Getting Millions Of People Listening To Your Music, With Many Giving You Money Voluntarily, Is Dumb?

from the please-explain dept

Tue, Dec 18th 2007 5:21am — Mike Masnick

Karl writes in to point out that on Fortune/CNN's somewhat bizarre list of 101 Dumbest Moments in Business, number 59 is about Radiohead's decision to offer a name-your-own-price offering for its downloaded music. As CNN notes, "Can't wait for the follow-up album, 'In Debt." Ha ha. It then quotes the disputed Comscore numbers, suggesting that since only 38% of downloaders agreed to pay anything for the album, this is somehow a dumb move. I would argue that the only thing "dumb" here is the inclusion of this move on the list. CNN seems to think that Radiohead expected everyone to pay for the album, when even the band has clearly stated that this was a promotional move. Is CNN "dumb" for putting this article online for free? Of course not -- because they make money through other means, such as advertising. In the same way, Radiohead did quite well even if people downloaded the album for free. After all, even if the Comscore numbers are accurate, Radiohead still pulled in millions, distributed millions of tracks to fans all over the world with no promotional budget, got its name and its music talked about around the globe and found at the top of popular playlists everywhere, and got a tremendous amount of free advertising for its upcoming tour and CD box sets. Can you name a single band in the world that would turn that down? Hell, can you name a single Fortune/CNN editor who would turn that down if he were in Radiohead's shoes? Not unless he was pretty dumb. In fact, if Radiohead did anything dumb it was shutting off the download site.

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Filed Under: business, dumb, economics, free, radiohead
Companies: cnn

39 Comments

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Adam Singer (profile), 18 Dec 2007 @ 6:11am

Traditional reporter, can't think outside the box.
Hey Mike,

This is the perfect example of an old media reporter who is not up to date on how business and the world works.

Continued education to stay relevant in the media industry is almost certainly something required - and the good journalists do just that.

Unfortunately many think they already know everything and see no need to get up to speed on business.
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I like Mike, 18 Dec 2007 @ 6:17am

Bad Economic Analysis
CNN's analysis makes a number of bad assumptions and draws spurious conclusions.
1. Assumes the 38% number is accurate
2. Assumes every non-paying download represents a lost sale
3. Does not factor in the value of the viral publicity
4. Does not consider the cost/revenue/profit aspect of the business model
5. Does not factor the value increased air-time the band received
6. Does not estimate the affect on ticket sales
7. Does not estimate the affect of later CD box set sales

I wonder if the RIAA helped author this article?
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Cynic, 18 Dec 2007 @ 6:17am

Possible PR move by the RIAA
I wouldn't be surprised if this was a ninja PR move by the RIAA to discourage other bands from doing this since it was clearly enormously profitable.

It's not as crazy as it sounds. After all, before DeBeers' diamond PR campaign of 50 or so years ago is something of a legend....to those who are aware there was one. Before that, nobody gave a crap about diamonds.
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Gunnar, 18 Dec 2007 @ 6:19am

It looks like a lazy list, with more focus on a "witty" headline than any information or insight. It would help their case if they were either funny or right.
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PaulT (profile), 18 Dec 2007 @ 6:41am

Wow, even the 'witty' "In Debt" remark is incredibly dumb. Even by the most conservative estimates, Radiohead made a decent amount of cash with this move, even before you factor in the upcoming CD and ticket sales.

The lowest realistic figures I've seen are about 6 million downloads for a $3 average fee = $18 million, but I'm not sure if the average includes the freeloaders, so it might be as low as $5-6 million gross. Now, even with the considerable bandwidth costs, production costs of the album and fees paid to marketing guys, there's no doubt that there was a good-sized profit left over - possibly in the realm of either hundred of thousands or even millions of dollars. This goes straight to the band, with no middlemen taking a cut. How many albums would need to be sold for Radiohead to get that kind of money from an RIAA label? A hell of a lot more, I'd guess. Not to mention the number of promotional appearances, video shoot, interviews, etc. the band would have to go through to get the same promotional value.

If this guy classes a dumb business move as being one where maximum profit is garnered with a minimum of effort, then he might be right. Otherwise, dumb journalism is all we're seeing here.
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Anonymous Coward, 18 Dec 2007 @ 6:44am

Mike is just upset, because the rest of the business community disagrees with his Anarcho-syndicalism views on entertainment.
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Ryan, 18 Dec 2007 @ 6:46am

Radiohead, those idiots.
*rolls eyes*

From personal experience, I can say that the free download thing works. Why? I had never listened to Radiohead, but when I heard about this, I hastened over to the website and downloaded a free copy. This was my opportunity to give the band a try risk free.

