Radiohead’s Experiment: People Taking Advantage



It’s been one month since we all started buzzing about Radiohead’s latest experiment: a downloadable set-your-own-price release of their latest album. I’m sure many people saw this as the band’s vote of confidence in the genuine goodness of humanity—although I’m sure they realized that not everyone would be willing to pay when they could get it for free.

And it looks like both sides are right. A few weeks in, it looked as though the average price being paid was £8 (about $16). However, immediately after that report came a second—in reality, the price paid was more like £2.50 (about $5)—less than Radiohead would have received from their record company per album had they gone the traditional route.

And now comScore reports on the data—and unfortunately, it looks like the majority of downloaders have realized that, as comScore puts it, “free + download = freeload.”

The good news is that a lot of visitors to the In Rainbows album site did “convert” and download the album. However, it looks like less than 2 in 5 agreed to pay any amount for the download. Interestingly, the proportion of freeloaders was slightly lower in the US than outside it (60% versus 64%).

On average, those who paid, paid $6.00 per download—but taken with all the downloads, the average price paid per download drops to $2.26. In the US, the numbers were slightly better—$8.05 on average per paid download ($3.23 on average for all downloads) versus $4.64 on average per paid download outside the US ($1.68 on average for all downloads).

After the freeloaders, the post popular price point was $4 and under (with 17% of all downloads), followed by $8.01-12.00 (12%). The bulk of the proceeds, naturally, came from this last group.

comScore features a quote from one pleased customer that I find telling (emphasis mine):

“I am surprised by the number of freeloaders,” said Fred Wilson, managing partner of Union Square Ventures and well-known music aficionado. “The stories to date about the In Rainbows ‘pick your price’ download offer have been much more optimistic. I paid $5 U.S. and had no reluctance whatsoever to take out my card and pay. It’s a fantastic record, the best thing they’ve done in years. . . .”

Yeah, I have no reluctance whatsoever getting a “fantastic record” at 67-75% off the usual retail price of any other album, too. Wilson continues with the more salient point:

This shows pretty conclusively that the majority of music consumers feel that digital recorded music should be free and is not worth paying for. That’s a large group that can’t be ignored and its time to come up with new business models to serve the freeloader market.

Can you think of a business model to better serve (and exploit) the freeloader market? (If you can, perhaps you shouldn’t be sharing it here in the comments—go find some VCs or something!)

Please note that even if it’s true that bands make all their money on touring and not on CD sales, it’s immaterial here: Radiohead would have toured whether they released the album as a pay-what-you-like download or a traditional album. The comparison being made by comScore, CNET, et al. is how much they would have made under their old contract versus how much they’ve made now.

Trackbacks

  1. [...] but there are also others who are happy to contribute. The bottom line is that there’s a substantial segment after free goods, and this is enormous if someone can find a way to tap into [...]

  2. [...] “This shows pretty conclusively that the majority of music consumers feel that digital recorded music should be free and is not worth paying for. That’s a large group that can’t be ignored and its time to come up with new business models to serve the freeloader market.”  said Fred Wilson, managing partner of Union Square Ventures. [source] [...]