Radiohead Lets Fans Set CD Price; Most Say $0

Nov. 6, 2007 — -- Last month, Radiohead announced it would let fans set the price for its new album, available for download on the British alt-rock band's official Web site.

Now, the statistics are in and it looks like offering fans free downloads turns them into freeloaders.

More than six out of 10 fans worldwide — 62 percent — who downloaded "In Rainbows" between Oct. 10 and Oct. 29 paid nothing for it, according to digital research firm ComScore Inc. The 38 percent who did cough up cash paid an average of $6 each. A total of 1.2 million people downloaded the album.

Though the majority of downloaders didn't pay a dime, Billboard senior editor Jonathan Cohen stressed that Radiohead's experiment wasn't a wash. Though the band hasn't revealed how much it's made off downloads of "In Rainbows" thus far, Billboard estimated Radiohead could eventually rake in between $3.2 million to $4.7 million, based on sales of its past albums and digital sales of John Mayer's "Continuum," the most downloaded album of last year.

But those estimates were based on Billboard's pre-release assumption that the average sales price would be $5, an apparently generous assumption. ComScore's initial figures put the average price at a paltry $2.28, according to ABCNEWS.com calculations, for a grand total of $2.736 million in sales. That's not bad, but it's a far cry from the nearly $12 million in sales the band may have seen from selling its album at the regular album price on iTunes.

So was that name-your-price idea a total bust? Maybe not. Because Radiohead made the album available online, the band does not have to pay any of its sales earnings to a record label.

"We estimated that $2.50 or $3.00 per album would've been their royalty rate [had Radiohead put out their album through a label.] Most of the purchase price of an album is money that is recouped by the label for what they spent on promotion, studio costs and administrative costs," Cohen said, adding that since they don't have a contract, Radiohead gets to keep almost all of the revenue generated by the digital sales of "In Rainbows."

Beyond that, Radiohead raised its profile by doing something completely out of the hard-edged, translucent CD box.

"There's no way you could consider this a failure because of the amount of attention it generated," Cohen said. "I think for them it was more about trying something different. And from that perspective it was a home run times 10."

Radiohead also offers fans the option of buying the "In Rainbows" Discbox, which includes a vinyl album, bonus CD and other trinkets at a set price of approximately $80. ComScore senior analyst Andrew Lipsman pointed out that a few Discbox sales could make up for many free album downloads.

"For every $1 spent on a downloaded album, $2 were spent on Discbox sales," Lipsman said. "At $80 for the Discbox, even if not as many people purchase it, that can still drive a lot of revenue."

Only Music Industry Cows Can Offer Milk for Free

Fans who pay for their tunes — as opposed to the many who download pirated music through file-sharing programs — know it's rare to purchase a new album for $6. New releases at brick-and-mortar stores like Wal-Mart, Target and Borders can cost about $15. Downloading an album at Apple's iTunes store is somewhat cheaper, but not by much: iTunes typically charges $9.99.

So does Radiohead's venture spell doom for album retailers real and virtual? Most likely not. According to Nielsen Soundscan, 89 percent of total album sales in the United States are still made in stores — 229.8 million for the first half of 2007.

Plus, Radiohead was able to let fans set the price of "In Rainbows" because it ended its contract with record label EMI last year. The 16-year-old band also had the advantage of a devoted fan base and publicity surrounding its unconventional album release.

And Radiohead hasn't abandoned traditional modes of CD sales. In October, it signed a record deal with British indie label XL Recordings for the physical release of "In Rainbows" outside of North America. It's expected to cement a similar agreement to cover the United States.

"Only a group of this magnitude can get away with picking and choosing who they're going to work with," Cohen said. "Can every band do this? No, absolutely not. And a lot of smaller bands that think that this is the solution to their problems are very mistaken. If nobody knows about you, why would they get your record?"