Will Radiohead make money with this album? In a word, "Duh..."
Can the mainstream press please buy a clue from the orange stack of Chance cards and get over the whole "Radiohead - name your price" thing? Brilliant marketing? Yes. Effective? Yes. One time deal? Who cares?
[UPDATE 30 October 2007: As predicted, Radiohead is making Gobs of money with this approach. Estimated sales were over $10 million for the first week. The first Week! Average price paid? $8.00 per download. You can read more here.]
Here's the simple truth: Artists get literally next to nothing on album sales when they are marketed by a major label. That means that they get, if they are lucky, a couple of cents per album, and that is only after every single entity who can get their dirty swollen little fingers into the pot gets paid. Where does the band make their money? Very simple. Touring and merchandising.
So when a band says step off to the 500 people in the middle who want to get paid for their work, and they buy some bandwidth and put it up for download, and then offer it for whatever people think its worth, they are going to make money if the music merits it.
It doesn't require an MBA to figure it out. Do the simple, simple math....and just in case you can't, Here: I've done it for you:
Bad Bad Bad major record label scenario:
Typical album price (on sale): $13.99. Maybe more, maybe less if its iTunes, but lets stay somewhere in the middle.
Amount taken by the Studio, distributors, marketing costs, shelf space costs, and all of the other bureaucratic Major Label overhead: $13.97.
Amount taken by band? .02 per album sold, after the first 500,000 units.
So on 1,000,000 units, that is $20,000.00 dollars (oh, except that the record company only pays for the number of units sold after the first 500,000, so scratch that. Make it $10k). Wow. Big deal, split 5 ways or more, for months of work. Thanks record company!
[pseudo-quote from Mr. Davis:]
"Oh, and by the way, for using our generous record label with its expensive reputation for 99% crap, we now own the rights to your songs, so if you want to perform them, you'll have to PAY US TO LICENSE THEM. Otherwise, if you play your songs in concert, we will unfortunately be forced to sue you for copyright infringement, theft of our intellectual property, breach of contract, and a whole slew of other legal violations for which your measly .02 cents per album will hardly cover. We pay more than what you earn when our attorney sneezes on our time."
[end pseudo-quote]
Where do I sign again?
Now here's the Download, pay-per-conscience scenario:
Studio costs: Not really as much as you think. You can buy world-class studio time for remarkably cheap these days, and if you're Radiohead, no recording studio is going to gouge you. Not to mention, this cost is a wash because the record company *surprise surprise* charges the band for that too, at "industry" rates (read: gougey-poo, Brit poppers).
End of the line Production and distribution costs: Next to none. Output from AIFF to MP3, buy some hosting, and put it on the site.Done. Pay a Web company a couple bucks and you're in.
Marketing costs: Again, next to none if you are a global icon. For Radiohead, the press did all that was necessary. And then of course there were the millions of us who have checked their site and the multitude of fan sites for any info on a weekly, if not daily, basis.
Now, the math:
Average paid per download? lets just say $2.00, to keep it on the low side. That accounts for the guilt-driven folks who overpay and those who put in 0.00, those greedy sons of lucky mothers.
Cost total? Next to nothing.
Take for the Band? $2.00 per album sold. So, on 1,000,000 units, how much is that?
$2,000,000 split 5+ ways. Ya think studio time is gonna' cost that much?
So, math majors, you tell me: which is more, $2,000,000.00, plus touring and merchandising, plus $75 per pre-paid boxed set? or $10k plus touring and merchandising, plus a generous $1.00 per unit (after the first 100,000) to the band for an expensive boxed set?
That, you MBAs writing industry-related columns, means, "Duh."
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Next Radiohead entry: Either why I think Jon Fine is a dillhole (the completely worthless "music" reviewer for BusinessWeek), or what I really think of the new Radiohead album.
