received from the record label. My <br />research indicates that most artists only recieve about $1 from <br />most CD sales.<br /><br />Time to wake up and realize that free-market capitalism does <br />not mean FREE! It's no suprise to me that most kids out there <br />that have little or no regard for artist's to make a living would <br />opt to pay nothing or pennies in some cases. That is a total slap <br />in the face of the artist saying that their hard work and creativity <br />is worthLESS. Think about it!

[chiefmoneymaka]

try again

They still averaged $8 in the US and $6 elsewhere. So they ended up with more income than they would have with your suggested approach. If people think the work is worthless, then it is. That's the way things work. People aren't going to pay for something if they don't want to pay for it.

[Chaku01]

Interesting though

Off course free-market does not mean free, and every work deserves a fair salary. I think this experiment is very interesting as it shows what the value of their music is in the mind of the people. It was clear from the beginning that a substantial part of the downloads would go for free, as this event has had a lot of publicity and attracted lots of curious people. For others that really appreciate RadioHead's music like me, they pay. I would have payed at least 10$ but couldn't, as the only credit card I own is not accepted...<br />Another point about a fair salary; even if we assume that the 4 million real fans would "only" pay 2.29$ for the album, that still makes 9.160.000$. Before we assume that this does not constitute a fair salary, I want someone to prove that the costs are higher and cannot provide them with food and shelter, that the publicity it gives does not influence their sold out concerts providing them with yet more(fair?)income and that it degrades them or the value of their music.<br />After this, lets talk about the fair salary of an exploited immigrant, or a single mom working 3 different jobs getting evicted from her home as she can't make enough pay monthly to provide shelter and feed her children, she who would earn those 9.160.000$ in "only" 643 years working every single day of the week (5$/hour, 8h/day)... who's degraded now?

[xixi77]

Dis-honest creeps, flawed marketplace

I agree with jimmyhoops that perhaps Radiohead shouldn't have fed into the online freebee culture. We're not talking about a lot of money if the album sells for $5 to $10. What kind of creep wouldn't pony up some small change for an artist's work? Conversely, what artist would want a bunch of leeches in their audience anyway? These lazy fools probably wouldn't pay for their lunch if they could get away with it. <br /><br />I do believe that lots of folks are willing to pay a reasonable amount rather than go picking through back-alleys to find what they want. It's the convenience factor. By the same token though, the internet is very cumbersome when it comes to transactions. Has anyone considered that? To log on, submit credit card #'s, screw up the form, try again, why it's easier and more convenient to share files or steal it when the chance arises. Online marketing needs more conveniences. Maybe that's where subscription comes in.

[OttoDyeDacked]

How do you know that 38% is low?

What makes you say that 38% is low? How do you know what percentage of downloaders would have either purchased the music through other channels or downloaded it illegally?<br /><br />You have -nothing- to base your assertion on. 38% could be incredibly, hugely high.<br /><br />And as rdupuy11 noted, all that matters is whether the band makes more money or less this way, not the percentage of people who pay.

[Renegade Knight]

3 Out of 5 could be trying the music to see if they like it.

I'm not going to pay for music I don't like. But I will try for free music I've never heard to see if I like it. If I don't, it would hit the bit bucker. If I do I'd go back and pay.<br /><br />I don't think the Radiohead experiment is over. Some of those 3 out of 5 will come back and pay.

[droobage]

yes, but how many people will be buying the CD, too?

I paid $6 for the download, but I plan on purchasing the actual disc when it comes out, too. I like having a physical disc to hold, and I love the artwork. So Radiohead will be getting my money twice. I think a lot of people will be doing the same. <br /><br />And another thing, where did these stats come from? I've heard about 5 different surveys since the release of this cd, all claiming different things. Until Radiohead releases the data themselves, I don't believe any of these "surveys" or "studies".

[enovikoff]

Cost of a CD is $12-15?

Where did that number come from? If you shop for CDs you know they cost YOU a lot more for recent releases. And, if you believe what an increasing number of bands are publishing about the finances of producing a CD through a major label, the cost to the label is about $1-2 per CD. The rest, typically $12-16 is distribution costs and profit. That leaves a lot of negotiating room for online content, don't you think?

[brodie657]

Not actual cost

$12-$15 is not referring to the actual cost of producing a CD. It refers to the cost to the consumer if they were to buy it through traditional channels (BestBuy, Itunes..etc). Sure you could get it for $9.99 if you're lucky, but typically a CD is going to cost you 12/13 bucks.

