Is free Radiohead a substitute for expensive Radiohead?

Geoffrey Manne —  9 January 2008

I’d have to say the answer is yes (duh).  Radiohead’s In Rainbows made a stunning “official”debut, coming out at number 1 on the Billboard chart with 122,000 US sales in the first week.

But Radiohead’s last album, Hail to the Thief, debuted at number 3, selling 300,000 copies in its first week.

The band must be disappointed with those sales numbers.  Number 1 or not (and I’m pleased to see it doesn’t take all that much to bump Mary J. Blige from the top spot), that’s a huge decrease in initial sales, especially for an album so critically lauded and with such a spectacular media following at the end of last year (including this very influential blog).

Of course it didn’t make my top 25, which probably explains the whole thing, come to think of it.

Geoffrey Manne

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President & Founder, International Center for Law & Economics

5 responses to Is free Radiohead a substitute for expensive Radiohead?

  1. 
    GMUSL Alum '07 9 January 2008 at 1:12 pm

    Geoff — check out an article on the different copyright related-“models” for music dissemination in this Month’s Wired.

    Radiohead got most/all of the money from the downloads, not a cut, and this CD is almost all theirs. It’s some interesting reading. Radiohead would much rather have, e.g., 90% of $122K + the download money than 25% of 350K and no download money.

  2. 

    And my point was that I don’t think you can correctly characterize this as a “huge decrease” in initial sales, since most of the initial sales occurred through Radiohead’s direct campaign. The key Soundscan defect is that it doesn’t count the direct sales by the band.

    My sense is that on a $12 retail CD sale, a band like Radiohead is likely to get $1 to $2 at best. So if you believe the comScore numbers (see below), they sold around 400k direct copies (excluding the 60% who did not pay for the album). At an average price (profit, largely) of $6, that’s the equivalent of 1-3 million retail units. Pretty substantial if you ask me.

    (Note: the band criticized the comScore estimate, but in a way that seemed to suggest that sales exceeded comScore’s report.)

    Here’s Wired’s summary of the comScore figures:

    In the first month, about a million fans downloaded In Rainbows. Roughly 40 percent of them paid for it, according to comScore, at an average of $6 each, netting the band nearly $3 million.

  3. 

    footnote on my prior post — saw an estimate that In Rainbows netted the band ~$3 million on the digital downloads. More than prior $ from digital distribution, but not clear how it compares to their all-channel profits.

    What would be a reasonable estimate of their profits on the 122k (or 300k) units reported by Nielsen?

  4. 

    Well that’s my point–to the extent that the online sales were “name your own price,” our best evidence to date (Radiohead has not, as far as I know released numbers, although they have suggested the public numbers are low) shows that price being very low. I know labels take a large portion of CD sales, but I also know that labels also provide all kinds of resources (recording studios, marketing, etc.) that make calculating profits per CD in a case like this quite hard.

    It may be that Radiohead is laughing all the way to the bank–but this also offers some evidence to support the contentious claim that illegal music sales hurt regular sales (not as contentious a claim as it once was after Stan Liebowitz cleared up the confusion–see here).

    Also, the Soundscan defects shouldn’t matter too much to the year-to-year comparison, unless there were significant changes in the interim.

  5. 

    Know anything about Nielsen Soundscan? It’s basically store-scanner data from a variety of outlets. According to Nielsen, Soundscan captures “data from point-of-sale cash registers … collected weekly from over 14,000 retail, mass merchant and non-traditional (on-line stores, venues, etc.) outlets.”

    It has some notable gaps — chiefly Wal*Mart.

    By the way it’s structured, Soundscan almost certainly excludes Radiohead’s own distribution of In Rainbows. Given that — and the fact that the band reported profits from selling In Rainbows via their own website higher than any of their other albums to date — I suspect they’re laughing all the way to the bank.

    monty