inputs/outputs

Radiohead has really started something with their “pay whatever you want” system. It was astounding to watch other musicians follow in their path (Jamiroquai, Oasis, etc) but it’s starting to spread into other industries. Paste Magazine is now offering a “pay whatever you want” subscription fee (with a minimum of $1).

Granted, a magazine based on music isn’t a leap away from CDs, but what if this was the new way of doing business? What if we could decide how much we wanted to spend on everything?

My guess: it would separate the good marketers from the bad ones. The bad marketers would become beggars, while the good marketers would become friends. The success of a business would rely on the relationship with the customer, and if the relationship was good and natural, the business would prosper.

The bad marketers would be creating powerpoints to train their employees on how to be effective customer service agents. The good marketers wouldn’t need powerpoints - they would already have the inherent skills necessary to establish good communication with consumers. The bad marketer would find any way to contact you, the good marketers would create value to draw you in.

Not everyone can do what Radiohead did, not immediately anyway. This is because you can’t really teach employees how to be good at establishing relationships and telling stories. Your company or product has to have inherent value before you even make a penny.

This is why an album that no one had heard yet generated so much revenue. The relationship with the fans, and the inherent value that the band had established drew everyone in. I want that same experience again and again with all of the products that I buy.

In my post about Radiohead, I had hoped that other bands would follow suit and start releasing music for free. Nine Inch Nails, Jamiroquai, and Oasis are all bands that have decided to give away their upcoming albums, or at least have considered it. It makes sense. This is a tipping point.

Most new bands sign record labels because it seems makes sense, even in the world of digital music. But it only seems to make sense. Most artists probably know that signing with a record label in order to finance the production of physical CDs is a risky investment, especially with the way the industry is currently going. At the same time, any artist or band that is interested in turning a profit doesn’t want the responsibility of being the first to explore the outrageous option of releasing an album for free online, especially when the success of such a project is so fragile.

But that fragility is only due to the fact that no popular band, before Radiohead, had taken the great leap. Because even though the arists know that they could get just as much PR riding on the energy of their live shows, the fans, viral/grassroots marketing, they can’t bring themselves to give up the CD. It’s unexplored terrain.

Now that the wall has been broken, and other bands are going to follow, the terrain will almost definitely change. Here are some possible scenarios.

1. Perhaps the big boys who have established careers won’t mind giving up the CD sales to get past the bureaucracy, but what about the newer artists? Maybe giving away the music for free will provide more exposure, and will get more people to come to the shows. And if it doesn’t, will we be forced to pay more for tickets (which are already pretty expensive)?

2. A&R execs don’t get to decide who’s popular anymore, the internet does. The internet decided that Tay Zonday was popular, and they decided that Britney Spears was fat. Does this mean that, in order to be successful, you should be a little sensational or remarkable? It sure would filter out a lot of the garbage, but it might leave out some of the gems that are handpicked.

3. And there’s the issue of noise. Right now, two or three bands are giving away music for free, and it’s remarkable because the terrain is unexplored. I’m sure that people have downloaded the music just based on the fact that it’s freely available and completely legal, but try to imagine a world where all music was free. On one hand, if a lot of people like a certain band, their music will spread to a very large audience. But I may never hear about a band that fills a niche genre for a smaller market unless I’m involved with a community of listeners in that market. And the typical user doesn’t necessarily have time to commit to that sort of thing.

4 . Along the same lines, what happens to radio, the so-called “mainstream” and Top 40? I’m thinking that not much will change here. Ideally, Pandora would become a major player and your radios would tailor the music it plays to your tastes. That’s right - no more AM, no more FM, just total internet radio. Realistically, money will probably play a role in the exposure of bands through a push marketing strategy (the way that radio currently is). This means that music PR firms aren’t dead. It also might turn into something that’s socially based - for instance, Radiohead is asking its listeners to decide how much their album is worth. Could radio turn into a collection of the songs for which people paid the most?

The fact is that sooner or later, recordings will end up being free. The combination of Radiohead releasing an album for free (technically), Amazon moving towards non-DRM music, and the way that the internet works, it will be a slow but steady move to the day that all recordings of music will be worth as much as you want them to be.

The interesting part will be seeing how the artists create enough value in their artistry to make sure that they can make a living. This may be a case of strongest-survive, but it’s needed. Capital is what make talentless bands popular and rich. I can’t wait to see what happens when it all comes down to the tunes.

My friend PJ went on a trip to Australia and told me about a bar-owner who allowed customers to pay “whatever they wanted” when they had finished their drinks. The bar is still in business, and PJ ended up spending some good cash there. The bar-owner’s ability to stay afloat has to do with the type of people who come to his bar, of course. It’s the same with most industries: we generally pay what we feel a good or service is worth. If it’s not worth the price, we stop buying until the price is right.

This particular Australian just happened to trust his customers. In a way, this is a brilliant bit of marketing. Radiohead is releasing a new album in 10 days, and their marketing will not be done through any label or PR firm. They will rely fully on the relationship they have with their fans.

Ever since we figured out how to squeeze audio into a tiny file playable on any computer with a soundcard, we started breaking down the walls of the music industry. The industry leaders stood strong as Napster, CD Burning, MySpace, BitTorrent, iTunes, and other technologies started tearing down their walls, leaving them cold and naked inside.

The system consists of a listener who buys a compact disc, whose money goes to an assortment of companies and people. Everyone from the people who manufactured the disc to the artist who designed the cover gets their cut, leaving the artist with a small amount for themselves. Digital music seemed so detrimental to this model because without a physical CD, the good became intangible. The industry, after a lot of pushing, finally embraced digital downloading, if they could restrict the sharing of files with DRM.

If Amazon broke the rules earlier by selling cheaper, quality, non-DRM digital downloads, Radiohead just rewrote the rules. The release of their new album was announced today, as well as the news of how it will be distributed. It’s available for download only, and it costs as much as you feel the album is worth. Yes, this means you can enter in any value when you order the downloads. They’re not signed, so they’re probably seeing most of the cash you spend on them (or they’re at least seeing more than they would on a label).

My guess is that most people will choose to get it for free. My second guess is that many will pay more than they normally would for a CD. It probably won’t be enough to outweigh the amount of people getting it for free, but it doesn’t matter. Radiohead will make a profit, and they will do so without a label backing them.

They won’t even need to pay for traditional advertising. They won’t need posters, banner ads, promo CDs, or anything of the sort. The internet’s social networks will carry the entire thing, and this remarkable story will spread like wildfire in the next week. Their message will be clear: we don’t need you, music industry.

Way to go, guys.

EDIT:  It would be cool if Radiohead gave this concept a name, like “variable value” or something.  That way, other bands can copy them without feeling like poseurs.