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38% of Downloaders Paid For Radiohead Album
brajesh sends us to Comscore for a followup on the earlier discussion of Radiohead making $6-$10 million on their name-your-own-cost album "In Rainbows" — with the average price paid being between $5 and $8. Comscore analyzes the numbers: "During the first 29 days of October, 1.2 million people worldwide visited the 'In Rainbows' site, with a significant percentage of visitors ultimately downloading the album. The study showed that 38 percent of global downloaders of the album willingly paid to do so, with the remaining 62 percent choosing to pay nothing... Of those who were willing to pay, the largest percentage (17 percent) paid less than $4. However, a significant percentage (12 percent) were willing to pay between $8-$12, or approximately the cost to download a typical album via iTunes, and these consumers accounted for more than half (52 percent) of all sales in dollars."
ANTI records which has some pretty big names pays 50%, does promotion and distribution but doesn't cover recording costs.
Here, check my math:
38% of 1.2 million people pay $6 = $2.736 million.
According to this article http://www.billboard.com/bbcom/search/google/article_display.jsp?vnu_content_id=1001017730, their last album sold over 900,000 copies in the US alone, so let's guess they did 1.5 million (which would be a pretty poor showing, internationally). At $2/album from the major that means that they'd get $3 million.
So depending on whether the download cannibalized their CD sales this time around, they might come out slightly ahead.
I worked for Universal Music Group for a while, building a royalty calculation engine, and I can tell you that your experience is the norm. I got different numbers from different sources, but between 80% and 95% of albums never recoup, so the artists never see any money outside of their advance (if they got one). The ideal for the record companies is to keep it this way, so they can give the band as little in advances as they can get away with, and keep all of the rest.
I would suggest Donald Passman's book All You Need to Know About the Music BusinessSeconded. Great book. It's actually the one that UMG execs handed me and told me to read for background information.
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I feel I should point out that V2 didn't give us an advance--not one penny. Our record label paid the entire cost of the recording and PAID them for distribution (somewhere around $10k I believe). There's no way they put $30,000 worth of effort into selling our record. Those people are crooks and always have been. Which is not to suggest that I think *you* are a crook - on the contrary. A very dear friend of mine used to work for Interscope and described to me how a certain nameless exec would ask for a print of EVERY PHOTO from a photo shoot just so he didn't have to browse them on a computer. Cost: $10,000. These companies are toast if they don't change. You don't need a million-dollar Neve board to record a record any more. You don't need a distribution company to reach your audience. It is with great pleasure that I watch the demise of this corrupt industry. Perhaps they will find some way to continue existing as providers of publicity.
"In this scenario, they're responsible for all the marketing, recording, and distribution costs. In the scenario where they're getting $2/album they don't have to foot any of those bills."
Huh? Typical music contacts often give you a set amount of money for a record and then X$ per CD, they then charge you for marketing, recording and distribution. so often an artist will come out ahead only if they sell X number of CDs to make up for those charges.
There are methodologies for attracting a fan base in this new Internet model. And if the OP's statistics generalize (that 7% of people who bother downloading your album decide to donate ~$6.80 on average), then moderately successful bands can indeed make some money with this model. (Not to mention live performances, etc.)
Actually, record companies advance the band up front, which isn't quite the same as paying them. The advance is paid out of the royalties of the album sales, so in essence, the record company is just giving them a loan. The record companies try to recoup 100% of all expenses out of royalties; this includes music videos, tours, production costs, many forms of advertising, and more. Even the band's producer is paid by the band out of a 100% recouped advance. About the only things that aren't 100% recoupable are actual pressing costs and distribution. Music publishing, you see, has very little to do with most other forms of publishing.
I recommend Donald Passman's "All You Need To Know About the Music Business" for a good overview of what record companies actually do, what the average royalties per CD sold actually are, and how recoupable advances can drive popular bands into bankruptcy. You'll discover all sorts of fun tidbits, like the 20% breakage fee on royalties (a holdover from the days of vinyl that bands are stuck with now). No, I'm not shilling -- I've read it, and it's quite enlightening.
To get back to the overriding question, the answer is almost assuredly yes. Radiohead most likely made more money off the download sales than they would have off a physical CD sale, since their royalties per CD are likely less than $3.
The Freelance Wizard
...And with all the free publicity, EMI (their old label) has decided to cash in-- selling their back catalog on a USB drive that retails for TWICE what the CD box set costs.To be fair, there is a small diff...
That USB drive contains .wav files - that is, an uncompressed, unadultered, 'yes-you-can-tear-that-bitch-up-without-losing-signal' format.
For someone doing mixes and modding, that's (almost) a godsend format. Not as good as the pure MOD files mind, but nice 2nd place to 'em.
