Wednesday, October 03, 2007

A Bold Master Stroke

The Rock and/or Roll band Radiohead has just announced (as of two days ago--so I'm a little behind the times) that they will be selling their next album online, for no fixed price. A prospective consumer has the option of paying anywhere from 99.99 GBP to, well, 00.00 GBP. I'm no economist, but it doesn't take Milton Friedman to tell you that a contract with Generic Big Record Company, Inc., is a bad deal for just about any music making organization: all the revenue from units sold gets chewed up by dozens of middle-person companies. I don't remember the exact figure, but a band makes pennies of royalty on every dollar's worth of sold CD. This is one reason bands like Metallica were so anti-file-sharing: despite being a huge, world-famous rock band, they need every income stream they can get, and get very sensitive when said income streams seem threatened. I've always thought that the internets, rather than being the net-negative bands like Metallica (and the big record companies) see them as represented a strong opportunity for music-makers to take their careers into their own hands.

At the same time Metallica was raising stink, a band from Brooklyn called (yeah, it's an awkward name) Clap Your Hands Say Yeah was selling 50,000 copies of their debut album out of the apartment they were using as an office. And also as an apartment. They were not signed to a label. They did not have distribution. They had a MySpace page, a pretty kick-ass album, and the US Postal Service. What they didn't have was the business-model equivalent of art-vampires sucking their profits out of their awkwardly named neck.

Long story short, the Wall Street Journal published an item today suggesting, in a remarkable display of convoluted logic, that Radiohead was taking advantage of its fans by not setting a price on their album. [click on the title of this post for the story] Assuming that CDs cost $6.40 to manufacture and retail for $16.00, and that the average fan chooses to pay the iTunes price of $10, WSJ decides that the band should just set a low retail price, say $3.40, lest their fans feel somehow cheated.

Huh.

Leaving aside that all these numbers and figures seem pulled out of thin air, what is the matter with Radiohead possibly making more money by using this distribtion model than the current dominant one? If the fans are paying less, and the band is making more, it seems to me that everyone's happy except for the big labels. If the Wall St. Journal really believes in the Invisible Hand, and the Free Market, and all that hoo-hah, shouldn't it be applauding this shift in the paradigm rather than trying to nitpick and quibble? What does the WSJ have to gain by supporting the status quo?

I know that I'm going to buy me a copy (once their site is uncrashed from the huge amount of traffic it's been getting). I might even pony up an entire Lincoln for it.

2 comments:

Rev J D said...

Right on. Its about time. As long as the band can support the bandwidth and server costs, it might just work.

I wonder what would happen with respect to the pricing if music groups just sell the torrent file so that they don't have the bandwidth issues. Depends if the Internet traffic backbone folks (ISPs and telcos) decide to start charging by overall bandwidth usage or setting monthly caps.

Joe said...

I just bought it for 4 pounds....so about $8.00. I figure that Radiohead has made enough great records and done enough for me over the years to be worth that contribution. Plus I got most of their earlier records from Napster for free in college, so from a karmic standpoint this works...