Filed under: Analysis / Opinion, Multimedia, Odds and ends, iTunes
Fortune: Radiohead was dumb to ditch iTunes, make more money
As long as we're in 2007 review mode, let's review the saga of Radiohead's In Rainbows album (which is definitely one of my favorite albums of the year, by the way). First, they said no to iTunes to keep their album in one-piece, then they decided to "sell" it for free on their website (asking their fans to donate what they thought it was worth), and then they cleaned up.Then Fortune calls their decision the 58th dumbest of the year. Yes, the geniuses at Fortune believe that Radiohead screwed up, because they say that 68% of people who picked up the album paid nothing, and the rest of the listeners paid an average of six bucks. But of course, Fortune has got it backwards-- Radiohead, as we noted earlier in the year, would only have earned $1 per album going through the record companies, and so they were still able to rake in twice as much at their average of $2.26 per album download.
Dumb? For the record companies, maybe-- they made exactly nothing off of Radiohead's new album. But when you consider what the band made, this distribution method makes even iTunes look dated.
[Via Gruber]
Reader Comments (Page 1 of 3)
Cause said 10:16PM on 12-27-2007
Only one problem, they didn't have to go through a record company to sell on iTunes. They could act as their own label. At this point the $1 per album logic fails.
As for artistic rights to sell it only as a complete album, I call bull. If they allow radio stations to play singles from the album it just don't float. :-)
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punkassjim said 1:00AM on 12-28-2007
Dude. NO MIDDLE MAN. From artist to you, no one in the middle to take a cut. I mean, I guess there's a chance they could have made more money selling through iTunes, but it's debatable. I'll go ahead and side with them in an ideological sense, because the money was good, and the impact of the gesture was absolutely huge.
And playing singles on the radio is intended to sell albums. Not just to sell singles.
ZeroCorpse said 1:26AM on 12-28-2007
The point is that even if they weren't going through a record company, they would still have to give iTunes a cut. That means that they'd get far less per album sale (and far fewer sales, probably) than doing it the way the did it.
For the record, I don't really like them, and I didn't download it, paid or not. I imagine a lot of non-fans DID download it just because they could for free, and in that case you have to consider that they wouldn't have had that sale anyway.
This is the model to follow-- Artist to consumer. No distribution B.S. or middle man. No record company taking a cut "just because it's the way it's done." The old model was based on the idea that artists are treated like work-for-hire sharecroppers, and it existed because at the time of its creation, it was IMPOSSIBLE for artists to get their music to purchasers without a record company to do it for them.
These days, the record company REALLY IS an unnecessary part of the whole process, and they take money for doing essentially nothing. They exploit artists, and they have almost nothing to do with the creative art itself.
So I applaud Radiohead and Nine Inch Nails. This is the way to do it, and I hope more artists cut out the middle man and give us the chance to do it old-school-- Play your music and if I like it, I'll give you a tip. Bard-style.
Cause said 3:49AM on 12-28-2007
No middle man? You mean like ISP and web content producers, etc... Depending on providers and bandwidth allocated it can be costly or very slow :-D Being responsible for a site that transfers over 2GB a day through Akamai, I can tell you it's not cheap.
Cause said 3:54AM on 12-28-2007
On the other hand I think the move by the band was great for the waves it created. Hopefully more and more artists will step out from the shadow of the record companies. PS Who's got money to do a startup to manage the needs of the musicians (touring, promotions, websites, etc) on a flat fee basis, there's got to be money to be made :-)
Sten said 10:18PM on 12-27-2007
I'm not so sure about this.
I think it worked because it was a one of a kind thing, by a band that attracts a kind of audience that is not your average music buyer.
If the more mainstream singers and bands would try this out, I think 99,99% of the downloaders would not pay at all.
And we don't know how many songs Radiohead would have sold if this album was available thru the classic channels.
But that said, I'm all in favor of any method of taking away the power from record companies and giving it back to the musicians.
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Dylan said 10:36PM on 12-27-2007
Whatever... Radiohead is so far beyond any of our comprehension.
They've done more musically than most bands ever will.
... and I'm not even that big of a fan.
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Mathew said 10:38PM on 12-27-2007
And Fortune Magazine is owned by Time Warner which might have a motive for making Radiohead looking dumb. (I believe they own a record company or two).
Radiohead has already cleaned up on the album and will reap even more profits when it releases the physical CD.
