It's Rishi

One of the hot news bits of the day was that the mega popular rock band Radiohead shocked the music world by announcing that not only will they not distribute their upcoming album, “In Rainbow”, via a record label (this fact had been known for some time), but also they will make the album available only on their own website for the shockingly low price of….free! Well, “free” doesn’t really capture the spirit of what Radiohead is trying to do. Instead of assigning a fixed price to the music download, they tell the customer that the price is “up to you”. The customer decides the price, no strings attached.

This marketing & distribution strategy that Radiohead can best be described with two words: brilliant and revolutionary.

Some points to consider:

1) The majority of consumers who were planning on getting a pirated copy of the album were never going to buy the album. Piraters are going to pirate…that’s just a fact. You can take measures to curb it but they’re generally ineffective. So, instead of trying to damn these people, people who want to listen to your music, instead why not embrace them. Give these people access to a free, high-quality download and hope that they will become concert-going, album-buying fans in the future.

2) Radiohead creates an incredible amount of good karma with their fans and, really, the music community as a whole. They’re basically saying to the world: “we create music for the sake of creating music and we want it to be enjoyed by as many people as possible.” There are people who truly can’t afford to spend the money for an album and others – each one a potential Radiohead fan – who may never become familiar with Radiohead’s music because they were not compelled to spend money to acquire it. By removing the cost barrier, these people can now listen to the album. Some will hate it, others will love it. Some will eventually pay full market price, others won’t pay a cent. Either way, the net effect for Radiohead is their music will capture some ears and some wallets from a new segment of music listeners.

2) Radiohead is essentially saying that they’re so confident that their album is great, their confident that music listeners will hear the music and feel compelled to compensate the band for the great product.

3) Radiohead will receive a tremendous amount of free PR for their new album from news organizations around the world. Again, the PR isn’t going to affect those people who were already awaiting the new album. Instead, the PR will pique the curiosity of millions of non-Radiohead-listeners.

The upshot of the prior 3 points is that more listeners = more fans = more concert ticket and memorabilia sales = more $ for Radiohead.

4) No record label = no revenue split. No iTunes = no revenue split. By making the album available only via their website, 100% of album revenue will go to Radiohead. (Actually that’s not entirely true..Radiohead will be selling a standard CD in record stores next year but you can almost bet that the vast majorify of people who buy the CD will be those people who had already downloaded – and loved – the digital version). For each CD sale, even a top name like Radiohead will only earn a small fraction of the selling price after everyone else in the supply chain has reaped their cut.

If Radiohead is successful with this expirement, what does this mean for the future of music?

1) This could be the final nail in the coffin for the record label industry. The Time article mentions the following:

“This feels like yet another death knell,” emailed an A&R executive at a major European label. “If the best band in the world doesn’t want a part of us, I’m not sure what’s left for this business.”

Couldn’t have said it better myself. What is left? It’s becoming increasingly clear that artists can promote themselves and their music independently from labels and, if this experiment proves successful, can even distribute and sell their music independently. Even iTunes will need to re-think their strategy. The role of the radio station music dj/director and the corner record store as marketing vehicles is dying rapidly as every iPod is sold and digital music track downloaded.

One question that has has been mentioned in many news articles is that if Radiohead, a top band, is allowing consumers to get their music for free, then how can lesser known, or more specifically the upstart, band compete? I would argue that it’s not as . Most fans who seek out new bands do so not because they can’t access (don’t want to pay for) music from more popular groups. Fans generally do so because they have already exhausted music from popular bands and are in search of something fresh and different. In this likely scenario, the upstart band will not be directly competing with well-known bands for consumer dolllars.

I’ll be eagerly following this story. Hopefully Radiohead will make an effort to be transparent about the various sales/revenue numbers for the new album. No matter what happens though, it is a real possibility that in a decade we will look back on this move by Radiohead as the crack that broke the dam in the record industry.