Archives For music

David Glenn brings us the latest in the filesharing dispute.  HT: Peter Klein, who says sensible things about the newest, and ugliest piece of the controversy:

Strumpf suggests that Liebowitz is pressing the issue so zealously because Liebowitz’s center at UT-Dallas receives funding from the RIAA and “other commercial interests,” a charge I find shockingly inappropriate and unprofessional. (Anyone who knows Liebowitz can attest to his zeal on a number of unpopular issues, such as his defense of QWERTY and his attack on the Boston Fed study of mortgage discrimination.)

I don’t know the primary sources well but one gets the definite impression that Oberholzer-Gee and Strumpf are being less-than-fully candid about their work. Their defenses against various critics (not only Liebowitz) seem weak and unconvincing. Overall, this episode reminds me of the Card-Kreuger controversy over the minimum wage: an empirical paper finds the opposite of what everyone expects and makes a big splash, but the authors don’t have a solid explanation for their findings, there are questions about the data and methods, and specialists aren’t convinced by the results. My conjecture is that in this case, like the minimum-wage episode, the spashy result will not stand the test of time.

I share Peter’s view that the Strumpf allegations about Liebowitz are remarkably unprofessional.  This is especially true given the consensus view that many of Liebowitz’s critiques have gone unanswered (Glenn writes: “in several cases, the authors have not replied to Mr. Liebowitz’s criticisms, either in public or in Mr. Strumpf’s referee report”).  The leading alternative theory to Strumpf’s concerning Liebowitz’s interest in the topic, is as Craig Newmark puts it, “maybe he’s just upset that a 40+-page lead article in one of the profression’s top journals has serious errors.”  Indeed.  Glenn’s article is worth reading.  It contains a nice summary of the “summer sales” test and I also learned that the OS paper “grandfathered” out of the new Journal of Political Economy policies on replication.

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.

I’ve been inspired by Lynne’s music favorites post (mainly so I can share my disagreement with her–and one big agreement).  It’s a bit off-topic for this blog, but some of you must be music fans.  And in the spirit of taking advantage of a platform while you have it, I thought I’d share my picks for best music of 2007.  Have at it in the comments. 

25.  Ha Ha Tonka, Buckle in the Bible Belt

24.  Great Lake Swimmers, Ongiara

23.  Dr. Dog, We All Belong

22.  Rogue Wave, Asleep at Heaven’s Gate

21.  Levon Helm, Dirt Farmer

20.  Sunset Rubdown, Random Spirit Lover

19.  Over the Rhine, The Trumpet Child

18.  The Apples in Stereo, New Magnetic Wonder

17.  Band of Horses, Cease to Begin

16.  WIlco, Sky Blue Sky

15.  Spoon, Ga Ga Ga Ga Ga 

14.  Black Rebel Motorcycle Club, Baby 81

13.  Josh Ritter, The Historical Conquests of Josh Ritter

12.  Deadstring Brothers, Silver Mountain

11.  White Stripes, Icky Thump 

10.  Cloud Cult, The Meaning of 8  

9.  The Bees, Octopus

8.  I’m Not There (Soundtrack)

7.  Blitzen Trapper, Wild Mountain Nation

6.  Shearwater, Palo Santo (Expanded Edition (ok, slightly cheating, but well worth it))

5.  The Broken West, I Can’t Go On, I’ll Go On 

10996709_155_155

4.  The Avett Brothers, Emotionalism

11037008_155_155

3.  Okkervil River, The Stage Names

11071092_155_155

2.  Menomena, Friend and Foe

25599_friendandfoe

1.  The National, Boxer

11021102_155_155

Radiohead results

Geoffrey Manne —  6 November 2007

Radiohead: In RainbowsThe results are in:  Radiohead did . . . ok.  Before I share the specifics, let me remind you of what one seemingly prescient prognosticator said a few weeks ago:

My prediction: They will receive an average price of $2 and a median price of $0.  

So what happened?

Of those who downloaded Radiohead’s digital album, In Rainbows last month, about 62 percent walked away with the music without paying a cent, reported ComScore, an Internet research company.

About 17 percent plunked down between a penny and $4, far below the $12 and $15 retail price of a CD. The next largest group (12 percent) was willing to pay between $8 and $12–the cost of most albums at Apple’s iTunes is $9.99. They were followed by the 6 percent who paid between $4.01 and $8 and 4 percent coughed up between $12 and $20.

* * *

According to ComScore, the average amount spent for all downloads came to $2.26.

So, if my calculations are correct, Radiohead received an average price of $2.26 and a median price of $0. 

Man I’m good.

By the way–read the whole article linked above.  Some interesting comments from Chris Castle on the Radiohead “experiment.”

UPDATE:  To be fair, these kinds of claims to depend a lot on the quality fo the data. See this comment from the band on the reported figures:

“In response to purely speculative figures announced in the press regarding the number of downloads and the price paid for the album, the group’s representatives would like to remind people that, as the album could only be downloaded from the band’s website, it is impossible for outside organisations to have accurate figures on sales,” they explained.

The statement added: “However, they can confirm that the figures quoted by the company comScore Inc are wholly inaccurate and in no way reflect definitive market intelligence or, indeed, the true success of the project.”

