GrindEFX

In 2007, Radiohead released its album “In Rainbows” with an interesting twist – along with traditional CD and vinyl versions, as well as 99 cent tracks on iTunes and other digital retailers, the band offered its own digital downloads of the album on a “pay what you want” basis.

While solid numbers are difficult to come by, the experiment appears to have paid off for Radiohead. Along with the huge amount of press the move generated, the band reported over 3 million combined sales (physical and digital), and “rumors, polls, and inside sources” suggest that the average person paid around $4 to download the album. It is also very likely the pricing model itself drove demand for the band – the deluxe edition box set of “In Rainbows” sold over 100,000 copies (at $81 a pop) when it was released three months after the digital release, and Radiohead went on to its most successful tour to date.

But what’s most interesting is how the music industry responded to this experiment – it didn’t.

Over at Music Think Tank, Keith Jopling asks, “Why didn’t ‘In Rainbows’ open the music floodgates?” He frames the question in a broad sense – why haven’t established bands followed suit with their own foward-thinking, innovative strategies? But for now, I want to focus only on Radiohead’s specific strategy of using the “pay what you want” pricing model.

Established bands are unlikely to adopt such a strategy – Radiohead had left EMI/Capitol and was on its own when it released “In Rainbows.” Call it inertia, risk-aversion, comfort with the status quo, the major labels and the artists they represent move at their own pace.

Emerging bands, on the other hand, are resistant to the “pay what you want” model for other reasons. The only reason it worked for Radiohead, they argue, is because Radiohead already has a huge and loyal fanbase – they could release paper plates and still make money.

So the “In Rainbows” experiment remains an anomaly. But does that mean that the “pay what you want” model itself is necessarily an anomaly? Or can indie musicians learn from Radiohead and find some success from asking fans to choose their own price?

Some have, actually. Magnatune, a hub for independent musicians, offers monthly subscriptions at a “pay what you want” price (although with minimums above free for streaming and downloading) – and splits its proceeds 50/50 with its artists. Again, recent sales numbers are scarce, but based on past numbers, the site seems to be doing well and growing, with several of its artists earning close to 5 figures a year.

Over at Music Think Tank again, Derek Sivers today offered this anecdote illustrating a band using the “pay what you want” model:

Terry McBride of Nettwerk told this story at a recent conference:

A band he was managing was doing the usual thing of selling CDs for $15. They’d mention it once or twice from the stage, and sell about $300 per night on average.

He asked them to try a completely different approach:

1. Say to the audience, “It’s really important to us that you have our CD. We worked so hard on it and are so proud of it, that we want you to have it, no matter what. Pay what you want, but even if you have no money, please take one tonight.”
2. Mention this again before the end of the show, adding, “Please, nobody leave here tonight without getting a copy of our CD. We’ve shared this great show together so it would mean a lot to us if you’d take one.”

It changes the request from a commerical pitch to an emotional connection. (Replace market mindset with social mindset!) Allowing them to get a CD for no money just reinforces that.

Terry said that the band did this for a while, and soon they were selling about$1200 per night on average, even including those people who took it for free! I think the average selling price was about $10.

But the important part came next:

Because every person left each show with a CD, they were more likely to remember who they saw, tell friends about it, listen to it later, and become an even bigger fan afterwards.

Then, when the band came back to a town where they had insisted that everyone take a CD, attendance at those shows doubled! The people that took a CD became long-term fans and brought their friends to future shows.

My advice for independent musicians is to not dismiss the “pay what you want” idea right off the bat. Keep it in your toolbox of business models. It very well may be viable, and may actually lead to more success than going the traditional route in certain situations.

Image courtesy of BockBilbo