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38% of Downloaders Paid For Radiohead Album
Posted by
kdawson
on Tue Nov 06, 2007 04:09 PM
from the fanatical-fan-base dept.
from the fanatical-fan-base dept.
brajesh sends us to Comscore for a followup on the earlier discussion of Radiohead making $6-$10 million on their name-your-own-cost album "In Rainbows" — with the average price paid being between $5 and $8. Comscore analyzes the numbers: "During the first 29 days of October, 1.2 million people worldwide visited the 'In Rainbows' site, with a significant percentage of visitors ultimately downloading the album. The study showed that 38 percent of global downloaders of the album willingly paid to do so, with the remaining 62 percent choosing to pay nothing... Of those who were willing to pay, the largest percentage (17 percent) paid less than $4. However, a significant percentage (12 percent) were willing to pay between $8-$12, or approximately the cost to download a typical album via iTunes, and these consumers accounted for more than half (52 percent) of all sales in dollars."
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Radiohead May Have Made $6-$10 Million on Name-Your Cost Album 539 comments
mytrip passed us a link to a Wired article indcating that if music industry estimates are correct Radiohead has made as much as $10 million on the 'In Rainbows' album so far. This despite the estimates of widespread piracy of the album as well. "[The estimate assumes] that approximately 1.2 million people downloaded the album from the site, and that the average price paid per album was $8 (we heard that number too, but also heard that a later, more accurate average was $5, which would result in $6 million in revenue instead).
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So the big question is... (Score:5, Interesting)
Re:So the big question is... (Score:5, Insightful)
Re:So the big question is... (Score:5, Informative)
38% of 1.2 million people pay $6 = $2.736 million.
According to this article http://www.billboard.com/bbcom/search/google/article_display.jsp?vnu_content_id=1001017730 [billboard.com], their last album sold over 900,000 copies in the US alone, so let's guess they did 1.5 million (which would be a pretty poor showing, internationally). At $2/album from the major that means that they'd get $3 million.
So depending on whether the download cannibalized their CD sales this time around, they might come out slightly ahead.
Re:Only in gross (Score:5, Informative)
Huh? Typical music contacts often give you a set amount of money for a record and then X$ per CD, they then charge you for marketing, recording and distribution. so often an artist will come out ahead only if they sell X number of CDs to make up for those charges.
Re:Only in gross (Score:5, Informative)
Nope. Many of those bills are recouped out of artist royalties. Marketing is usually split, often 50/50, recording is almost always 100% recoupable as are all other production costs (artwork, travel expenses, the time of the label personnel that were involved -- and some that weren't, etc.) and distribution costs are taken off the top before artist royalties are calculated. Distribution costs are also artificially boosted in various ways, to minimize the artist royalty.
My favorite technique is "breakage". See, back in the day of shellac records (before vinyl!), records were very fragile and lots of them got broken during shipment. Rather than address the complexity and fraud opportunities of getting retailers to report how many records arrived broken, the labels just offered to take 10% (IIRC) off the top for "breakage". This discount was also applied when calculating artist royalties, obviously. When vinyl was introduced, this structure was retained, even though breakage almost completely disappeared. When 8-track tapes, cassette tapes and then CDs came on the market breakage simply didn't happen any more, but the structure was retained. Along the way, the labels renegotiated their contracts with retailers and removed the breakage discount on the -- quite reasonable -- grounds that it didn't happen any more and when it did the shippers were responsible. However, they *still* apply the breakage discount to artist royalties. Nice, huh?
Re:Only in gross (Score:5, Interesting)
http://archive.salon.com/tech/feature/2000/06/14/love/ [salon.com]
Re:Only in gross (Score:5, Informative)
Whoa; Completely wrong.
Did they 'break' when they were vinyl? No. BUT, I worked for major chains, pal, and the automatic returns system (accounting) was valid because an enormous number of records ended up as returns. You have no idea what you're talking about. Big stores usually had staff whose sole purpose was to validate returns. The main cause of the returns? Warpage. And the reason for that? Two things: Thinner LPs, with less actual vinyl, and the killer cause: The major labels never veered away from tight 'shrink-wrapping', which, in combination with the standard 60 LPs to a box in trucks with higher heat... equaled Warp City.
On big number pressings, where sales were easily predicted at hundreds of thousands of units, the returns could hit 15-20% easily in Southern California, which makes the notion, that the "10% breakage" policy was an unnecessary artifact from the past, all the way wrong.
