Radiohead, Inc.

WRITTEN BY
Lane Brown

On the evening of September 30, from his home in Oxford, England, Radiohead guitarist Jonny Greenwood upended decades of music-business tradition with a simple post on the band's blog: "Well, the new album is finished, and it's coming out in ten days. We've called it In Rainbows." Free from their six-album record deal with EMI (Capitol Records in the U.S.), Radiohead released their seventh album as a digital download themselves, with no list price. Fans could also shell out £40 (about $80) for a box set (which includes a vinyl version, a disc of bonus tracks, and a book), while those wanting a conventional single CD would have to wait until January, when In Rainbows will hit retailers.

"It's certainly not a comment on the music business," says Greenwood. "We wanted to experiment and get the music out quickly. We didn't put much more thought into it than that." Still, the surprise announcement set off a flurry of discussion. As of October 10, the world knows what In Rainbows sounds like (see our review on page 111), but plenty of questions remain. Here, with help from some experts, we answer a few.

How much did all of this cost Radiohead? When you subtract the expense of manufacturing, printing, and shipping CDs, distributing albums is fairly cheap. Tony Greenberg, CEO of RampRate, a company that advises clients such as Disney and Microsoft on how to deliver content over the Internet, estimates that the price of distributing the MP3s, hosting the files, and processing credit cards was probably less than a dollar per album downloaded -- and that was mostly offset by the 90-cent transaction charge levied to those who chose to cough up for the files. (The band still have to pay for their own studio time and producer fees, which are typically covered -- but then charged to the artist -- by a label.) And it's not like Radiohead have thousands of employees on the payroll. Says Greenwood, "We put a message on our blog, and the small group of people at W.A.S.T.E. [Radiohead's online merchandise company] did the rest. It's a cottage industry, really."

How much money will they make?

At press time, the only people who know how many copies of In Rainbows have been downloaded are the band, their management, and their IT department. But early indications suggest that the pay-what-you-wish model paid off -- a survey conducted by The Times of London found that 3,000 people claim to have spent an average of $8 for the album. In a traditional major-label deal, a band of Radiohead's stature would earn up to $3 per CD.

The band could make as much as $50 on every deluxe box sold, after deducting manufacturing and shipping costs, estimates Ted Cohen, managing partner of music consultants Tag Strategic and a former vice president at EMI. "It'll be the most profitable album of this current era," says Jon Cohen of Cornerstone Promotion, a marketing company that's worked with Radiohead.

Now that they have my personal info, what's the band going to do with it?

To download the album, customers had to provide their names, addresses, and telephone numbers, which struck some as an Orwellian tactic. "Obviously, we're going to find the biggest, most powerful corporation we can and sell [the data] at the highest price," Greenwood says with a laugh. "What's more likely, though, is we'll occasionally e-mail these people, and invite them to be taken off the mailing list if they want."

Greenwood may be nonchalant, but plenty would pay dearly for that info. "It's worth a fortune," says Cohen. "But if they chose to exploit the database and sell it to other acts or brands, that's where this business model breaks." Avoiding 'head spam is pretty easy, however. "People are asked to put in an address and a phone number," says Greenwood. "But I never put in my real phone number or address."

Will there be extra tracks on the CD?

Radiohead's managers have suggested that when In Rainbows arrives in stores, there could be additional material not included on the download. "If the band is smart, they'll probably do something to differentiate that physical release, by adding a DVD or bonus material, but they won't just release a duplicate of what's already been out there," says Cohen. "That will make it more of a must-have." That's good news for retailers but could alienate fans who already paid for In Rainbows once.

Does this signal the end of record labels as we know it?

CD sales are already down 18.5 percent from last year. Could a thousand Radioheads make things much, much worse? "It's clever," says Jonathan Poneman, cofounder and president of Sub Pop Records. "But Radiohead, with their history and fan base, are in a unique position to pull this off. I don't think it's necessarily indicative of the way things are going to be done in the future." It's worth noting, however, that the marketing and distribution power of EMI helped Radiohead build such a dedicated following. "It doesn't seem like a model you'd want to try from the ground up," says Bertis Downs, R.E.M.'s manager. "The thing Radiohead have going for them is that people care."

Who might try this next?

While Céline Dion and Rascal Flatts are unlikely to forgo major-label distribution anytime soon, just days after Radiohead's announcement, Nine Inch Nails, Oasis, the Charlatans UK, and Jamiroquai all hinted that their next albums would be self-released. "There are plenty of bands that could do this," says Downs. "Dave Matthews Band, U2 -- anyone still touring, with a brand name and an identity built up through the years."

How does one celebrate toppling traditional modes of music distribution and pricing?

"That's a good question," says Greenwood, reached the afternoon of In Rainbows' release. "At the moment, I'm stuck talking to you on the phone. You sound delightful, but right now, you're between me and a long glass of something alcoholic."

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