Wednesday, October 3, 2007

What Should You Pay for Radiohead's "In Rainbows": $10 or $5?

If you want Radiohead's new direct download CD (see 10/1 entry below) you'll have to pick your price. What should it be?

Radiohead is letting fans determine the price they'll pay for their new album "In Rainbows." But...maybe devotees are paying too much. According to a poll by UK music magazine NME, the average fan says they'll pay $10 for the 10 song download. No surprise, this is the existing pricing model already developed by itunes.

Here's what making the average CD costs, according to the Almighty Institute of Music Retail (real name). At retail, the average price is usually $12-$16. To manufacture, distribute and sell in a bricks and mortar store costs about $6.40 per CD. Online distribution eliminates almost all these costs. That's why itunes is so tremendously profitable.

Radiohead has eliminated even more costs by dropping their label (EMI) so there's no need to share costs or profits. They may be able to distribute an album for as little as $3.40 (The Wall Street Journal 10/3/07). What's most important is that the band has eliminated distribution AND almost all marketing costs to date due to their viral strategy and tremendous "name your price" coverage on the internet and beyond.

Most everyone I've asked that likes Radiohead (but are not rabid fans) says they'll pay $5. Maybe not the $10 NME has found....but certainly a profitable venture. What will/would you pay...and why?

1 comment:

VeganSealClubber said...

Is the average $10 commitment in NME for Americans, or Brits? Just thinking about the exchange rate; they may have converted 5 pounds into 10 dollars, where it would seem a bit high.

I don't think I would feel guilty about paying $4--or even less--for the album, since it's money I wouldn't otherwise have spent on Radiohead music anyway. I would not, for example, have bought an album for $10; as it is, they get $4 rather than $0. It's a win-win.