Radiohead makes $6-10 million from the ‘pay what you want’ model

More reports are coming in from Radiohead’s ‘pay what you want’ experiment. In a previous blog post I estimated that Radiohead had made just under $9 million. Now, others are saying $6-10 million.

If you want to know just what that sum means, consider this: Radiohead’s last album sold 300,000 copies. Lets say Radiohead made $2 from each sale. That measn their total earnings would have been $600,000.

So

– earnings with record company : $600,000 … this includes irritating a lot of people with DRM sillyness, and engendering a lot of ‘piracy’

– earnings without record company: $6,000,000 … lots of people get the album for free, and legally. There’s no DRM silliness, customers feel like they are supporting the artists (and not the record companies). There’s no background threat of insane lawsuits and single mothers losing their house because they downloaded 5 tunes on soulseek.

Which is why I suggest that Ambisonia take up this model. Pay what you want. If you like it and you think the artist deserves a bit of money for it, give them some money.

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2 Responses to Radiohead makes $6-10 million from the ‘pay what you want’ model

  1. Nick says:

    There’s an interesting observation of the Radiohead model on the Window/Scene blog, where they point out:

    Pay What you Want isn’t giving it away or donation, a model which bloggers and digital service owners frequently use, asking visitors to “consider” giving via PayPal or other means. By stepping punters through standard credit card forms before they get the goods, Radioheads organisation WASTE sets up an expectation and a context of exchange, however little.

    http://window.org.nz/2007/10/artists-give-it-away-with-new.html

    There also has to be consideration of the novelty factor of Radiohead’s experiment.

    How much of that 10x increase in earnings is due to this being the most visible first time anyone has tried this before?

    If every artist did this for every album from here on, what would be their expected returns? I would say not much from music sales, though other revenue streams might fare differently.

    Another thought is that Radiohead have done this after being able to go independent from their previous record company contracts. Wouldn’t the parallel in Ambisonia’s case be artists leaving Ambisonia and offering their work independently at the customer’s price? Isn’t Ambisonia actually aiming to be a kind of label/record company, albeit with a new model from old physical media record companies??

  2. Nick, an artist in a recording contract makes less than 10% of the amount paid by the consumer.

    Ambisonia is offering around 70% of the sum paid by the consumer. This figure is also open for debate. If some contributors think they should be getting 80 or 90% then fine, lets discuss it. The important thing, as I have always stated, is that the activity is financially sustainable for both Ambisonia and the contributors.

    If you read the draft legal contract I sent around (between Ambisonia and the contributors), you will see how the contract between Ambisonia and the contributors is very respectful of the contributors (it was drafted from the point of view of the artist (which I still consider myself to be)).

    There is no ‘exclusivity’ asked for in the contract. Contributors can sell those same works via whatever other avenues they want. Contributors are not forced to produce work, etc. etc.

    Also, I estimate it would have cost Radiohead $50,000 to $100,000 to pay for the scalable infrastructure for the electronic payments and downloads.

    The percentage that Ambisonia takes actually represents that sum that Radiohead has paid.

    Ambisonia is much more similar to youTube than to a recording company. Except it actually tries its hardest to get some decent revenue to the contributors… which youTube does not.

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