two things to know before deciding what to pay for the new Radiohead album

Radiohead is experimenting with allowing you to pay whatever you want for the new Radiohead album, apparently on the theory that you’ll download it anyway, of which they get zero, or buy a CD from a label, of which they get very little.

My friend Iain waiting patiently for a Radiohead concert a long time ago in a place far away. (Image courtesy Nat.)

I thought it might be useful to add two facts for those trying to figure out what to pay for this.

First, what you’ve actually given to Radiohead (as opposed to the distributors) for past albums.

Terry Fisher’s stimulating Promises To Keep has a useful appendix1 discussing what goes where when you buy a CD. Bottom line from Table A.3, p. 262: on average, 12% of the money when you buy a CD goes to the artist; another 4% to the composer. Of course, these numbers are approximate, and averages: some marketing money and other expenses are then taken back from the artists, CDs sold in Canada are even worse (the distributor gets a much larger share), and some megastars get higher numbers in their contracts. But 16% is a good ballpark figure for the percentage of a CD purchase that goes to the composer-musician, which means if you paid $14 for the last few Radiohead albums2 Radiohead actually saw about $2.24 of your $14.

Secondly, the actual costs of the album.

The majority of costs of traditional CD sales go to various overheads- distribution, marketing, etc. So far, Radiohead has done no marketing for this album, except the website. For the digital product, the distribution costs are very, very low. Assuming they use very high quality mp3 files (call it 1/4 gig), and going from the prices charged by Amazon’s S3 service for bandwidth, Radiohead’s cost for distribution will be a little less than five cents.

Combine these two numbers and you get a price floor of about $2.30– if you pay that much for the digital downloads, Radiohead is probably seeing exactly as much money from you for this album as they will have seen from previous albums. Obviously, this is just a ballpark figure, but it is in the right range. Drop below that, and you’ve basically taken advantage of their experiment.

I personally have decided to split the difference with Radiohead; of the $11.70 that is no longer going to marketing, distribution, etc., half will stay in my pocket, and the other half will go to the band (on top of the base $2.30). I’m doing this partially because they were probably hosed by the labels in the past, partially because I want to encourage this kind of experimentation in the music industry3, and partially, frankly, as a bonus for being very good musicians- I like the idea of compensating good artists more than bad artists, instead of having admitted price-fixers set roughly uniform prices across the industry.

But yeah, bottom line: if you give Radiohead three bucks, you can probably safely sleep pretty easy at night that you’re not helping them starve. And if you give more, well, you’ve supported some economically innovative artists. Congratulations.

(And to Berkman folks still reading this blog: yes, this would be a good time for Terry to put out a press release pushing his own thinking in this area ;)

  1. Google Books link. If it doesn’t work, search for “promises to keep appendix: where does the money go” in google books. []
  2. $14 is the average price of their last album from the six stores google lists as selling it []
  3. 16% going to artists means 84% is going to things other than the art itself, which is insane in an age where the marginal cost of distribution approaches zero, and where word of mouth, sometimes computer assisted, like MySpace, is both free and the dominant form of marketing. []

55 thoughts on “two things to know before deciding what to pay for the new Radiohead album”

  1. At $1 you are doing better than right, IF (a big if) the bands royalty was 16% and the retail stores price is $14. Radiohead have probably negotiated better than 16% because they sell albums, or failed to get the cut they want having concluded their contract, deciding (like the Charlatans) to do exactly what they are doing. Atrtistes are paid royalties LESS EXPENSES on what the record company is paid, called PPD (packaged price to dealer). Most of you are thinking that the record company and the artist are twice a rich as what they are. It’s the music retail stores that make a swift 100% mark-up and the big money on an album. I hope this comes as a shock to you all !!!!

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