BY JONATHAN VALANIA FOR THE INQUIRER At 2:39 a.m. Philadelphia time, an e-mail went out to the world — or more accurately, a select group of Golden Ticket holders — announcing that the digital ghost of an album was born. The new Radiohead album, to be exact. Though e-mail is largely silent, this particular one would make a big noise. This particular e-mail bore a link to a Web site where the beneficiary was directed to click and download this brave, new Radiohead album, In Rainbows, sans cover art or album credits. Just a bare skeleton of MP3s to hang in your iPod and share with your friends, or keep secret to be savored in private — your call.
And depending on which side of the digital divide you sit, this momentous e-mail augured one of two things: the end of the music business as we know it, or the dawn of the music biz’s Second Life. You see, the band had run out the clock on its major label contract and opted not to re-up, and as ever, go its own way. And Radiohead’s first move was to give the power of pricing to the people, while appealing to the better angels of their fan base.
As per the plain-and-simple instructions on the band’s Web site — announced last week and trumpeted across the globe, equal parts news story and viral marketing campaign — you could pay whatever you thought was fair, as much as you like or as little. Even — and this is the part that shivers the timbers of the music business — nothing at all, save the 92-cent service charge.
From the outside, it must seem like commercial suicide to reduce the value of your once-most-sellable asset to a zero sum by giving it away for free on the Internet. In fact, what looked like a kamikaze mission was likely a soft crash-landing that the band has every intention of walking away from without a scratch.
To understand why requires a brief lesson in the economics of major label music-selling. Understand that under most existing deals, the artist gets paid roughly 10 percent of the retail price of an album sold. So, if the album is list priced at $10, the band makes one dollar, and varying pieces of the remaining pie are divvied up amongst the label, the distributors and the retailer. But before an album even goes on sale, the artist is in debt to the record company for the cost of recording and marketing said album. This money is known as an ‘advance’ and the artist must pay that money back before it can be expected to see a dime from album sales.
Fair enough, you say, if the artist spends, say, $100,000 (which would be considered a ‘modest’ recording budget by major label standards) recording the album, then the first 10,000 records sold should pay off the debt, right? Not so. The way these deals are structured, that loan or advance is not paid off by the gross receipts of album sales, but by the artist’s 10% royalty. In other words, the artist has to sell 100,000 copies to pay off that $100,000 advance before seeing any revenue from album sales. Meanwhile, everyone else — the label, the distrbutors and the retailers — makes money right out of the gate, because they have no debt to service. The entire cost of creating the product, bringing it to market and promoting it is shouldered by the artist.
With rare exceptions, that was the only deal you could get in the music business, and if you didn’t want to sign it, there were 40 other bands in line behind you gunning their engines and ready to run you over to sign such a deal. It was just the way things were done and there was no other way — until now.
Although it remains to be seen how many other bands can or will try to pull off a Radiohead move — Nine Inch Nails, Oasis and Jamiroquai have vowed to follow Radiohead’s lead — this bold experiment will likely be far more lucrative for the band members than a major label release, if only because the band has attracted a large and loyal following of just the kind of people who can be counted on to “do the right thing.”
A selective, informal check with some people who preordered In Rainbows seems to reinforce that notion. Kristin Thompson, a Philadelphia musician and deputy director of the Future of Music Coalition, hosted a panel last week on online music distribution at the Pop Montreal festival, a South by Southwest-style music-biz confab held in Canada.
She asked the four panelists — all of them up-and-coming members of the music business — to write down on a piece of paper whether or not they had preordered In Rainbows and how much they paid for it. All four had preordered and paid on average $12.60, or roughly the standard retail price of a CD, according to Thompson.
But even if the bulk of Radiohead’s audience doesn’t have the conscience of a Canadian, the math is still very encouraging. In addition to the pay-what-you-want for the MP3s, Radiohead is also offering a deluxe box set, which includes vinyl and CD versions of the record and a second, enhanced CD with additional new songs, artwork, and photographs of the band for the fairly princely sum of $82.
Thompson, for one, is not worried about the band’s bank account. “I think this will work out very well for Radiohead,” she says. “Even if only a small percentage of the public actually pays for the album, if they sell just 10,000 of those box sets, that’s $800,000, and much of it pure profit.”
Radiohead isn’t the first band to experiment with giving its music away; Prince parted with nearly three million copies of Planet Earth in England during the summer. In 2002, Wilco gave away Yankee Hotel Foxtrot after it leaked onto the Internet, then offered incentives to purchase it once it was in stores.
While Radiohead has yet to release any figures, traffic on the band’s Web site increased exponentially in the wake of last week’s announcement (the site www.inrainbows.com was jammed today). There is also another encouraging sign: Prior to its release, the album was never leaked onto the Internet.
Name a similarly high-profile album release in the last five years that you can say that about. Quite simply, you can’t.
What does all of this mean? Much like Radiohead’s leap into the unknown, it remains to be seen.