Radiohead's digital distribution experiment

For all the hype around Radiohead’s decision to release its 2007 album In Rainbows as a pay-what-you-want digital download, the experiment wasn’t all that groundbreaking, and ultimately amounted to nothing more than a big publicity stunt.

The band’s last album with record label EMI was 2003’s Hail to the Thief. Although it was offered multimillion-dollar contracts with other major labels, Radiohead decided to stay independent. The decision to distribute its next album digitally was intended to subvert the music industry’s promotion and marketing machine. In numerous interviews, including one conducted by David Byrne for Wired, Radiohead frontman Thom Yorke explained that the plan was to let fans preview the new album themselves, instead of the songs being filtered through journalists.

Radiohead’s managers, Bryce Edge and Chris Hufford, suggested the band could take this a step further by letting fans determine how much they were willing to pay for the album. So In Rainbows was released to the public on October 10 in the form of MP3 files, and people paid what they thought the download privilege was worth.

About a million copies of the album were downloaded in the first month it was available. According to comScore Inc., which reports Internet traffic statistics, about 40 percent of those downloads were paid for, resulting in an average price per download of US$2.26. Compared to what Radiohead would have been paid by a record label—at a generous royalty rate of 15 percent—the band made more on its own. Radiohead isn’t confirming any numbers, but the band had likely made in excess of US$3 million by the time the download offer ended on December 10.

However, by asking people to pay even a small amount you give them basic consumer rights. So when fans realized that the files they had paid for and downloaded were low quality, many felt they had been cheated. The MP3 files that were released were encoded at a bit rate of 128 kilobits per second. If you were to convert a CD without losing any sound quality, your files would be at a bit rate of 320 kilobits per second. If the download had been a free preview, which was the original plan, nobody would have complained, but some fans spent up to $200 as a show of support for Radiohead, only to find that the quality of their digital download was substandard.

Radiohead’s announcement that In Rainbows would be released on CD by independent label ATO on January 1 rubbed salt in the wound. It’s now being sold everywhere.

Hufford told the New York Times in December that he and Edge suggested that the band release only the digital album and a deluxe collector’s edition that would include an In Rainbows CD, a bonus CD, a vinyl version of the album, and limited-edition artwork. But the band overruled them and chose to release a stand-alone CD as well, believing that there would be a demand for it. Nielsen SoundScan reported that in the first week it was available, 122,000 copies of the CD version of In Rainbows were sold in North America.

Artists using the Internet to distribute their music isn’t a new thing. Toronto’s Jane Siberry, who now performs as Issa, moved the sales for her personal label, Sheeba, on-line in 1996, and adopted self-determined pricing for digital downloads in 2005. Last year, Canadian indie band Stars released In Our Bedroom After the War to digital retailers a full two months before the CD was released in stores.

Vancouver’s Nettwerk Records advocated the use of digital technology as a distribution enabler before anyone else, and music released by Nettwerk is open-source (there are no restrictions on the use or sharing of the music), in order to “encourage fans to share it with others and promote our Artists”, according to the company Web site. On his blog, cofounder and CEO Terry McBride writes that Nettwerk is in part a branding company where the artists are the brand. Fans of the artists, he suggests, are the promotion, marketing, and sales team.

Other forms of digitally distributing music include subscription models such as Rhapsody and advertising models like Spiral Frog. The most intriguing model, though, is demand-based pricing, like that used by Amie Street. When songs are first made available, they are free. The more popular a song becomes, as measured by the number of times it’s downloaded, the higher its price (to a maximum of 98 cents US).

This model seems best for emerging artists, and rewards early-adopting fans. Listeners can take a chance on something new without risking anything. As well, for recommending songs to the community, they receive credit that they can use to purchase music. The artists who are making music that people want to hear then benefit as their popularity grows. This system should really help the cream rise to the top.

In the Wired interview, Yorke explains that the download experiment worked because Radiohead has a strong fan base, which isn’t the case for all artists. Yorke’s note of caution to emerging artists was that if they are looking to sign a deal with a label, they shouldn’t give away their digital rights. Artists who do get no share of digital-download revenues, and everything points to that being the most important channel in the future.

[originally published in the Georgia Straight]