Pay what you want (and screw the music business)

Interesting piece on Radiohead by Jon Pareles in today's New York Times about the death of the music industry. So, as everybody knows, Radiohead decided to let the fans choose how much to pay for their new album "In Rainbows". Thus, when fans go to the Radiohead site, they get to determine the price of "In Rainbows." Fans can choose to pay nothing or $1 or $100. Everyone gets the same music, irrespective of what they choose to pay (or not pay).

So has it been an economic "success?

Yes. According to Pareles' myopic economic rationale, Radiohead have made money on the deal. Apparently, the average price paid for the album was $2.26 (in October 60% of downloaders paid nothing and the other 40% of mugs paid $6). And, given that bands normally only gets 15% of proceeds from a traditional studio album, Radiohead consider their "In Rainbows" strategy as a success:

Factoring in free downloads, ComScore said the average price per download was $2.26. But it did not specify a total number of downloads, saying only that a “significant percentage” of the 1.2 million people who visited the Radiohead Web site, inrainbows.com, in October downloaded the album. Under a typical recording contract, a band receives royalties of about 15 percent of an album’s wholesale price after expenses are recovered. Without middlemen, and with zero material costs for a download, $2.26 per album would work out to Radiohead’s advantage — not to mention the worldwide publicity

And no. After all, Radiohead is essentially screwing the music business. What they would call "disintermediation" is actually putting music business people out of work. Jon Pareles' "middlemen" are real people with real jobs and real families. However much Radiohead might hate the "exploitative" labels, it's hard to see the real benefit here for the music business. If Radiohead had a real social conscience, they would start their own label, employ their own "middlemen", and help build -- rather than destroy -- human infrastructure in a decimated industry.

When the history books get written on the death of the recorded music industry at the turn of the 21st century, Radiohead's "In Rainbow" will represent one more futile and counterproductive strategy in (re)building the economic value of musical content.

Comments

[brian t]

"However much Radiohead might hate the "exploitative" labels, it's hard to see the real benefit here for the music business."

Well, yes, and I think they'd agree. They're not making music for the music business, are they? Have a look for an article called "Courtney Love Does The Math", which is her inside view of the music business you think needs to be defended. The way they operate can be likened to a bank that gives you a mortgage, makes you pay it off, yet retains ownership of your house.

[Jonah]

I think raging against Radiohead is extremely short-sighted. The music industry has done plenty to screw itself already. Radiohead is simply delivering customers the music they want through a distribution channel that they clearly want (for more evidence, see iTunes' sales numbers).

As for lamenting the middlemen of the music industry, would you feel the same way for the middlemen of Typewriter companies? I'm sorry to see them lose their jobs, but should we all buy CDs (a format that is less desired and incresingly redundant) simply to keep the middlemen employed?

Radiohead should be lauded for taking the initiative in nuturing a new distribution channel and embracing the desires of their customers - don't forget they are also offering a CD and LP version of the album.

[Ben Fulton]

If they're going to do it as a charity, why don't they just give the money to the middlemen directly rather than pretend they're doing useful work?

[Peter L. Winkler]

"However much Radiohead might hate the "exploitative" labels, it's hard to see the real benefit here for the music business."

What is the music business, really? What does it mean? A lot of functionaries and dummy intermediaries whose real productivity was always questionable, especially executives whose only real talent is in getting cushy jobs and choosing to grant performers contracts to by extrapolating from past successes. Do they actualloy add any quality to the final product?

Should automobile manufacturers have given whip and buggy manufacturers an annuity?

"If Radiohead had a real social conscience, they would start their own label, employ their own "middlemen", and help build -- rather than destroy -- human infrastructure in a decimated industry.'

Why should they subsidize something that's no longer necessary? You've provided no reason for them to do so. Should the recording industry, from music companies through consumer electronics manufacturers subsidize the continued manufacture of analog cassettes, LPs and 8-track apes and the decks and turntables that play them? It would employ lots of people.

[Dan Blank]

Andrew: that is an interesting perspective. My initial reaction is to ask: is the goal in any industry to ensure it employees as many people as possible, changes as little as possible, and provides as much money as possible to entrenched powers-that-be?

I like your point that people often find joy in something that essentially means the loss of jobs and wealth to regular folks who love what they do. That really is a shame, and it is not often pointed out when people rail against a business like this.

But I am confused as to what you think the goal is. Is the focus on the music and the audience, or is the focus on ensuring existing business structures remain exactly as they are? It seems that you are arguing for the latter.

Personally, while I wish to see no one lose their job, I listen to music for the music itself, and perhaps secondarily for the artist and for other fans. I still buy vinyl and cds, and quite a bit of it, so I am not in a rush to see this go away.