[SeizeCTRL]

$6.66

I put down $6.66 which came out at a tad over $7 with the credit transaction fee attached. <br /><br />If the bit rate would have been higher, say V0 or 320, I would have paid more.<br /><br />I absolutely love the album. While it doesn't have any tracks that stand out like on The Bends and OK Computer, every song is still great. I think I clocked in about 1500 listens on Last.FM with it :)

[MSSlayer]

Even if the average is 50 cents

They are still making more money then by releasing it under a greedy major label.

[fuzzikitten]

Incomplete results...

"About 17 percent plunked down between a penny and $4, far below the $12 and $15 retail price of a CD. Another 12 percent was willing to pay between $8 and $12--the cost of most albums at Apple's iTunes is $9.99. "<br /><br />38% paid for the album<br /><br />17% paid $0.01-$4<br />12% paid $8 and $12<br /><br />That still leaves 9% unaccounted for. Did they pay between $4 and $8? Or did they pay more?<br /><br />Without some meaningful information (ie total revenue, number of total paid downloads, etc) this is periphery information that tells us nothing about the success of Radiohead's project from a financial standpoint.<br /><br />Okay, so more people downloaded the album for free than who were willing to pay for it. But in a volunteer system, isn't it remarkable that 38% were willing to pay *when they didn't have to pay anything*??

[twangboy]

Nonsense

Free beats fee? Does that make the tiniest bit of sense? The entire premise of this article doesn't match the numbers it reports. The average was $6 or $8 per customer? That is an amazing, fantastic success for the band, and far more than low-grade MP3s are actually worth. Of course that constitutes "mass financial support." But somehow CNET has a need to spin this negative. What a shame.

[ncalishome]

Free beats fee

Well hell, if Bush beat Gore with only 47% of the popular vote, then I'd say 62% of people downloading the album for free beats the 38% who did pay. $6-$8 per PAYING customer would equal a whole lot more if more paid, if the average held.

[bbydon]

so of those who downloaded were new

Where is the stat of those who downloaded for free never eve <br />bought a previous download.<br />Or how many downloads vs the total of a cd sale.<br />This would drastically effect the $2.66 average

[Penguinisto]

Missing figures:

So, what percentage of the total take did the band get to keep for themselves, as opposed to forking over to the RIAA and its member studios? And, did that total come out to something larger than they would have otherwise made if they had stuck with the RIAA scheme?<br /><br />That is the question that seems to go unanswered here.<br /><br />/P

[tsavola]

Why would they do that?

Why would the band give a cut of their digital sales to the RIAA or a studio? That's the whole point of their break from EMI, to cut those losers out of the loop. The only costs they incurred were for fulfillment (merchant fees, bandwidth, etc.)

[unknown unknown]

Glad I didn't pay for it

I wasn't impressed with their album. If i'd bought the CD it would have been one that ends up at the bottom from never being played.

[ColdMast]

I'm sure some people listened to it first...

before deciding how much it was worth,<br /><br />does this study show individual MAC addresses or even IP addresses.<br /><br />I'm sure some people downloaded and went "meh" and then trashed the the songs or kept the one track they liked.<br /><br />All these RADIOHEAD "Studies" always have a negative tone to them trying to show the consumer as some sort of GREEDY thing, there are still many people who don't know this stuff exist, It also assumes that everyone who went to site was a fan.<br /><br />If it was centralized, easier to use, with a listen then decide, along with some sort of moral/selfish altruism line about "you pay = we make music, no pay = no more music" heck chalk that next to a "real" charity line like "1/3 of proceeds go the artists' favorite {insert one} charity".<br /><br />ALSO SELL LOTS OF SWAG, I LOVE SWAG!

[rdupuy11]

compare to last album

I don't know exactly what Greg was hoping for...but if you compare 1 week sales to Radio Heads last album...they sold 300,000 copies of the cd, plus millions pirated....that was the old system, yes, piracy existed and it wasn't 100% payment...contrary to the fantasy world, some people live in.<br /><br />The 1.2 million 'sales' of this copy, include only 38% paid copies, or about 456,000 copies...a 50% increase over last time.<br /><br />Now the payment ranged from very little, to more than the retail price. But, the average payment, according to the figures, is much higher than the royalty RadioHead would have gotten from EMI.<br /><br />So better payment per album than you would have gotten from EMI, on sales of 450,000 vs. 300,000...and this is only the first week.<br /><br />Fantastic success. of course, some people with a vested interest in seeing middlemen scrape the profits for themselves....they don't see it that way, and they have a reason for not seeing it that way.

