In mid-October, Radiohead released its latest album, In Rainbows, and began a fairly novel experiment. They cut the record labels out of the equation and let fans download the album directly from the Radiohead web site, for whatever price they saw fit. A few weeks later, some financial figures are coming out, giving us a sense of how well the experiment went.
According to a study by comScore Inc., 62% of the estimated 1.2 million visitors (in October) to the Radiohead site downloaded the album and paid nothing whatsoever. The remaining 38% paid an average of $6. Overall, the band averaged $2.26 per download and netted about $2.7 million dollars in total, a number that's well below the earlier estimates of $6-$10 million. In the end, it's important to remember that the band gets to keep all the revenue (instead of sharing it with the record companies), and apparently the traffic to Radiohead's web site generated handsome incremental sales of high-priced discboxes. It's estimated that for every $1 spent on digital downloads, another $2 was spent on hard copies, which makes Radiohead's overall take even higher. What conclusions to draw? One is that Radiohead fans didn't exactly deliver the goods and demonstrate the power of this new direct distribution model. It may have worked moderately well for Radiohead. But will a lesser band take the risk? Not so likely. At least not now.
A quick PS: It looks like Radiohead is planning to do its first webcast in five years. Watch for more information here.