Wednesday, October 3, 2007

Radiohead’s Revolutionary Idea

We shouldn’t use the word “revolutionary” lightly, but in this case I think it’s appropriate. As Jason Gross from PopMatters’ blog Crazed by the Music reports, rock band Radiohead has developed a new model for the release of their new album, In Rainbows, on October 10:

“With their contract up, instead of signing to a new label, they decided to put out their new record themselves. A lot of bands have done that with their own labels but Radiohead decided that they wanted to put it out online first and ask fans to pay whatever they think is fair. This not only goes against the fixed pricing that Apple has demanded for iTunes but also the flexible model that the labels have been fighting for because in the end, they themselves still set the price. Actually, it goes against the whole orthodoxy of the industry itself.”

Indeed it does, for this is the first time that a top-selling band has completely eschewed any type of price structure for a major release. As Gross notes, the band has two distinct advantages in that they’re currently free from a label contract and they’ve made plenty of money over their career. Even if this release method results in a commercial failure—which I doubt it will—their risk of loss is relatively small in the long run. Moreover, Radiohead is coupling the October 10 release (which is digital only) with an elaborate limited-edition “discbox” for a fixed price of ₤40 (around $81-82 US), which includes shipping and the digital release. What I assume will consequently result is a decent amount of serious fans buying the discbox—assuring some fixed profit—while many others will pay a small average sum for the digital download, which, although not a guaranteed profit, costs less to distribute outside of a major label and third-party websites and stores.

Gross is accurate in his argument about the larger significance of Radiohead’s decision:

“Remember how EMI was banking on releases by Coldplay and Gorillaz to keep the company solvent? That’s two acts supporting a major label, which should show you what thin ice they’re on and how much thinner it’s going to get now…

“So then the big question is, what happens next for the biz? It’s not gonna crumble overnight (though was already crumbling anyway) but this is another huge challenge to it now. Other big acts will get the bright idea that they can do this too, no matter how long and how strong a relationship they’ve had with their label (when you see [Bruce] Springsteen or U2 bolt, you know the game’s really over for majors).”

In his book Exploding, former Warner Brothers music executive Stan Cornyn details how beginning in the 1970s, major labels became reliant on a small percentage of hit artists to offset the vast majority of acts whose releases lost money. Combined with a general “as much as the market will bear” approach to album pricing, this was a successful financial strategy when (for example) Fleetwood Mac’s Rumours sold seventeen million copies, and it remained successful until a few years ago, when the transition to digital media began accelerating. With CD sales now in a multi-year (and probably permanent) tailspin and consumers upset over RIAA piracy-related lawsuits and the use value of their purchases, a group of Radiohead’s stature opting out of the entire traditional contract and release model represents, as Gross writes, a looming “black hole” for the majors, for they would lose the profit source they need to survive in their current form. The ramifications of a music world without major labels as we know them are arguably varied (and a topic for another day), but it certainly looks like that’s where we’re headed.

Finally, although Gross doubts that smaller, independently-oriented artists will be able to follow Radiohead’s lead anytime soon, Bob Mould (a critically respected singer-songwriter with an established following) explores some potential offshoots of their strategy--and the resulting financial implications—on his personal blog.

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