I worked, briefly, all over Southern Cali, for WEA, doing Inventory, and part of it was dealing with returns. Did the labels mitigate some of the loss as part of overall contract strategy? Sure. But a mitigated LOSS, is still a LOSS. And trust me, when we shipped X number of units we wanted wholsale times X back. Nobody wanted to lose shit, mitigated or not. That's Business 101. Nice paranoid try, though.
Sorry if I sound harsh. But I hate the way the labels have treated artists and the fans. I always have. But we can expose these people, and their methods by stating the facts and telling the truth. It's not valid to get the facts wrong in pursuit of any 'point' one is trying to make. I hated the 'returns' thing, back in the day, because it was simply more evidence of the cheap-assed cynical methods that were being employed and 'perfected' before, during and after my stint in that part of the biz, before I went back to 'just' being a working, touring musician.
Re:Only in gross (Score:5, Insightful)
Not to mention probably the best PR money can buy.
Let's hope this raises the bar.
Re:So the big question is... (Score:5, Insightful)
Re:So the big question is... (Score:5, Funny)
did they make more or less profit than what they would have made with the standard sales method?
Standard sales method:(per $)
$.53 to record company
$.27 to record execs' Mercedes fund
$.18 to record execs' cigar fund
$.02 to Radiohead.
New distribution method:(per $)
$.01 to bandwidth costs
$.99 to Radiohead
meah I made that all up.
Re:So the big question is... (Score:5, Insightful)
But if you're the next great band, and no one knows who you are, you might want the label to push your product for you, while you focus on just making the music and touring.
If it were really that simple, everyone would be doing it.
Re:So the big question is... (Score:5, Insightful)
Traditionally, a record label's value-add was as a gatekeeper with access to the cartel-like retail channels. Those channels are rapidly diminishing in importance as the world moves towards downloaded music. Artists won't have nearly as much reason to sign away all of their control just to be able to access the market.
Re:So the big question is... (Score:5, Informative)
I recommend Donald Passman's "All You Need To Know About the Music Business" for a good overview of what record companies actually do, what the average royalties per CD sold actually are, and how recoupable advances can drive popular bands into bankruptcy. You'll discover all sorts of fun tidbits, like the 20% breakage fee on royalties (a holdover from the days of vinyl that bands are stuck with now). No, I'm not shilling -- I've read it, and it's quite enlightening.
To get back to the overriding question, the answer is almost assuredly yes. Radiohead most likely made more money off the download sales than they would have off a physical CD sale, since their royalties per CD are likely less than $3.
Re:So the big question is... (Score:5, Insightful)
Back in the days of monster sound boards, specialized recording equipment, a special sound-tight room and all that crap, sure.
Nowadays a somewhat-pro sound guy with a used Macintosh, the right software, and a small sound board, could do the whole shebang in a room lined with the appropriate sound-deadening material. Like a spare bedroom rigged for just that purpose.
It's not too hard to rig up, and the biggest expenses would be the Mac and the software that runs on it. An enterprising guy could set aside some dough and time to set up his own in-home shop, producing a very decent product in the meanwhile.
Or you could just check into a local studio, where the prices would be hella reasonable compared to some Sony/EMI/Whoever-owned studio.
Marketing isn't this big cloudy mystery that most people peg it as. Get playtime and interviews on the local radio station (in many larger cities, yes they do exist and thrive, and are not owned by ClearChannel). Do charity gigs. Pass word around online through donated royalty-free play on streaming Internet radio*. Pass around (or hire some kids to pass around) some CD's at the local high school. Do free podcasts. Hire a local web marketer and a local promoter to get your name out. Open for semi-bigger acts when they come to town. Play at the local "Big Ass" music festival (Salt Lake City, Utah had one yearly with that name).
I just described what many of the 50's, 60's and 70's bands did to get their names out, before the RIAA put a stranglehold on it all.
If you're good and not too un-lucky, word gets out and you get better recognition. Sure, it takes a bit longer than the synthetic "stars" that an RIAA house will shovel out, but you have more fun in the long-run and you won't end up being sucked dry in the process.
* Streaming radio? Hell yes! I've discovered more good, solid bands that way in the past four years, than through any other means.
But wait, there's more (Score:5, Interesting)
Dude, producers, sound engineers, and all those folks don't all work for the record companies.
