Making music in a world of freeloaders

OK, so we're a nation of cheapskates after all. Tell me something I didn't know.

The latest album release from the band Radiohead tested whether the public would support a scout's honor arrangement. If enough people would pay to download the band's music, that might serve as the harbinger for a different sort of distribution and sales model.

Until now, consumers could do little but bitch about the rip-off prices they were charged for music. After years of grumbling about greedy retailers and corrupt music moguls, here, finally, was a golden opportunity to change the future. They just had to do the right thing.

Well, we can still dream. It turns out that freeloaders by a 62 to 38 percent margin outnumbered the fans willing to pay for the British band's new album, according to ComScore.

Can't say I'm really surprised. The pick-your-own price idea isn't novel. Software developers have offered so-called freeware applications for decades. The idea being that the free stuff would entice some people to upgrade to the more feature-rich versions which cost real money. Even though you'd be hard pressed to find many companies that struck it rich going that route, it was, at the very least, good publicity.

An established band like Radiohead, which has rich corporate backing, can afford to put out a loss leader. The guys jamming two houses down from me just starting out don't have the same cushion.

But I'd be careful about dismissing this as a pipe dream. Just as one data point hardly makes for a trend, there's nothing conclusive here--other than a depressing reaffirmation of human selfishness. Music attorney and industry exec Chris Castle made a telling point in a conversation with my colleague Greg Sandoval that the economic lifespan of a music album can extend as long as two years.

Besides, we're talking close to 40 percent of the test group pulling out their credit cards to pay something. Some of us may be insufferable tightwads but maybe we'll one day grow into mensches.

[kwilco]

Cheapskates

Funny how I just read an article describing how Americans are deep deep in debt and adding on more more debt every day. We're cheapskates spending like there's no tomorrow. Perhaps a lot of looky-loos downloaded the album and decided not to keep it.

[bigpicture]

Freeloaders

Hey I run a coffee fund at work, just throw your money in the jar. I don't count how many do or how many don't, just that the fund is self supporting is all that matters.

[mikekrause]

Is there a happy medium?

Paying $12 to $16 for a CD is exhorbitant, and paying $0 isn't fair. How about something more in the $.50 per song range? AND... make sure it's DRM free thank you very much. Just my opinion, but I think going about half what the online stores are charging and stripping off the digital rights management so I can play the song I bought where I want when I want is the golden ticket.

[AlphaKonare]

There is..

There is a happy medium... it's called Limewire. Half of all music downoladers (I'm using rough numbers here) pay $1 for the song, and the rest rip it off for free. That works out to about 50 cents a song - enough money for the consumers not to feel ripped off and still plenty for the music execs to insulate their houses with and burn for warmth.

[ralfthedog]

$0.99 is the perfect price.

If a download service were to sell every song for $0.99 they would make a fortune.

[AlphaKonare]

Selfishness?

I really take some issue with this article talking about "human selfishness" and whatnot in relation to people freeloading off of music. (This is music that has been offered as free, anyway, so who can really balme them?) My point is who is the author to criticize consumers for their selfishness when everyday the execs of record labels and music download engines do the same thing? They charge absurd prices and then reap the profits for themselves - freeloading, as it were, off of the original manufacturers of the song - the artists. Do you think bands get $1 for every song you buy on iTunes? Not even close. In my opinion, corporate greed is what's really wrong with this system, and you can't fault Radiohead or the less greedy sector of the music industry for trying to find a way around that.

[38ffems]

I paid

I spent 3.45 british pounds including the service charge. I like the band and I would happily pay knowing that they are not part of the RIAA and have the guts to try to help out the consumer as much as themselves. I am sure they made money on it and the CD will be released in Dec with more content so they can make up for it then. I would like to see more bands avoid the big labels and take the crooks out of the picture.

[ethana2]

Thank you

for your support in our war against the oppressive middleman.

[ralfthedog]

I will download when the bank sends me my credit cards back.

I lost my wallet with all of my non business credit cards. I will check out the songs in about a week when I have a method to pay for them.

[sethum1]

Totally miss the point?

I think the author is focusing on the wrong statistic. What percentage of downloaders paid something? Please. That could just as easily represent everyone paying to the best of their ability. And would 100% payment be a better result, if everyone only paid one penny?<br /><br />No, it does not matter what ratio of the fans donated money, it matters whether this venture was more profitable than dealing through a record label. It is easily possible that the 38% of the downloaders that donated actually generated more profit for the band than the artists can get from the fraction of a percentage of CD sales.<br /><br />Who knows - perhaps those "cheap" 62% are now new or bigger fans that will attend concerts and buy memorabilia and help Radiohead reach higher fame.

