How do acts establish a direct connection with their fanbase? How do they entice listeners to join their e-mail list, with authentic e-mail addresses? That’s the number one lesson of Radiohead’s “In Rainbows.” Give away something desirable and you get the right to make contact with your fans thereafter. At MIDEM the co-manager of Radiohead said the “In Rainbows” release allowed the band to collect 3 million e-mail addresses, and ultimately play to 60,000 in San Francisco as opposed to 25,000 the previous time through. And isn’t live where it’s at?

Well, folks, I feel vindicated. As I previously wrote,

I think people are missing a crucial point about Radiohead’s “name your own price” strategy. It is not all about giving listeners what they want, namely DRM-free music that’s free (or nearly so); it is also about giving Radiohead something it apparently wants (and that it could not get working through a major label): deep information about its listener population beyond the hard-core fans (i.e., those who’ve already joined the Radiohead fan club), including in particular information about which listeners are good candidates for up-selling strategies aimed to move more Radiohead merchandise, tickets, and other Radiohead-related products and services.

This was at a time when Lefsetz (among others) was deriding Radiohead’s actions as “playing for tips,” a notion I thought was particularly wrong-headed. I don’t claim to be any great expert on the music business, but I think I called this one exactly right.

soroush yousefi (soroush_inblack@yahoo.com) - 2009-03-21 19:00

i am on of your biggest fans in iran. i love your group i’v listen tracks from pablo honey to rainbows. i was jus giving your group a segestion .i’m saying that maybe you want to replace your group with young and talented rockers to do sth make the group live for ever. i’v been working in a rock band in iran. i’m the singer and ‘im 18. i’m waiting to know what you think about my idea.

beachdog67[club2000] (beachdog67@gmail.com) - 2009-05-07 14:15

Mighty quiet around the halls of Swindleeeee!!!!! these days. Woof!

hecker - 2009-05-07 18:06

beachdog67: Yeah, unfortunately work has gotten in the way of Swindleeeee!!!!! goodness :-(

Put simply, Radiohead is making the following offer: We will provide you a digital album at a price that you choose, and in return you will help us to more effectively sell you something else at a price that we choose. Whatever this is, I don’t think it’s asking for tips. So could we kill this analogy please?

James - 2007-10-05 11:58

Hmmm, interesting concept that is being used more of a loss leader than anything. Funny thing is how much bad info they will get in this campaign with throwaway email addresses, disposable telephone numbers and addresses for the local landfill. Then again, like any marketing campaign, the conversion numbers are razor thin. But, yeah, tips? No, not really.

Frank Hecker - 2007-10-05 12:50

Re bad info: First, we don’t know how much bad info people will really submit. It’s possible that people interested in this offer will be less motivated to provide bogus info than one might think. But in any case bad info is not really a problem if it can be easily detected and scrubbed. As I noted in my original post, people using throwaway email addresses will cause bounces at some point in the future and can be purged, while bogus postal addresses can be detected (at least in theory) when doing credit card processing. If you deliberately provide bogus information then you are not a good candidate for up-selling, and Radiohead would want to know that as soon as possible; bogus information can thus be viewed as a signal of prospect interest, just like the chosen price.

Katie (kmw51688@yahoo.com) - 2007-10-06 15:01

I really, really doubt this is the reason Radiohead is doing this. If you don’t want to give any credit card info, you don’t have to. If you just want the album, put in 0.00 and you’re done. This isn’t some kind of massive conspiracy on Radiohead’s part to make some kind of giant marketing list.

Frank Hecker - 2007-10-06 21:13

Katie: Even someone who pays nothing has to provide a working email address, and I doubt everyone who does so is going to use a throwaway address. So at a minimum Radiohead comes out ahead of where they’d be if people picked up the album via P2P: they have at least some opportunity to do follow-up marketing. And note that providing permission for follow-up marketing is *not* optional; you can’t check out until you accept the terms of service. As to the “conspiracy theory”, I’m not claiming that Radiohead’s doing anything nefarious. But if they truly wanted to give the album away with no strings attached then they could have just put the MP3 files on the net for unrestricted download, and then provided a separate option to allow users to pay something if they wished. (This is the real “tip jar” option, as noted by Digital Audio Insider.)

First, I think people are missing a crucial point about Radiohead’s “name your own price” strategy. It is not all about giving listeners what they want, namely DRM-free music that’s free (or nearly so); it is also about giving Radiohead something it apparently wants (and that it could not get working through a major label): deep information about its listener population beyond the hard-core fans (i.e., those who’ve already joined the Radiohead fan club), including in particular information about which listeners are good candidates for up-selling strategies aimed to move more Radiohead merchandise, tickets, and other Radiohead-related products and services.

