How much are people really paying for Radiohead?

As it turns out, not as much as Radiohead's evil record label used to. As The Register reports on the Open Season podcast, not only have Radiohead fans been misrepresenting how much they've been paying for the free In Rainbows, but even if we take their word for it, it's still not as much as Radiohead would make had the band stayed with EMI.

People told the survey that they paid 8 pounds ($16), but the numbers don't support this. People actually paid closer to 2.50 ($5). Radiohead normally make about 3 ($6) (after royalties and such) with their record label. As such, Radiohead is actually making less giving the songs away than they did with the greedy capitalist record label, EMI.

So, was Radiohead foolish to experiment with free distribution? Or is it the sort of model that only millionaire artists can afford to indulge? (And is there an open-source analog here?)

I'm not sure, but I really did pay $20 for my copy of In Rainbows, and it is well worth it.

Oh, and by the way, Capgemini did a report which found that iTunes and the unbundling of singles represents a far greater threat to the record labels in terms of revenues lost than peer-to-peer file sharing:

Capgemini calculates that of 480 million pounds lost to the (British music) industry since 2004, 368 million pounds was the result of format changes: principally the unbundling of the CD into an "a la carte" selection of digital songs. Of the remainder, 18 percent was lost to piracy.

We're experimenting with all sorts of new models in the realm of digital goods. I believe this is an absolute requirement. But perhaps we're not quite as efficient as we like to claim? Or maybe these are just the necessary teething moments on the way to a more productive, efficient distribution system for music, software and literature?

[pscoop]

Is it all about the cost?

First, Luis Villa did a more general analysis (in the sense that he used industry average figures in the absence of specific knowledge of Radioheads contracts) - http://tieguy.org/blog/2007/10/02/three-things-you-should-know-before-deciding-what-to-pay-for-the-new-radiohead-album/ although his site seems down atm. His figures suggest $2.30 as the floor price for what Radiohead would expect from a CD sale, so it would seem that they are doing at least as well as they did before. Also it will be interesting to know how the sales go over time and the total volume (it's ok if you make less per sale if you have more sales, right?).

But, just like open source, I don't think this is just about price - now the band and fans have a direct relationship, there is now a quicker more direct route from recording to distribution, instantaneous geographic sales figures, etc.

[Lacquedem]

Volume may compensate for profit

Even if the numbers are right (2.50 v. 3.00), we need an analysis of how the sales numbers have gone. Far more people will buy an album at $5 than at $20, so they may be making up the $1 with increased volume. I'd be amazed if that weren't true, though a market analysis like that has to be done by an expert, and IANAE.

[Lacquedem]

Sales v. profit

Surely there are far more consumers in the market for a $5 album than a $20 album, so one would think they could compensate for decreased profit per unit with an increase in volume, right? Anyone have market numbers for Radioheads sales adjusted to current trends? I certainly don't.