[hollasch]

A Wider View is Needed

I agree with Sethum1. I don't have a single Radiohead album or song, but plan on downloading the album (for free) to check it out. Corporations spend billions of dollars annually in the form of advertising and then give the (often quite good) product away for free. Why? To increase their share of the market by luring new customers, and to reinforce the buying patterns of existing customers.<br /><br />If Radiohead makes twice the money off this album than the prior album, then having a 62% share of freeloading customers looks pretty smart, doesn't it? In addition, just like advertising, you now need to account for the potentially increased customer base for future albums as well.<br /><br />In short, it's vastly premature and narrow-minded to look at this venture as the author does and declare victory or defeat.

[ethana2]

Oh. I thought...

you were a free culture guy. I say that copyright in any form totally misses the point. The point is to have a rich, free culture, for me anyway. That's why I give away what I create unburdened by copyright. Money is a factor that needs to be relegated to the more concrete things in life and left there. If money's all they want, I guess I'll refrain from downloading their album and stick to jamendo.com...

[OttoDyeDacked]

Agreed

This is the second blog post here at cnet that claims that a 38% pay rate is a failure. Please.<br /><br />First, what percentage of the total downloads were people who had never even tried Radiohead before? Do they somehow count as freeloaders, especially if they decide they don't like it?<br /><br />Second, what percentage of the total downloads were people who tried the album for free and decided they liked it enough to pay for it, and went back and paid?<br /><br />Third, what percentage of the people who downloaded it would ever pay for a Radiohead album? <br /><br />Fourth, what percentage of the people who downloaded it would have pirated it instead?<br /><br />It's INSANE to claim that 38% is a failure. Since that 38% is about 450,000 people (in the FIRST WEEK), and their last album only sold 300,000 copies, it looks like a HUGE success to me.<br /><br />If Radiohead makes more money this way than the traditional route, this is a success, pure and simple.

[rdupuy11]

You are exactly right

The blogger who wrote this missive, totally was trying to stear the discussion in a certain direction, because the person has ulterior motives.<br /><br />The fact is, the stat of how many people had to download twice, because they have more than one computer, or the first download was interrupted, or they were just trying the music because they heard about radio head from one of these blogs...<br /><br />38% turns out to be a very high number, not a low number at all, and to state that it needed to be 51% to 'outnumber the freeloaders' is just an absurdity.<br /><br />And he wants to suggest that in the old system 100% of people paid, when in fact, it was more like 20% or so people bought the CD vs. the number of downloads and copies. So this represents a huge increase in sales.<br /><br />Another way to look at it, was the last album of radio head sold 300,000 CD's in the first week, of which RadioHead only got a small cut.<br /><br />This one had 450,000 paid, with an everage paying price of $8 in the u.s. which is far greater than the cut RadioHead used to make.<br /><br />The author, in part, just wants to stir up controversy, to increase hits...but also, is somewhat uncomfortable with the way society is changing and is proving himself to be an old curmudgeon.

[itango]

I agree completely.

This article also ignores that many people will not pay for music, ever, whether the music is free or not. There are many people that infringe copyrighted music, and have no intention of ever paying a penny - this is why the RIAA's claim that they are losing "billions" to pirates is suspect, because many of these people would never have paid in the first place.

[mmathu]

Missing the point

What a disjointed message... You wrote: "Please. That could just as easily represent everyone paying to the best of their ability." ... and you also told us: "Who knows - perhaps those "cheap" 62% are now new or bigger fans that will attend concerts and buy memorabilia and help Radiohead reach higher fame."<br /><br />You can't have your pie and eat it too. <br /><br />One or the other.

[Renegade Knight]

Both

There are a lot of people downloading. Some fit one catagory, some the other, some things nobody mentioned at all.

[sethum1]

That's not the issue

I wasn't arguing that the 62% who didn't pay had to consist entirely of freeloaders, or entirely of destitute fans, or anything in particular on that matter. The point is, it doesn't matter what reasons or goals the free downloaders had.<br /><br />The only issue is whether Radiohead could make a profit solely from willing donators. Not how many donators there were, or what the freeloaders were doing.

[ronan001]

Consider the many other Components...

Hey Charles, You have omittted Massive details. A Huge proportion of that 62% would not like Radiohead, would have never heard them, but downloaded it to see what all the fuss was about. <br /><br />Many who would consider themselves Radiohead fans, but then download it and thought, "hey this not very good", so they dont pay, which is right, it is not freeloading. We are thankfully heading towards a try before you buy music consumer society. Why should we look at a cover and buy an over priced CD that is filled full of awful songs. At least when you buy another item, you get to see it, you get to use it. But buying Music is like pot luck. You might hope the band will create an album as good as their last, but in many ways its a lottery unless you are a die hard who has made their mind up before listening.<br /><br />I would guess about 20% of that 62% would continue to listen to the album and yes, they are freeloaders. But 38% is a massively positive outcome.

