The music industry is one of my favorite topics. I believe the challenge of technology is helping to create extreme advancement in the quality of music. By freeing the industry from the grip of and evolving new tools for us to enjoy and find new music, many of us agree that the listening experience has never been better.
Enter the next chapter in the revolution of music: popular band Radiohead is allowing consumers to name their own price for their latest album, In Rainbows.
You really have to go and download the music for yourself. Whether you love, hate or don't know who they are, it's worth whatever price you set to experience the feeling of deciding for yourself how much their new album is worth. This is really the point, after all. If you love the band you feel the need to pay as much or more than a regular CD. If you think they are pretty good, like me, you set a lower price based on personal value (I paid $5). If you just want to experiment, go ahead and put in $1 as your price. It is an odd feeling to have the freedom to type in your own price. The only thing I can compare it to is passing the collection plate in church.
For Radiohead, those of us who wouldn't buy the album anyway is pure gravy. It's an odd spin on the economic theory of price discrimination. In price discrimination, prices are set according to the demand of each individual purchaser. Usually it happens when companies try to identify who you are and set that price - like airlines setting prices higher for last-minute reservations, which tend to be businesses who have no choice but to pay. But here, the consumer is self-discriminating.
It will be fascinating to see what happens next. Early reports suggest that buyers are paying about $10 on average - about the same as what albums go for on iTunes. For Radiohead, this top line revenue is great, but the bottom line is even better - they fired their recording label, EMI, and are collecting a much more generous profit by going straight to the consumer. Digital downloads cost nothing to send. Pretty smart for a band that "prides itself on an anti-corporate and anti-materialistic ethos."
In further news last week, Madonna is reportedly about to leave Warner Music to cut a much more generous deal with concert promoter Live Nation. It's a wild, wild world in the music industry right now. The challenge of technology is rapidly changing the rules of the game. And in a world where both artist and consumer can benefit from personalized pricing, challenge is indeed leading to improvement.
(In case you're wondering, I'm listening to the album as I type. It's good, not great in my opinion. Pretty typical Radiohead sound. And I still feel satisfied at $5.)
UPDATE: New research shows much less favorable economics than the survey I quoted above. According to research firm ComScore, 62% of the downloaders chose to pay $0.00, and the average price paid was $2.26. Some say this proves that the new model is a failure, while others say this was buzz-building brilliance. Overall, the In Rainbows story will not be over until we see how the album does once it hits the traditional retail market. Stay tuned.
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