That said, this model probably only works for established bands.
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dwash59 said 10:41PM on 12-27-2007
I would venture to say they did even better than the stats show. Many of the downloads came from people who would have otherwise gotten the album off of file sharing networks anyways. So really, the $2.26 figure is low. In fact, I would say some of the genius behind this distribution method was that it allowed the number of albums sold to be higher than what they could have achieved from album sales, which allows them to report higher numbers to venues and charge more for performances.
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Matt said 12:57AM on 12-28-2007
I think you hit nail on the head here and I'm surprised others aren't talking about the promotional value of this move. Most bands have their albums all over BT and other file sharing networks but have no way to measure how many people are listening to their music...and how many potential concert goers, t-shirt buyers, etc they have.
Upgray3dd said 10:46PM on 12-27-2007
They reportedly made $3 million in a month going this route. Not all groups have that type of juice but they catered to their fanbase and they were successful on their own terms. Congrats.
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Alex said 10:51PM on 12-27-2007
funny you wrote this on the day they actually used iTunes for distributing their video-podcast. For free, to be sure, and with videos one could already get at you tube and facebook, but still, speaking about 'dated'... it's just that radiohead understand pretty well that one size never fits all, and that what makes their albums great (for some) :)
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justin said 10:56PM on 12-27-2007
if the average price per album 'downloaded' was $3 then i'd almost call this a failure.
i'm not sure about you guys, but real 'hosting' and bandwidth does cost some money (as well as the multiple servers needed to do proper load balancing etc). yes i'm 99% sure they just outsourced it all but that does cost them money per download.
i'd be more interested to get real numbers (which we'll never get off radiohead i'm sure) as to how much _profit_ they made total and how much _profit_ per album they made.
the other reason this is being called something of a failure is that it likely didnt get proper distribution and mainstream channels where people go to look for music. i still dont understand why they couldnt also provide it on itunes on top of their download system, but whatever. they're already rich anyways.
if they keep releasing all their albums like they did with Rainbow, then we'll know if it really was worth it.
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JJ said 11:51PM on 12-27-2007
Justin,
I'm not sure if you are a radiohead fan, but I think you are missing the point.
Hilary Duff or Hannah Montana wouldn't do as well with this type of model. Their fans are buying an image. They need a picture to go along with the music.
So Radiohead doing this was a great idea, however I think that they should augment the physical disc with iTunes sales now that it's all out there.
Simon Arch said 1:41AM on 12-28-2007
"if the average price per album 'downloaded' was $3 then i'd almost call this a failure."
It's more than they'd have gotten per sale if they sold it on CD through a traditional record company.
Stephen Liu said 11:47PM on 12-27-2007
Seeing as they're technically their own label, they would have made more than $1 per album from iTunes. A lot more. Fortune's being slanted against iTunes, it seems.
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Greg said 12:00AM on 12-28-2007
Has anyone tallied the cost of bandwidth against the revenue of In Rainbows? I don't think it's fair to say that $2.26 per album is equal to $2.26 of profit to the artist.
I'm not knocking the band or the distro method, but I'd like to know if it actually worked in their favour.
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War Machine said 2:52AM on 12-28-2007
Even if they used a million dollars to pay for the servers and other related expenses in putting this album online (which is a very extreme figure), they still made at least 1.26 million on this album compared to the 1 million average from the others without the hassle of dealing with the record companies. Also, putting the album on iTunes would lessen the idea of the artist releasing the music directly to the people. They might've been able to get more if it had been through iTunes, but they don't make music for the money (I hope).
They made more money and the got more exposure than they would've gotten had they released the album the traditional way. How is this a dumb move?
James said 1:36AM on 12-28-2007
Guys... Radiohead did just fine. They did outsource the thing (to a t-shirt website I believe). So let's pretend they payed $100,000 to this company to host and run the site (which is astronomical... no way they actually payed that much). That means Radiohead still pocketed $2,900,000 *profit*.
I'd say in the future they only need to do something like set a bottom limit of $1 per album to cover costs.
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James said 1:36AM on 12-28-2007
Guys... Radiohead did just fine. They did outsource the thing (to a t-shirt website I believe). So let's pretend they payed $100,000 to this company to host and run the site (which is astronomical... no way they actually payed that much). That means Radiohead still pocketed $2,900,000 *profit*.
I'd say in the future they only need to do something like set a bottom limit of $1 per album to cover costs.
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