[jschwa12]

music discs

you people are not old enough to remember that in the era of phonograph records the stores had booths where you could actually listento the record before <br />buying it

[digitalshaman]

HELLO!! - RADIOHEAD gets ALL the VIG

the comment that music can bring revenues in for 2 years is a <br />bad hasty generalization. it depends purely on whether it is an <br />album or a single and just what music it is ... <br /><br />look at the top selling albums of all time and you can see a <br />pattern between generations as well as longsellers that have <br />been re-released over and over and over again .. did anyone <br />score tix to led zeppelin?? talk about long sellers <br /><br />the reality is that only 0.03% of music (about 50-60 albums in <br />the states) bring in over 50% of the revenues, annually. More, <br />major label bands only make money 3-5% of the time, and sell <br />on average just 5K per release (indies is like 1.5K that are of any <br />significance)<br /><br />BUT, here is the rub ... most music contracts are advances <br />against FUTURE royalties ... dont see too many actors signing up <br />they get an ongoing take as well as up-front.<br /><br />which brings me to the most important point completely missed, <br />chuck -- radiohead keeps the money -- it does not get a royalty <br />check for 12-14% of sales against revenue breakout numbers it <br />rarely can confirm actuarially. it takes what it can get which ill <br />bet is better than claim drm can stop copying and p2p is going <br />away ...<br /><br />it gets e-mail addresses of its fans -- it knows who paid and <br />who did not -- THAT IS A REAL BUSINESS!! -- they are selling <br />music so, the follow-up is, will they make more music under this <br />model must be compared with what they would be *paid* by the <br />EMI or any label... the merchandising and touring was always <br />going to the artists with smaller splits to venues and promoters. <br /><br />AND... they keep the rights!! so, THEY get to re-release and tour <br />knowing just who butters their RAINBOW.<br /><br />i'll throw another example in ... ever hear of ARCTIC MONKEYS <br />-- maybe you should ... they may be the first true success on <br />the internet (even if they did later sign with Domino and Warners <br />for the US)...<br /><br />[[d i g i t a l i s]]

[msouterblight1]

How they can make money..

Offer the downloads for free, but before the download of each song, play an ad. They could charge different prices based upon how long the add played, say anywhere from 10 seconds to 30 seconds. They could even offer a zipped copy of the whole album with a longer ad, say a minute or 2. I haven't downloaded the album, and I don't know anything about the content, but let's say there are 10 songs, at a million people, that would be 10 million ads played...I'm sure we would all watch a 10 to 30 second ad to get a song we liked for free...<br /><br />Just a thought.

[Carboglace]

music's too expensive, private p2p will take over...

I just spent $18 last night on an album I downloaded months ago...thing is, I would buy a heck of a lot more albums if they were priced reasonably...and you can't stop people from downloading between each other, especially now with private p2p, which is 100% legal, and which lets people share folders on their computers with friends. A great example is <a class="jive-link-external" href="http://www.gigatribe.com" target="_newWindow">http://www.gigatribe.com</a>

[basraw]

private p2p

&gt;especially now with private p2p, which is 100% legal<br /><br />it would not be legal if you are sharing copyrighted material.

[umcrouc0]

They still made more off of this

When they're getting all the royalties and arent't paying for physical manufacturing costs or give a store their cut, Radiohead still made way more off of this than they would have if 100% of the people had bought their album through a label. That's half the point of this, you don't need to have everyone pay if you're keeping all of the profits. <br /><br />The major label's reaction to this story is rediculous. Smaller artists are better off with digital sales where they keep all the royalties because no one has their music for free download. Everyone can get a copy of Radiohead's album for free because it is available all across the net. If you hear a good smaller artist and want to have their stuff, the only option is to buy it in most cases, making this business model ideal for them.

[rdupuy11]

Author doesn't get it

The author's outrage is lamentable. Because, in order to build a better society, to put it bluntly, we have to be a little smarter than /*this*/.<br /><br />The assumption that you are a freeloader because you didn't buy the music is absurd. The music was free, people tried it. The fact that MORE people paid for it under this scheme, than the old CD+piracy scheme, is a good thing. But that doesn't mean, I have to buy the music, if I don't enjoy it.<br /><br />I'm sure Radiohead wanted new people to try the music, and if some of them decided they didn't want to purchase, no harm, no foul.<br /><br />If I have to guarantee that I am going to like something before I even try it...then no thanks, I'll pass, because I cannot make that guarantee.<br /><br />Life isn't perfect. The unfortunate reality, is somehow the old system, of selling CD's, and calling the rest pirates (even if 75% of the people where pirates)...it somehow compartmentalized the issue in these people's minds, so that they thought everyone was paying...<br /><br />no, everyone was paying in the group of people paying. It's all about definitions, and you have to study that issue, and come to terms with it. If you don't....society doesn't advance.<br /><br />I hope that someday that no one pays for music though. You get famous, and make money from being famous...many ways to do that. Live concerts, t-shirts, memorabilia...in my opinion this is the best solution.

