The internet has been great for millionaire music performers and amateurs – it’s everyone else in between who gets screwed. Now we have Radiohead’s publisher Warner Chappell helping confirm the trend. The publisher’s head of business affairs Jane Dyball has divulged some information on the band’s “name your own price” offer last year.

Radiohead offered fans the chance to pay for a low-bitrate version of its new album In Rainbows, an album that was made available in various physical formats on indie label XL Recordings a few weeks later. Since the credit card processing fee could be set at zero, fans could preview and keep the album for free, while true mugs fans could pay twice: once for the preview, and again for the CD.

Not surprisingly, the avalanche of publicity for this brave move gave In Rainbows a huge boost – reversing a decade of dwindling sales for the band. Dyson said this week that Radiohead had sold 3.25 million copies, more than half of which (1.75 million) were physical CDs. 100,000 diehards paid £40 for the box set. This exceeds sales of 2001′s Kid A and Amnesiac and 2004′s Hail To The Thief. Only the band’s The Bends, a US hit in the early 90s, and the worldwide bestseller OK Computer did better.

There were other benefits to this go-it-alone strategy: since physical sales were handled by the Beggars Group’s XL label, an independent, Radiohead kept more of the revenue. The band didn’t have to pay overseas rates for revenue on digital downloads from their site, and cut out the retailer for those box sets, which were sold by Radiohead’s Waste Management operation. Dyball said the band saw more revenue from the “name your own price” digital download than it had from its final album with EMI. So the gimmick proved to be a resounding success for the band and their publisher.

But before musicians cheer too loudly, such success came at the expense of a hard-fought principle. The experiment was only possible because collective bargaining societies bent the rules to make it happen, bringing their own existence into question.

Let’s see why. (more…)

Radiohead’s Thom Yorke says the band won’t be repeating the band’s digital deal which allowed users to download a version of its most recent album for free.

“I don’t think it would have the same significance now anyway, if we chose to give something away again,” he said, describing it as a “one-off response to a particular situation”.

That’s despite the gimmick paying off handsomely – both in promotional terms, and financially. Radiohead have done better out of this deal than many pundits suppose – and I’ll explain why in a moment. So why not do it again?

The short answer: the job’s done, and they don’t need to. Don’t be fooled by the guilt-ridden, right-on rhetoric: this is a group of canny businessmen with offshore bank accounts. And so they make hard-headed calculations, as canny businessmen should.

A crisis in the Strategy Boutique

Radiohead’s commercial goal was to recapture some of the huge worldwide audience that followed OK Computer a decade ago. It took almost four years to release new material. The back-to-back follows-ups, Kid A and Amnesiac, were self-consciously experimental.

In the meantime, Radiohead-influenced bands such as Muse and Arcade Fire had captured a slice of their former audience, the epic rock seekers. Competing with these arriviste pomp-rockers was risky, as the bumpy 2004 release Hail To The Thief made clear. So a more accessible direction was a natural course for Radiohead to take.

But back in Oxford, there was a big problem.

Radiohead had an upbeat title and the sunny, warmer graphics concept all set. The trouble was, there just wasn’t a lot in the creative larder: all the band had was a few familiar riffs and mannerisms. These were more appealing on the surface than the Warp-influenced albums of 2001, but there wasn’t very much you could hum. Or at least, you couldn’t hum it without sounding like a faulty air conditioning unit.

In addition, Radiohead’s refusal to deal with a strong outside personality – they’d been friends since school – ruled out the option of involving someone who could develop some of these odds and ends into another Karma Police – a Phil Spector type. So what they had, simply had to do.

Bring on the ‘tards

The band had an ace up its sleeve, however. That huge former fanbase still viewed the fading memory of Radiohead with affection, and they’d been patiently waiting for three years since the last new material (excluding solo stuff). This was enough to create an instant buzz – and the band bet that enough of these fans were so dedicated as to pay twice: once for the “preview”, and once for the physical release.

But it was the Music Freetards who catapulted Radiohead from the Culture pages in the papers into the Business Section, and even the front page. After a decade of digital music shenanigans, hacks were still asking the question, “What’s the new Business Model?” To which the anti-copyright crowd replied: “give stuff away for free!” For hacks who can look no further than bloggers for their ideas, this was the cue they needed.

(Here are some field recordings samples of Music Freetards captured in their natural habitat, and doing what they love doing best – bullying and whinging.)