[Heebee Jeebies]

Well in this case...

Consumers as dumb as they are had the perfect chance to let the music industry know something important. Two things really, one they charge two much and second what a fair price is.<br /><br />However, instead of doing that the stupid consumers decided to send another message. Even when given the opertunity to pay a fair price they will basically steal anyways. Now technically they didn't but the vast majority of them didn't pay a fair price either.<br /><br />This whole thing wasn't about the music, the quality of it, the number of tracks or anything it. It was an opertunity for all of those saying the recording industry is greedy to let the recording industry know what consumers felt was a fair price for an album of songs. But, now the recording industry knows that what they are doing and how they are handling piracy is right on because consumers by and large don't want to pay anything which to them explains the stealing and justifies their lawsuit activity.<br /><br />Good job consumers. Nice message. Now you all deserve to get whatever the recording industry slides up your hind end. What a message you sent.<br /><br />Robert

[OttoDyeDacked]

Oh please

What, in order to send a message 100% of people who tried the album have to purchase it? That's ridiculous. A 38% payment rate is an excellent message: a very high percentage of people will pay for something they could otherwise legally have for free.

[mcfly09]

Phenomenon????????

"The group is a phenomenon with an enormous following"<br /><br />I think that's a bit of a stretch. Do most people remember any Radiohead song since Creep from 1992?<br /><br />On a side note, doesn't the lead singer look like Clay Aiken? I bet If Clay tried this he would sell more copies than Radiohead.

[jeffgtr60]

Cnet typical RIAA Microsoft shills

I would imagine Radiohead still made more money than they would have had they gone the typical route. I know I paid $15 on prinicpal. It will be interesting to learn what they "actually" made instead of what a special interest backed study estimates they made.

[Geminate]

Return to Value

Look, once upon a time there were vinyl records, they cost way more to produce than a CD. You got a 12" double-sided record, a record sleeve, an album cover, all the lyrics, nice big pictures of the band and artwork, there were frequently extras thrown in, the product was worth $12.00 USD. Today you pay much more for way less value for commercial music. Radiohead now wants you to basically get nothing except their digital music files, yet pay like it was a full commercial production. No CD, no graphics, no CD booklet, no case, nothing. It's time that value be placed back in to the consumer's purchase - what are we paying for? Music is just that, music. I am not saying that part of the product be devalued, but why not return to where you actually get something for your money? Why not sell CD's with many extras that make the purchase not only more value-added but also more enticing? Everything sold with a CD would also be considered collectible. Why not sell a package with the CD, large images and artwork, stickers, posters, large lyric sheet, videos, coupons etcetera? Extras and promotional items would just strengthen the bond between an artist and their fans. Giving away extra things at little extra cost would go a very long way toward repeat sales, especially for younger fans who really would appreciate hugely, the additional items and effort that went in to the production. Why not make music fun again and more than just an aural experience.

[Chaku01]

Just buy the Disc Box

You can buy something like that, the Disc Box for 90$ if I remember well, including cd's vinyl collectibles etc...

[xixi77]

Very good point

Very well put, the listener gets very little in the basic download compared to LP days. And the artist remains rather anonymous.<br /><br />I bought a Lali Puna CD that included the tracks as well as video files playable on computer or DVD. It was very nice to actually experience the artist(s) in some extra way.

[DaB3at]

Radio...who?

Seriously Radiohead's last big "woo" factor was "Creep"...back in the days when cd's were a luxuary...And they're still around?<br /><br />That been said, i have to give them props for trying out this business model, and it been a success."Success you say??"....yes SUCCESS. Even if one person bought the album online it would have been a success. Like many have said, no one forced these people to buy. Every one could have just downloaded and walked away, concious free(debateable, but not getting into that).<br /><br />This was no money making scheme thought up by Radiohead members on a gloomy night. This was done to cut out the middle man...obviously, and i think that is what most of you are not seeing. It is not about profit, revenue...blah,blah,blah, its about not needing a greedy bastard *cough-EMI-cough* to realease your stuff.<br /><br />I could go on forever, but i gotta go work and make a greedy bastard richer, :)<br /><br />Think of how many bands would have a higher percentage.....MetallicA. Okay okay...napster, blah blah...but if you think about it, they have been around for a while and more likely a bigger fan base than Radiohead, and it would be intresting to see what their figures would be like. Or maybe a band like The Rolling Stones....you know truly rocking bands :)<br /><br />k bye