Silicon Insider: The Radiohead Revolution

Oct. 11, 2007 — -- Though an event like this had been predicted for months, the news last week that Radiohead would offer its new album, In Rainbows, for free over the Web still landed like a bombshell.

I hasten to add that the album isn't exactly free. What makes the situation even more interesting is that the band is essentially asking that its fans choose the amount they want to pay for the download -- thus, if you're a dirtbag, you can take it for free, and if you're a true fan you might want to send along the twenty bucks it would take to buy the equivalent CD. There's even a very expensive gift box you can order from the band's Web site if you really want to show your support not just for Radiohead, but the whole idea of breaking the backs of the record industry.

Other artists are now following suit, including Oasis, Jamiroquai, Nine Inch Nails and Will.i.am of the Black Eyed Peas (the last memorably announcing that "the new distributor is your niece." But it's the Radiohead announcement that has really gotten the attention -- and plunged daggers of fear into the hearts of record executives everywhere.

This is, after all, the biggest band in the world -- and, thanks to OK Computer topping almost every poll of the best albums of the last twenty years, also the most admired. Lead singer Thom Yorke has always been a renegade, but until now it's mostly been about politics. With this move, he and his bandmates may very well completely reconfigure the entire entertainment industry.

It only helps that In Rainbows is also getting some terrific reviews. Certainly the news of the album's release, four years in the making, was met with cheers in our house. Sixteen year-old Tad has been a huge fan ever since I brought home a copy of OK Computer when he was just a little kid (though, I suspect like most people, we listen to The Bends much more frequently). And when the news came out about the pricing scheme (he got it from Boing Boing, I got it from Drudge) we met in the hallway and cheered.

But I was curious if his reaction would be different from mine. As a Boomer, I was raised with the believe that nothing is really free, that the product of anyone's hard work -- including works of art -- has a value, and that taking these items without paying is tantamount to stealing. But Tad (and even more his little brother, I suspect) is a Gen Yer, a member of what is pejoratively being called "the Entitlement Generation". These are the kids protesting on college campuses over the fact that they can't download and share everything for free … the assumption being that if the creator cannot come up with another way besides charging the customer to monetize his product, then he deserves to be ripped off.

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.

TAD'S TAB -- At englishrussia.com, you can spend hours musing over the insanity, eccentricity, and sometimes brilliance of the Russian federation and their citizens. From men in horse-drawn carts at McDonald's to the many mysterious abandoned cities across the country, englishrussia is there "just because something cool happens daily on 1/6 of the Earths surface"

This work is the opinion of the columnist and in no way reflects the opinion of ABC News.

Michael S. Malone is one of the nation's best-known technology writers. He has covered Silicon Valley and high-tech for more than 25 years, beginning with the San Jose Mercury News, as the nation's first daily high-tech reporter. His articles and editorials have appeared in such publications as The Wall Street Journal, the Economist and Fortune, and for two years he was a columnist for The New York Times. He was editor of Forbes ASAP, the world's largest-circulation business-tech magazine, at the height of the dot-com boom. Malone is the author or co-author of a dozen books, notably the bestselling "Virtual Corporation." Malone has also hosted three public television interview series, and most recently co-produced the celebrated PBS miniseries on social entrepreneurs, "The New Heroes." He has been the ABCNEWS.com Silicon Insider columnist since 2000.