Radiohead + Downloads + CDs = Success (any way you look at it)

Radiohead--the mega-successful English rock band--has recently turned the music industry on its head by releasing its new “In Rainbows” album online and allowing purchasers to “name their price”. Although hundreds of thousands of people are giving Radiohead a share of their hard-earned money, many—62% in fact—are not giving these talented musicians a cent.

What does this say for the future of the music industry? Is it doomed? Bands are concerned that their labels are screwing them, but should they also worry about their own fans ripping them off?

No, I don’t think so.

Let's turn that around and look at it from a different angle. The data above, then, from the 1.2 million downloads occuring the first week, would indicate that 38% of purchasers did reward Radiohead for their efforts. In fact, depending on who you speak to, this reward could amount to $10M after it's first week of release. Not too shabby if you ask me.

The world of music distribution has changed forever, and Radiohead is by far the most noteworthy act to adopt this straight-to-the-customer model. A lot of eyes are watching how this plays out, and some "suits" must be shaking in their boots.

For those of us without their head in the sand, this particular "name your price" type of music distribution is an interesting model. Whether it's wildly successful is not the question. The critical lesson here is that bands--especially successful ones--don’t need a middleman taking the lion’s share of their earnings. As a matter of fact, the internet has opened up new capabilities for all musical acts, so that top artists, independents, and amateur groups all share many of the same challenges and opportunities in reaching their audience, and turning celebrity into revenues.

Furthermore, selling your music recordings is only one way for a band to make money. You also make money from live gigs and merchandise sales. In fact, your music recordings could be seen as a loss-leader to generate interest in your concerts and merchandise efforts. Why? Because, practically speaking, those are harder to illegally pirate than your music recordings.

So, we’ll all be waiting to see what happens. Radiohead also has a reached a label deal to sell CDs of their latest album, so they’ll make even more money on their recordings. They even preach that their intent with the new download purchase model was to drive CD sales. Yeah, I'd be saying that too, but with the overall decline in CD sales, I’m betting they see the writing on the wall—which says “Figure out a download revenue model” in big, bold letters…

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