In 2007, Radiohead had a problem. Like many bands, they were facing the global issue of music piracy. The traditional model of music creation, distribution and monetisation was broken. So they decided to fix it by giving away their new album, In Rainbows, for free.
That was more than ten years ago now. And Radiohead made more money from giving the album away for free than they had made from all previous albums combined.
So how did offering something for free become such a great business tactic?
It worked because they had a Tribe. A loyal base of followers who loved them so much that they happily downloaded the album, then the ones who really cared paid using the Pay What You Want option.
Radiohead gave their fans the album for free, then simply asked them to pay what they thought the music was worth.
The official figures have never been revealed, though various estimates abound on Google.
“If Radiohead had sold this album through a recording company, price of this album would be about $14.99 and Radiohead would receive about 15% of this total ($2.25). Radiohead’s share would be even less ($1.40) if this album was sold via iTunes. Since, they opted with PWYW pricing strategy, 38% who downloaded the album paid something, at an average payment of $6. This resulted in an average payment of $2.26 across everyone who downloaded this album. 62% people opted to download for free.”
Many people thought that this was an insane idea at the time. The traditional music industry, as you’d expect, were violently opposed. Indeed even other artists thought it a bad idea.
Gene Simmons of Kiss, for example, is quoted as saying:
“That’s not a business model that works. I open a store and say ‘Come on in and pay whatever you want.’ Are you on fucking crack? Do you really believe that’s a business model that works?”
Thom Yorke, Radiohead’s front man pointed out that the band were losing huge amounts of money from illegal download sites such as Bit Torrent.
Therefore, they knew they had to do something.
So by acknowledging that people were going to do this anyway and that, in practical terms, it was impossible to stop, why not simply take the people who would use Bit Torrent and invite them to the Radiohead site to download for free?
Statistics show that in fact, Bit Torrent still accounted for many more downloads that the official Radiohead site, even with the free offer. So the problem hadn’t gone away. However, by going direct to their fans, they managed to attract a slice of that download traffic and appeal to enough people to make money.
So how did this actually work in practice? And why was it so successful?
The offer was based upon a Pay What You Want offer. In effect, an honesty box where you could tip the band and pay whatever you wished.
However, additionally, they also had various other paid options, all the way up to an $80 physical box set. They sold more than 100,000 of those.
There was no middle man. Unlike a traditional music album release, there was no music industry giant to take a share. The band collected the lions’ share of the income. So while the money from the Pay What You Want stream was lower than a physical album sale, they had nobody else to take a slice.
And finally, the most important thing of all.
They had a Tribe.
I wouldn’t suggest for a moment that this business model will work every time. Indeed I believe that Radiohead may not have done it since.
And I certainly don’t think a band just starting out could possibly succeed like this.
However, Radiohead had a Tribe.
And the Tribe displayed their loyalty when enough of them were emotionally engaged with the band to voluntarily pay for something, even though they weren’t being asked to and could have had it for free. They did it because they liked them and thought it was a good thing to do.
So what can you learn from Radiohead’s experiment?
Firstly, that the band were savvy enough to realise that the business model they were operating in was broken. Something had to be done. Ten years later, the High Street superstores are finally waking up to the same problem. In the UK, Marks and Spencer Chairman Archie Norman has recently been quoted as saying “The business is on a burning platform.”
Radiohead were ten years ahead of Marks and Spencer.
Unlike the huge retail chains, Radiohead actually did something. For sure, it was a bold strategy, however the single biggest thing that they did was to start accepting that the business model they were historically attached to was no longer viable and that it had to change.
And that’s probably the single most important step they took. What can you do to take action against the market forces in your business?
Secondly, they turned to their Tribe of followers and appealed to their better nature.
Thanks to social media and the band’s large following, they were able to bypass the Gatekeepers and go direct to the fans. And this is very important. This ONLY worked because of that audience and following.
This goes back to one of the core concepts I was taught many, many years ago about building long term relationships and selling.
You may well be sitting here in January 2019, worrying about your own business, your own offer, what the internet is doing to the way you work.
I’m not saying you should start giving away your inventory for free. Far from it.
So the question is.
What are you doing about building your own Tribe?