Front money? How many record company contracts have you seen? And how much does a record company actually advance on royalties for anyone but a superstar?
Marketing: yes, that's true. Of course, it's less true now than it was fifteen years ago. Fifteen years ago, there were record stores, and people actually listened to the radio. Well, they killed [nytimes.com] record stores, and nobody listens to music on the radio anymore anyway.
Record companies are only now getting into the tour bus business, because that's the only part of the industry making money. That is not traditionally what record companies do. That's what band managers do, and for most recording artists, that's still what managers do.
Top-of-the-line instruments? Dude, you mean like Nikes and stuff?
So, no, I say your understanding of the music industry clashes with mine. But you do point the way forward: out of the hands of old "CD and lawsuit" companies and into the control of groups and individuals (within the current record companies, or outside them) with influence on the market as it currently is. And, with the internet, it currently is more segmented and more regional than it's been in a long time. Radio DJs are all but irrelevant; MTV? When was the last time they showed music? And yet the record companies still insist on making $2M videos? The current arbiters of music fashion and taste are those people who've been supporting recorded music since its advent, but have never been under the control of the music industry: your buddy who makes the mix tape, the club DJ, your little hoodrat friend who's been "saving it for the scene". The "industry leading" recording studios aren't worth it for most musicians: they can get a "good enough" job done in someone's house in the Meadowlands. The "music people" and their cocaine only harmed Rock-n-Roll to begin with.
So no, the Reagan 80s were not a glory period for music. As the saying goes, I survived the 80s one time already...
Re:So the big question is... (Score:5, Interesting)
"Educate the public?!"
Bah.
You'd think that people didn't have a natural NEED or DRIVE to CONSUME, PERFORM and SHARE music. The record industry corrupts commercial radio with payola, flogs the same cruddy musicians with posters for years on end, sues Internet radio stations, sues online guitar tablature sites like Olga out of existence, sits on copyrights until the recordings are historical, installs rootkits on our PCs, and they charge everyone money for playing or performing any recordings.
If the music industry put 1/10 of the effort that the film industry put into promotion, I don't think we'd have a problem.
Top ways that new music has reached me since 1994:
Aside from getting an album on a shelf in a CD store, they do NOTHING to promote music. In fact, they couldn't do more to repress music if they tried.
Down with commercial radio, and down with the record industry.
Re:Which leads to a bigger question (Score:5, Insightful)
When you go out to dinner how much do you tip? 15%? 20%? Why pay that when you can get it for nothing? Is it out of guilt? For future service? Either of those motives work well enough in this case. And unlike the waiter they don't need everybody to do it. Just a reasonable portion.
Comparing it to current sales and profits is not very meaningful. The industry is changing, and so is the profit model.
You are still missing something (Score:5, Insightful)
In anonymous situations, many people are jerks. How often does someone cut you off when driving? How often does someone barge in front of you in a line at a store or restaurant. What is the difference? Anonimity.
Unfair to music company execs. (Score:5, Funny)
I really don't think it's fair that Radiohead is just giving it away over the internet... Record companies put in a lot of hard work and effort to make a band successful, and I think it's really dishonest to just cut them out like that.
Perhaps its time the government did something about it, before the record industry starts losing even more revenue and therefore jobs.
Got radio head? (Score:4, Funny)
Listen, Fred:
RF containment
Could leave you dead
Drop the insulation
And broadcast, instead.
Burma Shave
One thing they didn't account for (Score:5, Interesting)
Re:One thing they didn't account for (Score:5, Insightful)
it worked (Score:4, Interesting)
Re:it worked (Score:5, Insightful)
The reality of music in the Internet age will be that hardly any bands "make it big", but lots of bands make a living.
The question being (Score:5, Insightful)
A lot better than software (Score:5, Interesting)
Well, of course, it culd be that not all the users are keeping the program, they may be testing, etc... but I am counting the hits that the server register from the same address within a month... So the program has being used a month more or less....
So judging by that, music consumers have a more happy pocket than software users.
Another possibility (Score:5, Insightful)
For some reason, I'm inclined towards the latter.
what idiot wrote this? (Score:5, Insightful)
For example, if I divide it in to two groups: those who paid less than $4 and those that paid more than $4, you could say that the largest percentage (83 percent) paid MORE than $4.
