Business Lessons from Radiohead
The rock band Radiohead made headlines earlier this year by releasing its new album on its Web site and letting fans choose the price they’d pay to download it. Now, Radiohead’s front man says that the band made more money from the name-your-own price release than all its previous online sales combined — offering businesses a glimpse at how the Internet is turning business models on their heads.
The Internet is arguably the world’s most efficient distribution channel, and it’s no secret that this has disrupted industries with products that can be digitized. The Business Technology Blog is a big supporter of anyone who embraces the fact that their industry is changing and is willing to experiment with new ways of doing business. (No surprise, seeing as this is a blog.) That’s why we’ve been fascinated by Radiohead’s self-release and pricing model.
In the months since the release, there’s been a steady stream of predictions and forecasts about how well the band has done. The most definitive came from comScore, a company that measures Internet traffic, which said that 62% of people who downloaded the album didn’t pay a thing for it. But that’s OK: The band doesn’t rely on album sales to make money anymore, according to an interview in Wired.
In the interview, former Talking Heads singer David Byrne and Radiohead front man Thom Yorke talk about the economics of digital music and how the Internet changes the way bands make money. One takeaway with broader implications for any business: Yorke and Byrne say that with the rise of the Internet and digital distribution of their products – i.e. the music they make – aren’t what make them money, anymore. Instead they use the music as a marketing tool and make money through licensing deals, concerts and the like.
Incidentally, Yorke addresses the issue of the name-your-own price release head on: “In terms of digital income, we’ve made more money out of this record than out of all the other Radiohead albums put together, forever — in terms of anything on the Net,” he says.
When I first heard about Radiohead’s move on NPR a few months ago I knew it was going to be a success. Web 2.0, user generated content, open source, peer-to-peer file sharing etc. all point to the growing communal inclinations of our society. The tide is changing and yesterday’s power-brokers are today’s paupers. I mean, we live in an age where a post on Digg can reach more people than all major networks and newspapers combined (and arguably from a more sophisticated audience as well)
Genuinely successful business people have always known that if you offer true value, publicity, money, fame, and happiness will naturally follow. ‘Pay it forward’ works. The writing is on the wall. People who fail to see it will go down with the Dodo bird.
Raza Imam
http://BoycottSoftwareSweatshops.com
WSJ.com's business-technology blog focuses on the technology that businesses use -- the hardware, software, services and know-how that can make or break a business -- and on the people who deploy that technology. The lead writer is Ben Worthen, who joined The Wall Street Journal from CIO Magazine. The blog also includes contributions from other reporters and editors at the Journal, WSJ.com and Dow Jones Newswires. Have a comment? Write to 
