Time Magazine published an article shortly after Radiohead made their announcement exploring their decision and what impact it will have on the world of music. Radiohead had utilized a record label in the past, but their contract with EMI/Capitol was up after their last album and the speculation was that they would switch labels for their 7th album. Then frontman Tom Yorke said this:
“I like the people at our record company, but the time is at hand when you
have to ask why anyone needs one. And, yes, it probably would give us some
perverse pleasure to say ‘F___ you’ to this decaying business model.”
Then speculation turned to RH self-releasing their new album. But no one saw this move coming. The reaction from the record label industry was predictably grim. One exec said,
“This feels like yet another death knell. If the best band in the world
doesn’t want a part of us, I’m not sure what’s left for this business.”
It’s true. When a band is on a major record label, their take home profits from an album are about 30% of the total revenue generated by the album. The other 70% go towards the various services afforded by the label. Now granted, up and coming bands do not have the luxury of being the “biggest band in the world”, nor the ability distribute an album for free. They need exposure and that’s why they go to a label. However, with the age of the internet, anyone can do their own promotions and gain a loyal fanbase without ever signing a dotted line. There are many bands that have made it big without being played on pop radio or having a song in an iPod commercial. They know that the fans drive the music, not the labels. Alienate your fans and you have nothing to survive on.
Radiohead has decided that rather than forfeit 70% of their profits, they will instead bank on the fact that their fans will support them if given the opportunity. It’s these anticipated returns that gave them the guts to take the gamble and create a new business model. Anticipated returns may also come in the form of concert revenues. Prince was derided by record labels for releasing copies of his newest album for free in the newspaper in London. He then promptly sold out 21 consecutive concerts in London, pulling in far more cash than traditional CD sales would have.
Record labels are by definition middle men. They are taking someone else’s product and marketing and selling it for them. When artists take control of their own marketing and sales, the labels cry foul. When fans download the songs free on the web, it’s the labels that level huge lawsuits against them not the artists (with the exception of Metallica, who incidentally tanked after suing their fans. Coincidence??). Artists understand that if they produce music that fans want to hear, the fans will pay to hear it. Labels don’t care about what fans want to hear, because in their experience people will listen to anything that is forced on them hard enough. So labels rely on their buddies in radio and TV to overplay a song until it’s being hummed by teens who them buy it at Target for $10. When a band as big as Radiohead does something like this and sets a new precident that other bands will follow, the labels get scared, but they still don’t understand their own fatal flaw.
For instance, British music zine NME published this article loudly wondering if the new RH album will be eligible for the music charts! Talk about missing the point completely! Radiohead doesn’t care about the charts! This is an example of the industry still thinking that they are in charge of other people’s art. “Without music charts, how will people know what music is good right now???” The industry needs to realize that people can listen to any album at any time online and decide for themselves if they like it or not. That’s what RH understands and is about to prove.
Early estimates show that most people are paying $10 to download the new album, the typical price of a CD at Best Buy or on iTunes. The fans are showing that they care about the music and about supporting the band making it, not about marketing. The RH website crashed on Monday due to the high volume of orders, all on one day of marketing. The digital album will have had ten full days of marketing when it is finally made available. Most label-backed albums get months of very expensive marketing before their street date. Which is proving to be more cost effective?
Mark this down: the day the recording industry changed forever was October 1st, 2007. This is only the beginning.