Radiohead makes millions with free digital content

While the AP headline may be “Most Fans Paid $0 for Radiohead Album”, half the real story is buried in the piece and the other half isn’t really there at all.

In October, Radiohead offered up their latest release “In Rainbows” as a digital download on their website with a “fill in the blank” price to be determined by the customer. Customers could pay whatever – including $0 – that they felt the music was worth to them.

Now the data is in and 38% of the people worldwide, when faced with a legitimate option to pay nothing actually paid an average of $6 for the music. The average for U.S. purchases was $8.

That is an astounding affirmation of the “pay what you like” or “donationware” model.

The first piece of Radiohead’s Web empire

Let’s look at what Radiohead got out of their viral marketing efforts so far:

  • Their website currently has 102,420 inbound links as reported by Yahoo. Pretty nice for a domain that was purchased under 6 months ago.
  • Google is currently reporting a toolbar PageRank of 6, for whatever that is still worth.
  • Technorati lists that the site has been blogged about over 8,000 times.
  • 1.2 million people visited the website to download their “album”.
  • If we assume that a million of those followed through the download process, it means that Radiohead has made about $2,280,000 in sales thusfar – with almost no real overhead except for bandwidth.
  • Perhaps a million people listening to their music – this is a great foundation for their next release as long as the music is quality (I like it anyway!).

This is a great foundation on the Web for them to build on with future releases.

That $2,280,000 is almost pure profit. No packaging, no advertising, no hands in Radiohead’s collective pockets.

Not bad considering that usually only cents on the dollar of a CDs purchase price typically ever make it to the musicians themselves.

The big question is with the ability for artists to produce, distribute and virally promote their music themselves how long do the record companies have left?