(of course, IIRC Trent Reznor gave a lot of his away in MOD formats --for free-- back in the day, so...)
Quo usque tandem abutere, Nimbus, patientia nostra?
You have no clue about the music business. Try again
"When I first heard Daydream Nation it quite frankly scared the living shit out of me." -- Matthew Stearns
Nope. Many of those bills are recouped out of artist royalties. Marketing is usually split, often 50/50, recording is almost always 100% recoupable as are all other production costs (artwork, travel expenses, the time of the label personnel that were involved -- and some that weren't, etc.) and distribution costs are taken off the top before artist royalties are calculated. Distribution costs are also artificially boosted in various ways, to minimize the artist royalty.
My favorite technique is "breakage". See, back in the day of shellac records (before vinyl!), records were very fragile and lots of them got broken during shipment. Rather than address the complexity and fraud opportunities of getting retailers to report how many records arrived broken, the labels just offered to take 10% (IIRC) off the top for "breakage". This discount was also applied when calculating artist royalties, obviously. When vinyl was introduced, this structure was retained, even though breakage almost completely disappeared. When 8-track tapes, cassette tapes and then CDs came on the market breakage simply didn't happen any more, but the structure was retained. Along the way, the labels renegotiated their contracts with retailers and removed the breakage discount on the -- quite reasonable -- grounds that it didn't happen any more and when it did the shippers were responsible. However, they *still* apply the breakage discount to artist royalties. Nice, huh?
Note to ACs: I usually delete AC replies without reading them. If you want to talk to me, log in.
Not far off:
http://archive.salon.com/tech/feature/2000/06/14/love/
http://www.negativland.com/albini.html
"When I first heard Daydream Nation it quite frankly scared the living shit out of me." -- Matthew Stearns
That's how with the RIAA style creative accounting a band can have a certified platinum album and never recieve a royalty check.
TFA seems to be comparing Radiohead's model to iTunes and traditional record sales, which is a bit confusing. Given that it doesn't take sales of the disks into account, the only fair comparison would be strictly between Radiohead and iTunes/<your_favourite_provider_of_lossy_compressed_files>. On those terms I would be surprised if this new model isn't hugely more profitable for Radiohead and cheaper for consumers.
If you take a different view of their model and consider the downloads to be predominantly promotional, they have more than paid for their promotional material before the actual product even ships. They have also made more than enough to pay for pressing upfront as well as any further promotion.
While a lot of the recent publicity is generated by novelty, I think online busking is an excellent long term method of promoting quality recordings.
The disc sets sell at 40 pounds each, from which they have to pay for pressing, printing, handling and shipping. I don't know what it's like in the UK, but I know locally 40 pounds (~$A90) would easily cover those costs for runs as small as 1000 and internationally they will probably sell a lot more than that. Radiohead has elimitated the risk of over-producing discs by offering a pre-order model and they don't have to give 98-99% to a record company.
I don't think TFA can make sensible analysis until after the discs ship. It's definitely an interesting model.
I don't therefore I'm not.
I "purchased" twice (first for free, then I paid $8) but only downloaded once, figuring that they're probably paying for bandwidth.
"Scud Storm!" -- Jeremy of PurePwnage.com
Whoa; Completely wrong.
Did they 'break' when they were vinyl? No. BUT, I worked for major chains, pal, and the automatic returns system (accounting) was valid because an enormous number of records ended up as returns. You have no idea what you're talking about. Big stores usually had staff whose sole purpose was to validate returns. The main cause of the returns? Warpage. And the reason for that? Two things: Thinner LPs, with less actual vinyl, and the killer cause: The major labels never veered away from tight 'shrink-wrapping', which, in combination with the standard 60 LPs to a box in trucks with higher heat... equaled Warp City.
On big number pressings, where sales were easily predicted at hundreds of thousands of units, the returns could hit 15-20% easily in Southern California, which makes the notion, that the "10% breakage" policy was an unnecessary artifact from the past, all the way wrong.
I worked, briefly, all over Southern Cali, for WEA, doing Inventory, and part of it was dealing with returns. Did the labels mitigate some of the loss as part of overall contract strategy? Sure. But a mitigated LOSS, is still a LOSS. And trust me, when we shipped X number of units we wanted wholsale times X back. Nobody wanted to lose shit, mitigated or not. That's Business 101. Nice paranoid try, though.
Sorry if I sound harsh. But I hate the way the labels have treated artists and the fans. I always have. But we can expose these people, and their methods by stating the facts and telling the truth. It's not valid to get the facts wrong in pursuit of any 'point' one is trying to make. I hated the 'returns' thing, back in the day, because it was simply more evidence of the cheap-assed cynical methods that were being employed and 'perfected' before, during and after my stint in that part of the biz, before I went back to 'just' being a working, touring musician.