Radiohead Roundup

Thom Yorke reckons

that the music industry has a "decaying business model," and so he

and his band, Radiohead, have decided to opt out of it. Go to their website,

and you can download their new album for whatever you feel like paying.

My view on this is that it makes a lot of sense: by cutting out all the middlemen,

from EMI to iTunes, Radiohead builds a stronger connection to their fans, as

well as an enormous amount of goodwill. And a few other people seem to have

an opinion on this too.

Count me in with this lot:


Economist says that Radiohead’s move "reveals a recognition of the

fact that recorded music is no longer an excludable good; those who wish to

get recorded music for free will be able to do so, no matter how hard record

labels try to shield their product behind a wall of technology. Once one understands

that, it becomes clear that all music purchases are essentially conducted on

the honour system."

Bob Lefsetz

says that "it’s not like Radiohead’s living in a different world. But they’re

playing by a different rule book. One that says the money flows from the music."

Lefsetz also

says that Radiohead isn’t a technology company, and should have gone with

iTunes or Amazon or someone else who’s good at fulfillment and whose servers

won’t crash.


Mankiw says that this is a form of tipping, and "we economists don’t

understand tipping".

And here’s lots more commentary:


Rodrik’s wife says that Radiohead has gone bonkers, but still paid over

$10 for the album. Which leads Dani Rodrik to conclude that Radiohead has not

gone bonkers.


Wilson says that band is actually behind the technology curve: "We’ve

had the technology to allow bands to bypass traditional and online distribution

for years."


Dillow notes that "Canadian singer Issa

has a choose how much to pay system, and finds that 94%

pay at or above the suggested price for a downloaded track. Such systems demonstrate

that social norms really work. People behave honestly even when they needn’t

– they obey the social norm of reciprocity. "


Marco predicts that Radiohead "will make a hilarious amount of money".


Bayley of the Entertainment Retailers Association sounds a bit panicked,

saying that "the ERA does not support the distribution of music from just

one source because it limits access for consumers".


Anderson uses the opportunity to plug his next book: "Regardless of

what the average consumer decides to pay, this is another example of a business

model enabled by FREE. They only way Radiohead can enter into this with no idea

of what people will pay is because they have a product whose marginal cost of

manufacturing and distribution is close to zero."


Levitt wants to analyze Radiohead’s data.


Manne says Radiohead is getting more than just money: "Here’s

what else they get: An excellent mailing and e-mail list. To buy (or receive

gratis) the album from the website one must enter name, email (and no cheating,

since download codes are sent via email), address, cell phone number, etc. For

Radiohead, this is a valuable list, I imagine."


Cowen says that "no this model won’t much change the music industry".


Borjas takes the model to its logical conclusion: "The band’s history

suggests that many people (misguided as their tastes might be) would rather

listen to something else. Even at a nominal cost of zero, many of these people

will still not want to hear Radiohead’s music. The time spent listening to Radiohead

has an opportunity cost, and Radiohead will have to lower the price even further–below

zero–in order to attract them. In other words, the band will have to pay listeners

for the right to invade their airspace."

And Robert

Cyran says that "early indications suggest that Radiohead’s loyal followers

are paying too much for the band’s seventh disc."

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