I didn't like a single song.

*delete*

How many people downloaded the album who would NEVER consider buying the new Radiohead because they didn't know about them or never took the time to try them? Thousands. This was virtually free publicity for them.
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Danny, 18 Dec 2007 @ 6:47am

I read that the other day...
and I find it odd that it's 101. I'll bet the Radiohead thing isn't the only mention on that list that was put in just to satisfy some interest or simply because someone came up with a witty headline for it.

Radiohead spent almost nothing in distribution since they sold downloads instead of bungling around with those little plastic cds meaning that even if that 38% is accurate most of that went straight to their pockets instead of the lion's share going to some record company. Translation: The RIAA is crying foul because a fairly well known act is trying to figure out a way to be successful without them.
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Michael, 18 Dec 2007 @ 6:57am

"Is CNN "dumb" for putting this article online for free? Of course not -- because they make money through other means, such as advertising." ...Such as advertising... Is there anything else?
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JustMatt, 18 Dec 2007 @ 6:57am

Re: The Anon RIAA Troll
To which specific business community are you referring? By any measure of the word I am very successful in my field and I wouldn't presume to speak for the rest of the business community. Unless you are Ted Turner, Bill Gates or The Donald I doubt very much you are speaking for the rest of the community.

Rock On Radiohead! More power to you!

Finally: Seriously dude(ette), stand up and be counted. We don't mind if you participate as long as you state your bias up front. Hiding behind A/C is just lame.
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known coward, 18 Dec 2007 @ 6:58am

maybe the author
. . . needs to be certified by the prof in yesterday's article.
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Wolfger, 18 Dec 2007 @ 7:11am

I'd like to be as dumb as Radiohead. I'm guessing that if the CNN reporter has a chance to compare his yearly salary against any band member's take on this album, he'd want to be that dumb too.
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Anonymous Coward, 18 Dec 2007 @ 7:23am

-Radiohead is a known brand.

-The free download stunt got them an enormous amount of free PR.

This will be more interesting when an unknown band does it and the NY Times/CNN/blogosphere doesn't shoot their collective wads over the innovation. If it makes money for THAT band, then there will be something to talk about.
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chris (profile), 18 Dec 2007 @ 7:38am

Re:
...Such as advertising... Is there anything else?

they're called video news releases where PR firms make phony news segments to promote something and pay news organizations like CNN and fox to run them. it's like an infomercial disguised as news.

PR types call it the video equivalent of a press release, while free media types call it deception. either way it's big money for news organizations.
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John Duncan Yoyo, 18 Dec 2007 @ 7:47am

Re:
Yep I'd bet a few quatloos that Radio head made better money with this release than they would have with a standard money grubbing record label deal.
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Eric Aitala (profile), 18 Dec 2007 @ 8:01am

Videos
Folks mentioned making videos and production costs... Radiohead managed to handle both pretty well. They made their own videos and it looks like they produced the album in their own studio...

See http://youtube.com/radiohead

EMA
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Chronno S. Trigger, 18 Dec 2007 @ 8:16am

Re:
Another AC who believes this will only work for big bands.

Hay everyone, list of your favorite indi bands.

My favorite is Shiny Toy Guns.

Did any one else see that Cartoon Network is #21? What they did wasn't as dumb as what Boston did.
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Anonymous Coward, 18 Dec 2007 @ 8:18am

Re: Re: The Anon RIAA Troll
Hiding behind the name JustMatt is lame too. You know why? Because there are millions of Matts' so you better list your high school gpa and social security number so you can be less lame.
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Kevin, 18 Dec 2007 @ 8:20am

It's really simple.
CNN is owned by Time Warner. What else does Time-Warner own? Lots of content companies like Warner Records, Warner Brothers, etc. This guy is just toeing the company line, he's probably been drinking the Lool-Aid for too long.
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Mathias, 18 Dec 2007 @ 8:25am

better than traditional...
it says: "Sixty-two percent, according to comScore, decide to pay nothing, while the other 38% voluntarily fork over an average of six bucks."

If I assume that they would have received $0.72/disc sold through traditional channels, hell, let's call it a dollar/disc.