[Heebee Jeebies]

This proves...

That dumb consumers deserve everything they get from the RIAA. Here they had the perfect chance to tell the entire music industry what a fair price was. And, what do they do, basically steal the music. Instead of being fair and instead of using this opportunity to set a fair CD price of say $9.95 they did what they have been doing all along stealing copyrighted works.<br /><br />Consumers now just need to bend over and smile because I hope the RIAA doubles their efforts. Apparently the only thing dumb lemming consumers understand are lawsuits.<br /><br />Congratulations.<br /><br />Robert

[crue24]

Won't work...

I wouldn't call this a failure, but I don't think the "good semaritan" model will actually work. I'm sure plenty of people didn't pay because they only downloaded it because it was free. I think it was a cool experiment though.<br /><br />Realistically though, I think the direct model could definitely work to everyone's benefit. The artist charges a reasonable price, $5-10 for an album, and distributes it DRM free over the web. Releases a few songs for free now and then. Has 30 second clips you can listen to, (ala iTunes), allowing people to try before they buy.<br /><br />Donations are not going to cut it, the bands are going to take on lots of expenses by eliminating the labels and they aren't exactly releasign albums every month. But if the price to purchase is reasonable, I think there would be much less piracy, without having to use annoying DRM.

[hawkeyeaz1]

Stop the presses!

The fact that one song (that was hard to get to) didn't raise millions of dollars isn't proof of anything!<br /><br />Firstly, there are people who just like the song, but would never buy.<br /><br />Secondly, the song isn't exactly a top 10 hit in the world.<br /><br />Thirdly, it DID get them exposure, which may very well pay off down the road.<br /><br />Fourthly, not every band makes it all that well with the current (broken) model.<br /><br />Fifthly, the direct marketing makes the artists more than the overcharging through 'normal' means.<br /><br />So no accurate conclusion can be drawn from this one instance so early on.<br /><br />Calling consumers cheapskates with so little proof is a cheap shot.

[pfisher2000]

I wanted to be good

I think the findings are probably misleading. <br /><br />Honestly, I would have given more than I did (the minimum) but the web site was a bit too quirky for me and my computer, I guess. I could not get it to allow a value other than that. There was a 3d-party currency exchange rate involved and I found it all frustrating.<br /><br />On the other side of this, I did appreciate the site 's minimalist, off-beat design.

[R. U. Sirius]

Freeloaders?

So I read your article without paying. Does that make me a freeloader too? Oh but you'll say your material is paid for, which is true, via advertising. <br /><br />Face it Coop, the old models are dead. The people who didn't pay should not be called freeloaders. They are listeners, and are participating in a sponsored program. Everyone who went to that site could have been presented with advertising of some sort. In fact Radiohead could argue that it's funding its own advertising, and that it is the vehicle for bringing in the direct revenue they are making from everyone who is buying the mp3's, or more importantly, buying the value added products such as the physical CD's or other collectibles Radiohead chooses to sell. <br /><br />It will be up to Radiohead, not the media nor the RIAA, to determine whether this model is profitable. And there's the rub, the middleman has lost control, and the new model allows the artist to connect directly with their fan base. By doing what they are doing, Radiohead are building a database of contacts for people who are fans, and it gives them the ability to communicate directly to their audience, to do special announcements, special releases, and not have to rely on the media machine.

[Len Bullard]

We Still Don't Get It

The industry still doesn't get it and most of the commenters don't either.<br /><br />*WHEN A MEDIUM IS TO CHEAP TO SELL, YOU REPACKAGE IT INTO A HIGHER FORM MEDIUM*.<br /><br />IOW: money can be made but not by the bands unless they are willing to be more skilled than just musicians, or sign up to companies that can add the rest of the oomph for the new media (note: that is plural).<br /><br />1. The money is content is not only made in the initial sale, but in the rehosting (eg, from vinyl to CD). To make that work, one MUST own the copyright.<br /><br />2. Presentation is more than sound. The generation of 'music only' presentation died with MTV. IPods briefly revived it.<br /><br />3. Next generation albums are combinations of virtual reality/virtual world technology, sound and live feeds using the 3D sound engines. They are more like games but not really games. They are 'five acres and a mule' systems. SL isn't the future. ActiveWorlds was but it is past and SL is passing.<br /><br />4. We are already obsolete. The stars of the VR generation of music are 13 and 14 years old today.<br /><br />Get ready to move over and let 'em by.

[daneh6366]

DUH

Stephen King tried thia approach years ago with his novel The Plant. He found the same thing; most people just didn't pay. Doesn't say much for the integrity of most people now does it?