Silicon Insider: The Radiohead Revolution

To my mind that is a pretty unethical attitude. But I also am realistic enough to realize that history is now flowing that way and the task now is to manage the situation, not try to reverse the tide. And, frankly, the record (and the rest of the entertainment) industry brought this on itself. It's been four years now -- a consumer generation -- since this column and others warned the music industry that the two stupidest things it could do were: one ignore the imperatives arising from the new technologies in recording, distribution and storage; and two criminalize their own customers (i.e. the legions of college downloaders). The music industry didn't listen -- and instead of co-opting Napster, blew it up and filled the world with even more clever imitators.

Then Steve Jobs, with iTunes, gave the industry one last chance to rethink its business model -- and it refused. Now, it is harvesting the results.

You can be sure that the Radiohead announcement is the beginning of a tidal wave. Everyone is watching what happens.

If the band pulls this off successfully, you will see a whole bunch of other bands deciding not to renegotiate their record deals, or trying to break the ones they are already in. But even assuming the worst-case scenario, that all of those millions of Radiohead fans decide to take In Rainbows for free, it's still hard to imagine how the band loses. After all, it produced the album without a contract, using its own studio outside Oxford, so it hasn't had to pay exorbitant recording fees. True fans will still shell out the forty bucks or more for the boxed set. Legions of listeners, having enjoyed their easy access to the new album, will sell out Radiohead's shows (if Yorke even decides to tour), and the band will sell millions more in merchandise. And that's if nobody actually puts money in the In Rainbow tip jar.

And you know that's not going to happen. I'll even bet that, not having to pay overhead to the record company, Radiohead makes more money this way than if it had gone the traditional route -- and I mean just from the album, not the millions that will accrue from the merchandising and everything else. Meanwhile, for bands that really like to tour, there's no reason -- with CD sales down 15 percent in the US just this year, while arena show revenues are up 11 percent -- not to treat their albums are loss-leaders, as marketing tools to put butts into seats at live shows.

As for the record companies: tough luck. They had their chance. The smart ones now, while they still have some value, should tear themselves apart and start over. They should take a cue from the technology industry and become strictly venture capitalists, investing in new bands, take a piece of the action, marshall expertise to help the new acts grow successfully, then cash out by taking the band 'public' and move on. Meanwhile, bands are going to have to recognize, like Radiohead, that even though they are creating art they also need to attend to business – and that presents a huge opportunity to marketing and branding experts in helping them do so.

Will the Radiohead Revolution work? Of course it will, though there are a lot of bumps in the road ahead. And will the Entitlement Generation actually pony up when they can get the goods for free? Well, at the Malone household, I can say that our Gen Y'er has decided that In Raindows is worth twenty bucks.

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