Consider: The minimum price of the new Radiohead album isn’t really 1p (or 0p), and it really isn’t “up to you.” Part of the price for getting the album is supplying your name, email address, physical address, and other contact information, plus permission to have Radiohead send you newsletters and merchandise and ticket offers. (Read the terms of service, folks.) Note that Radiohead has structured the offer so that this information has a high probability of being valid and not faked or fraudulent:

• People will not supply fake email addresses, since they need to receive the email with the information about how to download the digital album when it becomes available. (Incidentally, this helps explains why this was structured as a pre-release offering: If people could get the downloads immediately then they’d have less motivation to give a valid email address.) Some people of course could be using “throwaway” addresses, but probably only a very small fraction of people would bother to do this; those who do try to deliberately prevent Radiohead from emailing them later are obviously not good candidates for future Radiohead offers, and can be flagged as such later when future emails to them bounce.
• People have to supply a valid credit card, and this enables a cross-check against the postal addresses they provide (which will typically be the billing addresses for the cards). Again, some small fraction of people will try to “beat the system,” most notably by using stolen credit cards. However the low price would likely reduce the number of people doing this: Why commit credit card fraud for something that costs less than $1 (including processing fees)? Of the remaining people who do commit fraud, some may be detected, the associated charges reversed, and the supplied (invalid) contact information flushed from Radiohead’s database. (I presume Radiohead and its credit card processor anticipated a fair amount of potential fraud, and this helped dictate the size of the credit card processing fee.) Of those whose fraud goes undetected, most if not all probably supplied 0p or 1p as the album price, and will be flagged appropriately as noted below.

As a result of this offer Radiohead will thus acquire a massive listener list with verified (or at least potentially verifiable) information about how to reach those listeners via email, postal mail, or phone. But wait, there’s more:

Because listeners can name their own price, Radiohead also gets valuable information about the level of a listener’s devotion to Radiohead’s music and their willingness to provide their hard-earned cash to support Radiohead’s creation of that music. (Note that these are not the same things: Someone can be a devoted fan but not a good customer—or, at least, not a good customer yet.) Radiohead can then use this information to tailor its direct marketing efforts to these listeners.

In practice those who responded to Radiohead’s offer for just the digital release (i.e., excluding people who got the digital release along with the discbox) probably fall into three general categories, and marketing to the categories can be prioritized accordingly:

• Those who paid 0p or 1p, or some other miniscule amount (under $1). These people are likely very casual fans of Radiohead or people who are not Radiohead listeners at all but were just attracted by the novelty of the offer, perhaps mixed in with a few people who really like Radiohead but have absolutely no money to spend. For the most part these people are not likely prospects for becoming good Radiohead customers; however at a minimum they might become serious Radiohead fans and help build good word of mouth around Radiohead releases.
• Those who paid some fraction of current prices for digital albums, say in the $2-5 range. These are probably people who like Radiohead but are not dedicated enough fans to pay full price. (I happen to fall into this category myself; I paid $4 for the album.) These people are probably not real good prospects for buying Radiohead merchandise, tickets, etc., but at least this offer captures incremental revenue from this group that Radiohead would not have otherwise seen with a traditional major label “everybody must pay full price” strategy. And of course Radiohead still has a chance to try and up-sell these listeners in the future.
• Those who were willing to pay a price roughly comparable to what they would have paid through the iTunes Store or Amazon, or even somewhat higher, say in the $8-12 range. These are probably serious Radiohead fans who are willing to go out of their way to support the band, especially when they can be assured that all their money is going to the band itself and not to the label. These people are prime candidates for marketing efforts aimed at turning them into truly dedicated fans and (even more important) lucrative customers for Radiohead physical merchandise and live shows.

So Radiohead not only gets a high-quality listener database, but it now has everything it needs to do highly-targeted marketing to its listeners, including marketing targeted to listeners in particular geographic areas. This is why I partially disagree with Bob Lefsetz’s comment that Radiohead “look like shitty businessmen”; no, they just look like shitty e-commerce site operators. However in my opinion the underlying business strategy is a brilliant way to maximize potential revenue in a way that also respects potential customers, and quite possibly will be the model for how at least established acts interact with their listeners (not just their hard-core fans) in the future.

matthew - 2007-10-05 05:54

This is a totally authentic piece, very accurate and on the money. Most people just don’t understand economics. Most business graduates fall into this category. Radiohead is going to make an insane amount of money on this deal - even at $1 a pop. The music is digital and being stored on a server somewhere - it costs them next to nothing to distribute and diminishes with each purchase.

Dwane Mann (europasol1@yahoo.com) - 2007-10-12 13:44

Are the things that they are doing wrong? Their business decision can maximize their outcome.

Michael (n@na.com) - 2007-11-17 02:50

One thing about the whole hubub about this album that people are missing is that it is really killer. This album has the most listening value of any album since the 70s.