Lies, damn lies.... and terrible journalism.
yes, and..... (Score:4, Interesting)
That pretty much explains the music "industry" in a nutshell.
go to drudgereport.com right now (Score:5, Interesting)
you see the very first story linked as:
"Most Fans Paid $0 for Radiohead Album..." [breitbart.com]
(breitbart is a right-leaning media outlet as well)
ps: right now being 4:15 pm, 11/06/2007
what's funny is how a pro-file sharing website, like slashdot, can spin a positive out of the numbers, and an anti-file sharing website can spin a negative
spin, spin, spin
just my two cents: radiohead probably made more money off their album with this internet tip jar concept than if they signed with a label, considering how the companies nickel and dime artists to death. actually, radiohead has some clout, so maybe that's not 100% true. but rather, an unknown band would DEFINITELY make more money with free albums and an internet tip jar than signing with a label
hopefully more and more bands will realize this, and a critical mass of hot young bands will coalesce such that one will consider doing business with the defunct music labels ever again
then the RIAA attack dogs will sue up and coming artists to sign with the music labels? (half-joking, i wouldn't put it past them)
Re:go to drudgereport.com right now (Score:5, Insightful)
That's the bottom line, that's the number that matters, and without any spin it's clear that this is a good, positive number.
More data needed. (Score:4, Interesting)
No surprises (Score:5, Insightful)
Hmmmm.
Three cheers for Radiohead, at any rate.
Something to consider (Score:4, Insightful)
These numbers are meaningless (Score:5, Insightful)
17% paid less than $4? Well, that means that of the 38% that paid, 21% paid more than $4. What does $4 have to do with anything at all? It is a completely arbitrary number.
The numbers that would be important are:
Of the 62% who paid nothing, how many of them would have bought the disc at retail at launch?
Of the 38% who paid something, how many of them would have bought the disc at retail at launch? How much more / less did they pay than if they bought it at retail?
Not to mention that they will still sell physical CDs, which they stand to make more money off of.
15% after recoupment is better than average (Score:5, Insightful)
A lucky band might get a deal whereby they are paid 15% of revenues *after the record label recoups it investment*. Costs to be recouped can include nearly anything: secretaries, fat cat lunches, photography and printing costs, air conditioning, parking, coffee. You name it. Perhaps most importantly, the label has to shell out a pretty hefty percentage of revenues to the distributors and manufacturers whether they be a disc manufacturer or iTunes.
My band had a record distributed through V2 records and I believe our tiny label was *supposed* to get paid about $2 per record. Despite selling a few thousand records, we never got paid a dime because they claimed they didn't recoup the cost of their sales department selling our record to Target, Best Buy, etc.
I'll admit my band isn't as popular as radiohead, but let's do a little arithmetic. Suppose radiohead sells 1 million copies of their record at $20 a pop. That's $20 million dollars. Let's further suppose they get an extremely generous (nay unheard-of!) deal whereby they're paid 20% of gross after the label recoups their 'investments'. Let's suppose they get an amazing distribution deal that only siphons off 10% of gross revenues. Hell let's go crazy and assume that the record label doesn't expect to recoup anything and pays radiohead their percentage from the first record sold.
20% of $20 million is $4 million
take 10% of that and give it to iTunes and that leaves $3.6 million dollars
I'd bet my right arm that radiohead have made out like bandits on this.
For some interesting reading on the crooked record business, I would suggest Donald Passman's book All You Need to Know About the Music Business [amazon.com]
Re:15% after recoupment is better than average (Score:5, Informative)
I worked for Universal Music Group for a while, building a royalty calculation engine, and I can tell you that your experience is the norm. I got different numbers from different sources, but between 80% and 95% of albums never recoup, so the artists never see any money outside of their advance (if they got one). The ideal for the record companies is to keep it this way, so they can give the band as little in advances as they can get away with, and keep all of the rest.
Seconded. Great book. It's actually the one that UMG execs handed me and told me to read for background information.
Skued Numbers? (Score:5, Interesting)
And it could have made even more money! (Score:5, Insightful)
Site Usability The website where you buy/download the albums is REALLY hard to navigate and understand. They don't even make clear that you set your own price. Had I not known beforehand that you could set the price, I would've abandoned the site because it looked broken.
Can't Purchase After Download If you download the album for free (like I did), but then decide you like it and want to pay for it, YOU CAN'T! Basically they let you have one download per email address. So unless you have another address handy to use the second time, you can't retroactively pay for your first download. That's just silly. Of course some of us want to decide whether we like it or not before handing over some cash, so this is a significant feature flaw.