So says Scott Adams, creater of Dilbert and now author, in today’s WSJ.  The context might interest TOTM readers who’ve been following the Radiohead/ voluntary pricing discussions here and elsewhere:

A few years ago I tried an experiment where I put the entire text of my book, “God’s Debris,” on the Internet for free, after sales of the hard copy and its sequel, “The Religion War” slowed. My hope was that the people who liked the free e-book would buy the sequel. According to my fan mail, people loved the free book. I know they loved it because they emailed to ask when the sequel would also be available for free. For readers of my non-Dilbert books, I inadvertently set the market value for my work at zero. Oops.

So I’ve been watching with great interest as the band “Radiohead” pursues its experiment with pay-what-you-want downloads on the Internet. In the near term, the goodwill has inspired lots of people to pay. But I suspect many of them are placing a bet that paying a few bucks now will inspire all of their favorite bands to offer similar deals. That’s when the market value of music will approach zero.  That’s my guess. Free is more complicated than you’d think.

This time from Paste Magazine (HT: Peter Schwartz via Wired Blog Magazine), and motivated by the Radiohead Experiment, and with an interesting twist:

Subscribers who choose to pay more than the normal $19.95 asking price will have their names printed in an upcoming issue of the magazine, but the entire year-long subscription can in fact be had for $1, as I just confirmed.

Both Paste and Radiohead appear to be making these moves to broaden their consumer base (and as Geoff has pointed out, getting access to valuable customer data), strategies that are at least related to strategies commonly observed from multi-product firms, rather than some more permanent attempts to incorporate voluntary pricing into the business model we’ve seen (e.g., restaurants).  Aaron Schiff has some nice posts up looking at some voluntary pricing download data from a website called Jamendo which makes the data publicly available (the minimum donation is apparently $5). Schiff reports that the average donation is a (surprisingly high in my book and much higher than the reported estimates of Radiohead’s donations) $14.55 and the data are available on his site.

Radiohead revisited

Geoffrey Manne —  1 October 2007

I started writing this as a comment to Josh’s last post, but it got so long I figured I’d make a post out of it.  Thanks for the inspiraiton, Josh.

I really hope Radiohead releases the data on its little experiment!  My prediction: They will receive an average price of $2 and a median price of $0. 

And I think Radiohead has a better chance of succeeding than that coffeeshop Josh wrote about (which is somewhere near here, right?  I should really go grab some free coffee).  Their fans are rabid, and they feel an emotional connection to the band unlike I imagine anyone has to a coffeeshop.  There are people out there who believe that Radiohead changed their lives.  Incidentally, these people are also anti-capitalists.  And yet they will find themselves throwing money at the band, completely unnecessarily, simply because, well, it’s a whole new zeitgeist, man. 

For the rest of us–the more rational Radiohead fans (it’s hard to deny the quality of this band.  It’s hard to believe that the same public that loves Britney could also love something as good as Radiohead, but there it is)–views will be split.  Some will feel an obligation to compensate the band for their work, although they will find it hard to explain exactly why they feel obligated if the band itself is not obligating them.  Others will think it’s cool, and it’s an awesome slap in the face to the paleolithic record labels, and will contribute to the cause.  And most will know that they would probably have just burned the CD from a friend anyway, and entering credit card information is such a pain, and, well, why should I pay if they don’t make me?  And these people will pay nothing.  A large subset of them will claim to have paid $5.

So what does the band get?  For starters, some good press (although they hardly need that).  They also get to satisfy their moral desire to bring down the (putatively) evil record labels (to say nothing of DRM!) and to demonstrate their disdain for capitalism and consumer culture.  Consider it a form of charity. 

Or competitive advantage.  I can assure you that in a post-record-label/post-DRM world, where revenue comes from live performances and t-shirts, Radiohead will be in a considerably better position than the 4 million bands trying to make it on MySpace.

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 (but not home number.  Anyone see mass text messaging in Radiohead’s future?), etc.  For Radiohead, this is a valuable list, I imagine.  It may also be valuable to any number of direct marketers and online advertising companies. 

Mostly, though, I think Radiohead is leaving money on the table.  And I also think that the band will not release the data, and we won’t know the extent to which this experiment fails.

I, for one, have already pre-ordered my copy.  And of course I paid $5.

UPDATE:  Steve Levitt wants to crunch the data.  Note also the colorful quote from Thom Yorke (Radiohead’s front man) about the music industry’s “decaying business model.”

I’ve previously discussed the voluntary pricing strategy taken by restaurants and cafes in a handful of states to offer food and drink for free and allow customers to decide whether and how much they would pay.   I was rather skeptical about the profitability of this strategy in the retail setting.  But it looks like we may soon have another datapoint from another industry as the WSJ reports that Radiohead will sell its new album (“In Rainbows”) only as a digital download from its website and allowing fans to choose how much they will pay.  From the WSJ article:

By letting consumers dictate what they will pay for a digital copy of the album, the band will test theories of online pricing that have been the subject of much speculation in recent years — most notably, the notion that fans will pay a fair price for downloads if given the freedom to do so on their own terms.

Speaking of experiments in online behavior and “voluntary pricing,” Stan Liebowitz has posted a paper to SSRN critiquing the empirical claims in the highly publicized JPE Oberholzer-Gee and Strumpf paper on file-sharing which found little, if any, impact of file sharing on music sales.  Unfortunately for the economics profession, one aspect of the critique is that the authors of the JPE study have not been willing to share data with Liebowitz so that their findings can be replicated.