Radiohead Has Single-Handedly Changed the Music Business Model

radiohead with their album in rainbows is changing the music business modelWhen Radiohead announced that they were going to be offering their new album online in exchange for whatever amount of money that a buyer saw fit to donate, many people laughed. "Most people will just snatch the album for free" they said. Record companies nervously laughed. "This model is doomed to failure" they said.

Other bands watched to see how Radiohead would do in its first week. Well the first week was a big success for the band, as they sold 1.2 million albums. The average "donation"? $8. So, Radiohead netted just around $10 million dollars in their first week of sales. That's not gross. That's net profit. No middleman. No promotion. Just direct access to fans.

There are so many great things about this that I don't even know where to start.

First off, it cuts the greedy record companies out of the equation. Record companies have WAY too much control over their artists, and for artists not to be creatively stifled by a record label is a great thing.

Second, this $10 million dollars is straight profit for the band. Considering that a band will have to sell something like 5-6 million albums just to come close to making this much money, you can see just how truly great this is for a band. And how many bands sell that many records these days? Not many. Plus, record companies will make the artist pay for expenses such as videos, promotion, etc.

Third, for offering albums directly online, the band will significantly cut down on the time that it takes to get their money out to the public. A band could conceivably finish mixing their album on a Friday and have it available to the public on a Tuesday. If a band finished an album and it is released by a record company, then the album could sit for six months to a year until the record company is ready to release it.

Fourth, an artist could choose to release just one song whenever they feel like it, and offer it for sale on their site. Conceivably, an artist such as Eminem could release one song, offer it on his web site and have millions of dollars of revenues in a week. Even if the average sale price was $1, an artist like that could generate millions in profits just from one song.

Fifth, the band will create a list of buyers that it can tap in the future. I can guarantee you that almost all of these 1.2 million Radiohead buyers will buy the band's next offering. Radiohead could go straight back into the studio and have another album for sale in 4-5 months. Why not? They don't have any labels to worry about, any promotion to worry about, none of that.

Sixth and finally, the band can easily market itself with very minimal costs using the Internet as well. Film a video on the cheap and release it to Youtube; announce the album on your web site; announce the album to various fan websites. It would be easy and cheap for a band like Radiohead to get their album release date out to the public.

Radiohead will probably end up netting $20-$25 million dollars from this album. They would have to sell an insane amount of records to gross that if they had released this the traditional way. The best part is that record companies, which have been screwing artists for years, aren't getting any of this money.

Other artists, such as Oasis, have already announced that they will be releasing albums in this way in the future. And why not? More money, much less stress, much more control. Sounds like a plan to me.

Filed under: General Knowledge

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