So given these two significant things were hampering sales of the album, I'm actually pretty optimistic about the model. The next artist that does this and gets the site experience right and supports a "delayed" purchase, will make even more.
I persist in not caring (Score:5, Insightful)
So I don't really care who downloads the albums of famous people. There are plenty of brilliant bands out there who you've never heard of and won't download their albums even when they give them away (and they often do).
Yeah, a bunch of famous people got in the newspaper and made a bunch of money off of it. Big deal.
My Indie Band Tried this as an Experiment -Results (Score:5, Interesting)
Here [stellarvector.com]
Results to Date
70 downloads
5 donations
% of downloaders making a donation: 7%
Smallest donation: $2
Largest donation: $12
Average donation: $6.80
As a poster suggested to me in the last thread about Radiohead, I'm not going to quit my day job.
Re:My Indie Band Tried this as an Experiment -Resu (Score:5, Insightful)
Putting up a free download link, and having a donate button
OR
Having an order form that explicitly lets you type in $0 for the purchase price.
Your method will not work because the audience at large feels no obligation to to "donate". Radioheads makes you feel like you ought to pay something, even if it's minimal. Those 62% must feel really bad about now, unless they didn't like the music, in which case they probably appreciate Radiohead for not charging them.
They still benefitted from the record industry... (Score:5, Insightful)
So how could you market your music? Mail CDs to the radio stations, doubt it. Battle of the Bands, local gigs, works fine but takes a while to build up a non-regional following, and even that might not lead to radio play. So you're still left with word of mouth.
and this is where Radiohead cheated. Their word of mouth was spread via the mass media. I heard about it on not less than 3 radiostations. Radioheads "Can we get people to download something for free?" is not much different from a local ice cream shop offering a free scoop on their anniversary. Since the ice cream is free, I'll give it a try even if I normally don't eat ice cream in February. Sure I might return one day and purchase some on my own, or maybe i'll never go back there.
While I envy Radiohead's experiment on downloading free music (or name your price), I think it would be far more interesting for a study to be done on the viability of the thousands of bands which do not already have an international following of giving away their music.
Re:what is radiohead? (Score:5, Funny)
Re:In other words, greater than 6 in 10 will steal (Score:5, Interesting)
The most interesting thing about this is that while 60% of the people paid nothing, the band still made more than they would have under the old method. Perhaps we could do this with the food we currently pay farmers not to grow, give away staples like rice and flour for "pay what you want".
Re:what is radiohead? (Score:5, Funny)
Re:what is radiohead? (Score:5, Funny)
(types google into wikipedia)
Ahh, I see!
Re:what is radiohead? (Score:5, Funny)
If every user [wikipedia.org] expected every /. [wikipedia.org] article [wikipedia.org] to contain hyperlinks [wikipedia.org] to define every [wiktionary.org] little [wikipedia.org] word larger [wikipedia.org] than two syllables, the it would indeed be a pile of shit [rnc.org].
Re:what is radiohead? (Score:5, Funny)
Re:The Point (Score:5, Insightful)
You can't go by the percentage because you don't know what they would mean in other contexts. All this says is that 12% of the total downloads came with a payment competitive with download services given the option of not paying at all. This says nothing about the number of downloads that would have been made at typical download service prices if there was no choice but to pay that price.
How many fewer downloads would there have been if it was a mandatory payment? How many of these downloads were from people who would have never downloaded the album at typical prices? How many of these downloads were from people who were not willing to pay for an album they had never heard, but after downloading it for free decided it was worth their money and paid for it? How many were people who had already paid but were now downloading a second or third copy for work? How many were from people who would have paid typical prices for the album, but instead happily downloaded it for free?
We don't know, and we can't know, because we have no way of converting the figures about downloads into figures about individuals. So how do you figure out how all these various factors turn out? If we can't put a number on each individual factor, can we at least find out how the add up together to give an overall picture? Yes. Yes we can. With total income.
The most definite fact we have about this is that Radiohead pulled in a high-seven-figure gross in a short period of time.
So however all these factors we're discussing about human behavior shook out, it resulted in a hefty pile of cash for Radiohead.
Hard to say that doesn't look good. It would be nice to compare this to Radiohead's (not the record company's, but the band's) income from previous albums.