Interesting concepts this early on a Monday.
Thanks - have a great day.
-Dan

[Jaap Stronks]

You can't keep the middlemen when they're not needed anymore in the retail chain, just because they're here now since they were needed in earlier days, out of a sense of social responsability. It just doesn't work that way. They are no longer needed to connect artists to their audiences. Which makes them free to pursue other careers, perhaps, as teachers, consultants, or whatever floats their boat. My point being: I think you're mixing means with purposes.

[Sebastian]

There are always real people with real families behind industries that change in a way that they employ less people, but that's the ultimate way capitalism works.
Industries go, industries come. This is sad for the people that are affected, but we live in capitalism, don't forget that.

This was definitely the lamest argument against the Radiohead-thing. Try at least to tell the world that it was not a commercial success or make something else up. Have you got friends in this industry? Or are you in this industry yourself?

[Eric Gauvin]

*Selling* music online makes a lot of sense, but selling *and offering for free* strikes people with common sense as very silly and as trying to seem altruistic. If this took off, I predict more and more people would shift to the free side and it wouldn't be viable.

Also, a big factor that was left out of their equation is that many freeloaders still got their free version from their regular free source. Why would they want to change their pattern of behavior and go to radiohead's difficult site?

[dubuc]

Radiohead's approach can only have a limited impact on the music business itself. Looks like Thom Yorke's gang launhcing of "in rainbows" is just a rich kids whim. They have an established reputation already. What other rock band could behave in the same way without being concerned by phone, grocey store, beer and booze bills? Those who really think of making a living from their music cannot cannot afford to give away their music for free. For a very simple reason: nobody knows them. They cannot count on massive downloads... Many of them put their works on platforms under creative commons... Hoping that the Long Tail effect will work for them... This apporach is as dumb as Metallica sueing P2P platforms in the early 2000...

[Captain Obvious]

Your sympathy for the middlemen betrays your olde elitism, Keen. The welfare queens at the record labels have feasted on our blood long enough and are no longer necessary. New and exciting recording artists like The Hollywood Undead and Tila Tequila don't need industry pencil-pushers to share their gifts: they've found their way to the top of Myspace's Top Artists page through real friendship, not industry snoots.

[Alex Beamish]

Um .. but where's the added value that the record label would have contributed to the deal? In this case, none. There was no marketing, no promotion. I imagine the band paid for all of the production costs. They don't need the record label for anything.

This comment is like kvetching that a farmer chose to sell his crops at a farmer's market (dastardly person!) rather than accepting whatever price the large supermarket chain deigned to give him.

And what about the fishermen who caught whales for whale oil, the mechanics who built steam engine locomotives, or the coopers no longer needed because the demand for oak barrels has dropped off? What about them?

The industry is changing, and the record labels need to accept the change and adapt, or they will become extinct. Simple.

If only Thomas Paine had done the decent thing and followed your advice, and instead of self-publishing "Common Sense," he had waited for large publishing houses to come into being so they would have been able to make money from his tract...

Intermediaries are only important when they add value to the equation. I wouldn't be at all surprised to find new types of intermediaries evolve (roles that iTunes and Amazon play to some extent). But it's not Radiohead's job to keep intermediaries in work when they aren't needed; they are artists trying to connect with listeners.

[Max]

Andrew -- the "real people" argument only works if you're, well, a communist or incredibly altruistic. If there is no reason for Radiohead to need the middlemen, then why should they somehow benefit these people? If Radiohead chooses to be charitable that's their choice, but not their obligation. In some instances, the middleman has succeeded (think eBay), but in this instance, a major band no longer needs the recording industry machine, and therefore no longer needs to pay the middleman. One could argue that without the middleman there will be no way for the masses to find new bands that can then go it on their own -- but it's likely that some other mechanism will help new artists that takes less a cut of the artists pay out(perhaps a middleman like a social network). Until then, I suggest these unfortunate middlemen with families prepare a resume and create something on their own. It's an opportunity for those willing to take it.

[W^L+]

The only reason all those people have jobs now is because they were not only facilitating consumers' access to music, they were gatekeepers. They were able to consume the overwhelming majority of the music dollar, while "creatives" (that is, musicians and composers) lost control of their creations and consumers (that is, the customers who pay for music) to buy songs they did not want in order to obtain the ones they did want.

Thanks to pioneers like Napster, iTunes, and RadioHead, both musicians and consumers are seeing that much of the music industry is superfluous. Don't be alarmed. This process will give consumers a much larger selection of music to choose from, and give more musicians (especially the smaller and less-known acts) the opportunity to make (less luxurious) livings from their talents.

