Radiohead's Reality: Just Two Out Of Five Listeners Paid For In Rainbows Download

Music-biz professionals suspect band made out well financially — but caution situation was a 'novelty' unlikely to be repeated.

The grand Radiohead experiment in letting listeners set their own price for In Rainbows earned the band tons of press and lots of compliments from its peers (and, of course, some criticism over sound quality). By some accounts, more than 1 million people downloaded the album.

But as excited as fans were, less than 40 percent of them actually paid for songs. According to data from comScore, a company that measures consumer activity online, only 38 percent of Radiohead fans ponied up any cash for the download, while a majority paid nothing.

For a band whose audience is notorious for its fierce loyalty and dogged devotion to the group's sometimes cryptic and challenging career path, that's kind of bummer, right? Well, not necessarily.

While Radiohead's U.S. publicist, Steve Martin, declined to respond to the comScore data, explaining that the band "is not going to discuss financials with anyone," and a spokesperson for the band's former label, EMI, also declined comment, we spoke to a number of music-industry professionals, several of whom said there's definitely an upside to the "freeloader" numbers — but noted that the band was one in a few that could benefit from such an arrangement.

"Whatever that 60 percent of people were going to do, they weren't going to buy the Radiohead album anyway," said the manager of several groups who have sold millions of albums on major labels, but who — like most of the people we spoke to for this story — requested anonymity. "Anyone who went to the Radiohead site to get it instead of PirateBay or some other site like that would never buy it, so it's not like they've been CD buyers their whole lives and supporters of Radiohead and decided, 'This week I'm not going to contribute.' Just consider those 60 percent to be gone already — except now Radiohead have their e-mail addresses and they can market to them."

According to the numbers posted on comScore's Web site, during the first 29 days of October, 1.2 million people around the world visited the In Rainbows Web site, with a "significant percentage" ultimately downloading the album. The percentage who downloaded for free in the U.S. was a bit lower (60 percent) than in the rest of the world (64 percent), and comScore found that U.S. consumers were willing to pay a bit more when nobody was looking.

Of those who did pay for the record, the biggest percentage, 17 percent, paid less than $4, and 12 percent paid between $8-$12, comScore reported. Either way you cut it, said the manager (who did not have first-hand knowledge of the specific details of Radiohead's financial dealings), Radiohead likely quadrupled their take on what they would have made had the record been racked in traditional record stores. "Now Radiohead are getting the retail, label cut, distribution and manufacturing margin, as well as the mechanical and artists' royalty. Of that 40 percent, they're getting a much higher figure [from sales] because they're using the Internet and the cost of distribution is so much less.

"It just validated what we already knew: If you give something for free, people will take it for free. That 60 percent acted with logic, while the others acted with emotion and said, 'I don't care that I can get it for free, I will make a donation.' That's illogical," the manager said. "But it's an emotional reaction they're appealing to with their fan base."

The comScore results are not based on numbers provided by the band, but culled from a group of consumers in comScore's worldwide database of 2 million people, who have allowed the company to monitor their online behavior. Senior analyst Andrew Lipsman said the numbers are "very valid," because the few hundred people the company tracked — he would not divulge the exact number for proprietary reasons — could easily be weighted to represent the whole online buying population of In Rainbows.

"Because it's a small sample with a small range of transactions, we're confident the numbers are accurate, and there's a small margin of error, maybe a few cents either way," said Lipsman. The study was not commissioned, but undertaken by comScore due to the intense interest in the album. Lipsman still cautioned not to use the results as a marker for the viability of this model for a number of reasons.

"Because they're the first ones to venture into this, they already have a loyal fanbase and they got the benefit of a marketing bump from the publicity that won't happen with other bands," he said. One very promising footnote to the download figures, he added, is that for every dollar of revenue from album downloads, the band generated two dollars in sales of its $81 special edition box set of In Rainbows, due out later this year.

A major label record executive who also requested anonymity cautioned, like Lipsman, that whatever Radiohead's take, the In Rainbows experiment should likely be looked at as an anomaly, not a new business model. "It was a novelty, and economics dictate that if everyone goes in this direction, it won't have the same impact," the executive said. "Also you have to consider that it was Radiohead, so the more people pile in, the less novelty and less traffic they'll get."

And while Radiohead could count on the millions of fans who have supported their albums and tours for 15 years, the combination of the novelty factor and the high rate of "freeloaders" who took advantage of the set-your-own-price deal paint a somewhat grim picture for less-established bands that might consider going this route — but that have not had the benefit of the promotional push of a label for more than a decade.

"If only 38 percent are paying for Radiohead, who the hell would pay for a band they've never heard of?" wondered another manager who has worked with some of the most popular major-label bands of recent years, and who requested anonymity. "Whether people paid for it or not, the download numbers are high because people wanted to be cool and there was some rubbernecking."

A less optimistic take came from veteran music-business attorney Peter Paterno (Dr. Dre, Metallica), a strong advocate of artists' rights to control the means by which they distribute their music. He said it's hard to tell if the download exercise netted Radiohead a pile of cash or found them running in place. "If your business model is giving away music and selling tickets, maybe this works," he said. "And maybe they have a broader plan to make money. But a band like this would make somewhere around $2 or $2.50 per album, depending on the pricing [with a traditional major label album sold at retail]. So even if they're making four times that amount, but they're only getting one-fourth of the people paying full price, they're in the same place."

Regardless of how many people paid for the download, in the end Radiohead had nothing to lose, financially or otherwise, from their experiment, according to Billboard director of charts and senior analyst Geoff Mayfield. "I think it's one of the most misunderstood stories of the year," he said of the blogosphere blowup about the album possibly signaling the death of major labels. "Radiohead never said they were looking for a new model, all they said was, 'We made a new record, here's how to buy it.' And within a week you knew they were negotiating with major labels. They never said they wouldn't sign another major contract.

"I think we can all assume this is not the whole album, and when it gets released [in stores], I suspect there will be more tracks, or some additional content, and enhanced audio," he continued. "[I'm sure they were thinking] 'There's only so many people who will buy it anyway, so what do we have to lose if some take for nothing?' They don't get your e-mail address when your buddy burns it for you from CD.

"And at the end of the day, I don't know how much they lost by doing it this way," he added. "But they gained a significant bargaining chip with labels through the press they got."