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October 01, 2007


Matt M

"Fans won't know the quality of the tracks in advance"

That'll only really be a problem with the pre-orders though. As once various tracks have been released (and I'm guessing p2p sites will be busy) fans will be able to form an opinion on what the album's probably going to be like.

Then it's just a case of how much you like/respect the band.

Backword Dave

In answer to 2: a reference point would be the cost in a store would it not? In answer to 3: maybe so, but even if that did happen, they may be able to find new listeners and they have a back catalogue (even a few sales of old albums won't do their bank accounts much harm) and they will have ticket and t-shirt sales. (I might predict that the album t-shirt, and there's bound to be one, would do particularly well for cachet value.)

Lawyers, Guns, and Money has an interesting non-Freakonomics comparison. http://lefarkins.blogspot.com/2007/10/take-that-record-labels.html


#2's the part I'm struggling with. How much of the cost of a $15 CD is currently alloted to the artist? $3? And the label used to take the other $12 in exchange for distribution?

If that's the case, I would happily pay $3. Just don't know if that is the case.

james C

You seem to have misunderstood the bagel story.The man does not ask his customers to choose how much to pay. There is one price, but no one to check if they actually pay it.

Simon Stephenson

"People behave honestly even when they needn't - they obey the social norm of reciprocity."

Would that this were true! You're talking chicken feed here for most people - it isn't going to make much financial difference to them whether they pay a piddling amount or nothing. So most people will conform to what they consider is the norm - which in this case is to pay something approximating to the expected amount. If it was considered acceptable to pay nothing for the download then this is what just about everyone would do. Reciprocity doesn't come into it - going along with the herd does.

How many people, do you think, look at their monthly pay cheque and say "I've not really done my job very well this month - OK, I've had other things on my mind, but the Company shouldn't have to suffer for that - I'd better repay some of my salary"? Now THAT would be a real example of reciprocity!

Matt Munro

Read today that the site had crashed due to demand and that "most" people had paid the standard retail price. Maybe it says more about the demographic of the everage Radiohead fans than anything else, can't imagine it working for 50 cent.

Maynard Handley

There is a MAJOR confounding factor here which is the business of Radiohead being wankers about not selling individual tunes.

The limited amount of Radiohead I have heard leads me to suspect I'd not pay anything for the album, but I am someone who is immensely picky about the tracks I like, and most of what is in my iTunes collection consists of one or two tracks from an album, not the entire thing. Thus, even if I liked Radiohead, chances are I'd be interested in only one track, and might pay what I consider to be a reasonable $1. Does this get counted as a vote for one track, valued at the standard price, or does it get counted as someone "exploiting" the system? (And, whether Radiohead wants me to or not, I'd still toss the rest of their precious album, not matter how important they claim it is to respect the artistic merits of the entire work.)

In some sense, of course, it's unimportant --- the value I place on the album is $1. But in another sense, it means that as an economic/sociological experiment there is so much going on that the experiment is practically worthless. This matters because I imagine there are going to be an awful lot of people, amateur and professional, looking at this experiment and telling us how it supports their pet view of the world.


The minimum fee is 1pence.

Kevin Carson

It's hard to see how they'd NOT make money on this. The quality gap between music produced with modestly priced home studio equipment and that produced in the big commercial studios is relatively small, and diminishing rapidly. Compared to the music companies' markup based on an IP-centered business model, the overhead cost per unit of studio work and Internet hosting is probably infinitesimal. Marketing costs are also minimal, because they've got the brand locked up. So damn near all of the recommended price is probably free and clear.

Robin Goad

I did some further analysis on this using Hitwise Internet usage data here: http://weblogs.hitwise.com/robin-goad/2007/10/radiohead_freakonomics_and_fre_1.html

The main finding was that the people downloading the album from Radiohead's site are not the same sort of people who download from stuff for free from the file sharing sites. This could mean one of two things for Radiohead - either they've managed to tap into the market of people who are willing to pay for the content and the honour systmem will see them good; or they've just started giving their music away for free to the very people that are usually prepared to pay for it. Hopefully Radiohead will release some data from this experiment and we'll see which is true!

Robin Goad
Research Director, Hitwise


There is a MAJOR confounding factor here which is the business of Radiohead being wankers about not selling individual tunes.

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