Instead of suing the fans, the industry should be finding new ways to help musicians connect with fans. Make yourself useful. Reinvent the business from the ground up. Get rid of technological usage restrictions (the so-called digital rights management technologies) and help your customers find new ways to listen to music and to mix and combine it, so that you will still add value to the product they purchase.

[Anon]

What a lame argument. It should be Band and Fans, everyone else is just mooching and *should* be eliminated at every possible turn. Why would any consumer want to pay retail from dozens of middlemen when they can buy wholesale directly from the band at a much reduced price? They're helping fans, not screwing *the industry*, an entity that doesn't even have a right to exist and only cropped up because artists couldn't distribute their own music. The Internet is forcing ALL old fashioned media to change, the newspaper biz isn't fairing any better, and that's good, things changes, that's life.

[Aidan Henry]

Andrew,

You say, "Jon Pareles' "middlemen" are real people with real jobs and real families." Are you trying to create sympathy for this group? It's not working.

Radiohead understands that the two most important stakeholders in the music industry are the band and the listeners/fans. This relationship is of the purest form.

So let's cut the crap. Why do we need all the bureaucracy, management, and red tape of a huge record label when the Internet can overcome all the hurdles that the original record company was set out to eliminate?

Basically, record labels are marketing companies - they are hype. In the past, indie musicians had no way of reaching out to the masses beyond signing a record contract. But with the advent of the Internet, such an intermediary is no longer needed. Radiohead is a prime example of this. Kudos to them.

Cheers,
Aidan
www.MappingTheWeb.com

[Carl Gundel]

Radiohead deserves all the proceeds from its own music since they took the risk to let listeners set their own price. They must have a good product and loyal customers. I have seen other small businesses try the same thing without the positive result.

[Jim Dooley]

Yes, but those unnecessary employees (and labels) helped build the Radiohead brand. That brand (which has generated alterative revenue steams via concerts and merchandise) is what allows the band to pursue this current trajectory. If a large number of artists follow this music-posting model, the novelty-related publicity will fade away … putting artists back in the position on needing forms of advertisement and promotion.

[leemelon]

One hundred plus years ago being a blacksmith was an honourable and much sort after profession.

Times change, horses are now novelty/luxury items for those in the country (and very wealthy city folk).

We still need blacksmiths, just nowhere near as many. Placing this in the context of your argument Andrew we should have never moved onto the motorcar.

People will lose jobs at the record companies but they will find new jobs. Just ask all those people who used to work telephone switchboards 20 or 30 plus years ago.

[Celebrità Nude]

Congratulations for your blog.

[Yossarian]

It seems like quite a few of the comments are vexed about your defense of the middleman aspect of the music business, a position that I can agree with. However, I'd be curious to note the other facts of Pareles' article (if I remember it correctly). Radiohead is the first band of its stature to do something like this, on a scope like this. That is, it is the first band that has had the success necessary to afford this kind of giveaway without a label. While many other bands might give away their music, I wonder that they can get the production quality that they desire without the deep pockets that Radiohead now has thanks to their past success - success that was due in part to the publicity and support of a label.

[JTK]

Now that is at stupid comment Andrew Keen!
If we where to follow his logic we would still be riding horses and have horse shit all over the streets.

[John Bayko]

I think it's disgusting that you're giving your writing away free, directly to the public, when you should be distributing it only through one of the well-established print magazines, who have been suffering greatly diminished sales lately. The rise of the web has crippled the print publication industry, and you are not helping. Workers at printing plants and trucking companies have families too, you know.

[John Rodriguez]

One point that I think is being overlooked in this entire argument is that, like it or not, Radiohead and most other prominent musical acts, whether they are mainstream or niche, were funded by and promoted by the same system in which they all seem to be universally marginalizing.

It is hard to defend the bloated employment and rampant greed which plagued the now defunct music industry, but it has been at the very least partly responsible for the success of acts like Radiohead.

The most important question in this debate is not whether or not Radiohead was justified in their decision to self produce and distribute their music online, the more important question is whether or not the next breakthrough act, without the financial security provided by years of financial support and promotion by their label, would have the ability to build a fanbase to allow such a production and distribution method to be "profitable".

The business model which they have represented may seem to satisfy the pro-independence, anti-corporate rallying cries from established, well known acts and most music consumers, but the devaluation of the product itself is going to make it nearly impossible for new acts to generate the type of income required to produce and promote their own music.

[Internet Celebrity David Elliott]

I think it's hilarious that so many of you come here to tell Mr. Keen how wrong he is.

www.internetcelebritydavidelliott.com