38% paid and average of $6, and 62% paid nothing, then the average person paid $2.28 per download.

Of course, I'm sure there were expenses involved in making the download available so its not all profit. I think they did better than they would have, they've just cut out the draconian, money-grubbing middle man.

Talk about liars figuring...CNN is only slightly better than Fox News...
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JustMatt, 18 Dec 2007 @ 8:50am

To the A/C
Odd that you chose to ask for GPA and SSN when you know neither of those are relevant nor likely to be given.
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Greg, 18 Dec 2007 @ 9:17am

I'd actually be really interested in Radiohead, or Saul Williams for that matter, since he did basically the same thing, giving us some data on how their final take from the download-and-pay-what-you-want thing compares to a traditional CD/iTunes release.

I doubt those numbers will ever be published, but I'd love to see them. If they're good, it could drive other bands to try the same thing.
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Joe, 18 Dec 2007 @ 9:33am

I think Radio Head played it smart
My only irk with Radio heads way of paying was the extra surcharge used for credit cards. It was an extra $3-4 surcharge because I charged the songs to my credit card rather then using pay pal. I paid i think $6 plus the additional cost of my card which i felt rather ripped off by.

If that surcharge wasn't in there i think they might have actually sold more songs rather than the people taking it for free granted I'm sure a lot of the people who took the songs for free know the band less and by giving it away for free they will increase concert attendance.

Not to mention i'm sure by selling the song this way they keep a higher % of the profits rather than only getting pennies on the CD sales.
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Chuck Norris' Enemy (deceased), 18 Dec 2007 @ 10:00am

Re: I think Radio Head played it smart
I remember the fee at 0.45 GBP which is roughly a dollar. Did you use a debit card? I don't recall having to pay for each song, just the whole album. So that was a one time fee.
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Anonymous Coward, 18 Dec 2007 @ 10:04am

Re: I think Radio Head played it smart
Blame your credit card company...I work for a big financial institution....They get far more from every credit transaction than debit. We can't even use our debit cards in the cafeteria in my building, bet the food company loves that. That's why all the promotions you see require a transaction using a signature, not a pin.
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Mike (profile), 18 Dec 2007 @ 10:36am

Re:
This will be more interesting when an unknown band does it and the NY Times/CNN/blogosphere doesn't shoot their collective wads over the innovation. If it makes money for THAT band, then there will be something to talk about.

Plenty of unknown bands have taken similar paths to stardom. Not exactly the same, but using similar means. Here's a recent one:

http://www.nytimes.com/2007/12/18/nyregion/18singer.html?ref=music

And, yes, you can say that the NY Times wrote her up, but only after she became famous. The point isn't that every band needs to take the exact same path or use the exact same plan, but that there are now tons of ways to use the internet and free promotion to make a name for yourself and make money from other channels.
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Broke Musician, 18 Dec 2007 @ 10:36am

It only works for radiohead
As a musician myself, having been signed as well.. i can tell you this business model just does not work. It may have been a success for radiohead, but for the other tens of thousands of other bands that are not well known it simply doesnt work. Indie bands have tried this for years and they will ALL tell you that you make squat. The only way a band gets to the level of radiohead is with money, which none of the labels have anymore. You will never see a band get to that level again by giving things away for free, or giving them the option to pay for it. So all the anti-RIAA crowd out there waiving the flag of victory... its too bad you will be the ones to suffer in the end. The lack of good songs on the radio is not the radio's fault.. there are just no labels pushing good NEW bands anymore. Just recycling the old ones that they dont have to spend money to promote. Its a sad time for music.
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Get a real job..., 18 Dec 2007 @ 11:02am

Re: It only works for radiohead
you hippie!
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Anonymous Coward, 18 Dec 2007 @ 11:29am

Re: Re:
http://www.nytimes.com/2007/12/18/nyregion/18singer.html?ref=music

And, yes, you can say that the NY Times wrote her up, but only after she became famous. The point isn't that every band needs to take the exact same path or use the exact same plan, but that there are now tons of ways to use the internet and free promotion to make a name for yourself and make money from other channels.

I suppose you and I have different definitions of "Famous".

Anyone with under a million google hits on their name is not famous.

FWIW, what do you think Ingrid nets a year from her music?
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Mike (profile), 18 Dec 2007 @ 12:09pm

Re: It only works for radiohead
i can tell you this business model just does not work.