Radiohead made a low-bitrate version available several weeks ahead of the physical release of In Rainbows. The management even waived the credit card charge – and you could get the album, in its entirety, for free.

Such was the buzz around Radiohead’s approach to market that few people noticed that it really wasn’t very inspired. No one seemed to mind very much. Contractually free of their deal with EMI, the band signed with Beggars Group indie label XL Recordings to release the physical version – which went on to top the charts in the UK and the USA. Many fans paid twice for the same recording – and some of these are fans who’ll complain about the music business’ practice of getting us to pay for the same record twice as one format supersedes another.

How the honesty box worked

Despite investing £20,000 in new servers to cope with the demand for the digital preview, Radiohead benefited from the “honesty box” release in several ways. There’s the one I’ve mentioned: the bet that people would pay twice – once for the preview, and again for the physical release.

There was an instant cash-flow dividend, too. There was no waiting around for a royalty statement from the Accounting Department of the Mega Label. And best of all, the renewed interest from overseas – particularly the United States – gave the band far higher royalties than they’d gain from a physical release with a major label.

So although fewer fans put less money into the honesty box than many people claimed, it didn’t really matter. Enough had done so to recoup the one-off costs – and the album was available as a sampler for weeks.

But one-offs, by definition, are not to be repeated. Neither Trent Reznor nor Coldplay have generated anything quite like the publicity that In Rainbows digital preview enjoyed.

Without the Freetards, the publicity coup could never have happened. Even the most inventive major label marketing genius with the biggest budget would have struggled to get such an indifferent “product” to the top of the charts on both sides of the Atlantic.

And the real money, you’ll note, is in the CD, and getting fans to pay twice. Which looks a lot like the Old Business Model to me.

Radiohead last month let punters “set the price” for the digital download of their new album It’s Raining In Rainbows, which is coming out on CD shortly. Since people could download it for free – how much did they really pay?

Estimates to date have relied on self-selecting opinion poll data. This one, ComScore reminds us, is very different [see Update, below]. ComScore based its survey on software monitoring user’s behaviour (with their consent) – making it much more accurate than earlier polls.

In this survey, almost two-thirds of downloaders paid nothing for the album, and only 38 per cent made a contribution at all. However, the results show up an interesting quirk.

Overall, the band grossed about a quid per download, reckons ComScore. People who paid contributed an average of $6.00 (£2.89) – but once freeloaders were included, that falls to just $2.26, or £1.09 per album. Either way, you can’t build much of a business off a quid an album – that much we already knew (although digital utopians spend much of the time in denial about this).

Now here’s the quirk.

From the US, the average contribution was $8.05, but outside the US it was $4.64. That’s quite a disparity.

Since Radiohead made the download legally available for free, and since a consumer acts rationally to find the lowest price possible, one can surmise that US Radiohead fans are 73 per cent more irrational than Radiohead fans outside the United States.

The takeaway point from this will trouble anyone selling sound recordings, whether they’re a basement indie or an established label – it’s the fact that a top band with a worldwide fanbase which has been waiting four years for a new release, can only expect a quid from each LP in a voluntary model.

Comscore quotes independent A&R man Mike Laskow of Taxi:

“Radiohead has been bankrolled by their former label for the last 15 years. They’ve built a fanbase in the millions with their label, and now they’re able to cash in on that fan base with none of the income or profit going to the label this time around.”

(That’s not strictly true – Radiohead actually are releasing a physical CD of the album using an old school record company, and the low bitrate MP3 preview is just a marketing gimmick.)

“At some point in the not too distant future, the music industry will run out of artists who have had major label support in helping them build a huge fan base. The question is: how will new artists be able to use this model in the future if they haven’t built a fanbase in the millions in the years leading up to the release of their album under the pay what you’d like model?”

The instant response is that you use the internet to scale up to millions. But like so many utopian answers, the case for that at best is “not proven”.

We’ll know the answer once an artist has been able to build up and sustain a worldwide fanbase in the millions over the course of a few years – without major label support, and purely from sales of digital music. But we might be waiting for that for a very long time.

Clever bands who want a worldwide audience jump onto a major label. Now you know why. ®

ComScore writes:

“Our study was not based on a poll at all, but rather on the actual observed behavior of our panel of Internet users. In other words, we saw exactly what they paid for the album so there is no potential for survey response bias. Our total worldwide panel has 2 million consumers, and we observed a few hundred transactions at the Radiohead site. Based on the size of the sample, the margin of error would be pretty small.”