Yeah, why trust proof of many other bands making it work when you have a single anecdote of a failed musician?

but for the other tens of thousands of other bands that are not well known it simply doesnt work

No one is saying that the identical model that Radiohead works. Radiohead is in a special position, but plenty of others *have* used similar models to become successful. It's no guarantee of success, but what is?

Indie bands have tried this for years and they will ALL tell you that you make squat.

There are always going to be bands that don't make money. Just like there are always going to be restaurants that fail to make money. Just because most restaurants fail do we assume that there's no business model in being a restaurant?

You will never see a band get to that level again by giving things away for free, or giving them the option to pay for it.

Want to bet? So far, we've seen plenty of bands take this path to stardom and it's only going to grow.

its too bad you will be the ones to suffer in the end

How will they suffer? There's more music than ever before being produced. And it's available and easier to get than ever before. I'm confused how anyone is suffering. Other than those who think they need to sell bits of plastic.

Its a sad time for music.

Other than for all of those who have learned to use the internet to build up a fanbase. And other than for all the fans who have a lot more music. And other than for the existing bands that have embraced the internet to get more fans. Yeah. Except for all those people.
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farkus, 18 Dec 2007 @ 1:14pm

Radiohead taking off download?
I couldn't believe they took the download offline. They had a really good thing going and they ruined it! The should have kept going while they could.
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Anonymous Coward, 18 Dec 2007 @ 1:41pm

Re: Re: It only works for radiohead
Yeah, why trust proof of many other bands making it work when you have a single anecdote of a failed musician?

That's pretty much the strategy you use to persuade people that these strategies work.

Someone doubts you.
You toss out an anecdote.
You extrapolate proof from that story.
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Mike (profile), 18 Dec 2007 @ 2:53pm

Re: Re: Re: It only works for radiohead
That's pretty much the strategy you use to persuade people that these strategies work.

Not so. First of all, my responses are to people who insist that such things will never work. That's an absolute statement -- and to prove an absolute statement incorrect, you just need a single example to the contrary. So a single point is perfectly reasonable in such cases.

Second, I have always made it clear that no single model works for everyone, but that if you understand the economics, you can create myriad ways of succeeding. The examples I use help to illustrate that it is *possible,* not guaranteed.

Finally, wherever possible, I add in detailed research and data to back up my points.
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teknosapien, 18 Dec 2007 @ 3:09pm

Sounds like
The Grateful Dead philosophy has hit main stream music.
The dead practiced this for years they even set up a section in the sweet spot for recording. the only rule you cant sell it but you can trade/give it with who ever you want. maybe thats why they were the top grossing touring band for over 10 years.
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Boris Jacobsen, 18 Dec 2007 @ 5:31pm

Exceptions
Can you name a single band in the world that would turn that down?

Here's two for starters: Metallica and Kiss
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PaulT (profile), 19 Dec 2007 @ 12:31am

Re:
"This will be more interesting when an unknown band does it and the NY Times/CNN/blogosphere doesn't shoot their collective wads over the innovation. If it makes money for THAT band, then there will be something to talk about."

That band would be the Arctic Monkeys. Their first album was given away for free on MySpace before it was released. It became so popular that when it was released through a record label, it became the fastest-selling debut album of all time in the UK charts, and the second-fastest selling debut indie album in the US.

Face it, this is a new idea so it's going to be talked about. It'll happen again and again, not only with new artists but with the next Nine Inch Nails album, as well as other established artists who have expressed an interest in the same model (Oasis, Jamiroquai, The Charlatans). Whether or not it becomes a regular thing depends on the successes of the next few bands to try it, but like it or not, Radiohead are in profit right now.
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ST.Rage, 19 Dec 2007 @ 7:18am

Re: It only works for radiohead
How are we suffering? There is more music than ever, Bands are recording incredible stuff in home studios and doing a great job at producing it. As a musician myself this a GREAT time for music. Oh not signed either nor do I want to be, screw the RIAA. Plenty of bands will get to the same level as Radiohead.

wakeup
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whaTASURPRISE, 19 Dec 2007 @ 4:33pm

Re: Traditional reporter, can't think outside the
CNN is a Warner Company....they were bitch slapped by Radiohead and now Madonna, they are hemorrhaging relevance by the second...of course this was printed as a dumb move, what else could they do besides spout bs sour grapes?
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