Two weeks ago, the British rock band Radiohead announced that they were releasing their long-anticipated new album in ten days time. Ordinarily, when a band finishes an album, it takes three or four months to get it into stores, but Radiohead accelerated this process by self-releasing their new songs, online. If avoiding the record labels altogether wasnt enough, the band made even more of a splash by asking fans to name their own price for the digital download.
Innosight President Scott Anthony posted his take on Radioheads innovative distribution model over at the Harvard Business School Publishing website. In brief, Scott characterizes the scheme as disruptive, and points out that its impressive and immediate success ought to be instructive to the music industry, which is still reeling from the disruptive onslaught of digital music:
"Interestingly enough, early data suggests that customers are paying comparable prices to what they would pay in stores or online (full disclosure, the author ponied up $10 for the digital download). This is great news for Radiohead who doesnt have to split revenue with distributors and the record label. Early estimates pegged the groups first day take at around $10 million from sales of 1.2 million albums.
Not only will this effort provide a bonanza of data for economists, it is yet another nail in the disruptive coffin of the major music labels.
Historically, record labels provided a very valuable set of services. They scoured the world to identify up-and-coming artists. They helped those artists build fan bases. And they provided different ways for musicians to connect with that fan base.
New mechanisms allow the collective to identify new artists. For example, buzz-worthy bands start attracting friends and friends-of-friends on News Corps MySpace. Last.FM (purchased earlier this year by CBS Interactive for around $300 million) keys users into obscure artists they might like based on their preferences. This democratizing of talent discovery mimics changes in the lending industry, where credit scoring techniques obviated loan officers who used intuition and judgment to make lending decisions. Radiohead is demonstrating the power of a direct model in the music industry.
The genius behind Radioheads move is that they are capitalizing on the revolution in access enabled by digital distribution a revolution that has rapidly dilated the market for non-mainstream music. Back in the go-go 90s, when, in my teenage years I found myself moved by Radioheads particular brand of wry pre-millenial dystopic anomie, the mainstream distribution channels available to me (FM radio, MTV, Rolling Stone, etc) were too narrowly focused on manufactured pop and fashions of the moment to give me what I was looking for, to "get my job done in innovation parlance. I wanted to trace the sonic lineage of the music I liked, to discover cool bandsand all a kid could do in this regard was trawl through record stores, scour British rock magazines, and worst of all talk to burnt out old dudes.
Nowadays, of course, this task is effortlessly and painlessly accomplished through iTunes and Wikipedia and Myspace and Facebook and Pitchfork and last.fm, and every kid on campus is bopping to would-have-been-obscure indie music on their iPod. This massive democratization has made it so much easier for the casual fan to find and access music, and, for a band, all it takes to get downloaded by every kid on campus is buzz and what creates buzz like a clever, counter-intuitive, disruptive new business model?
Previous business model innovators in the rock world include the Rolling Stones, who pioneered the band-as-mega-corporation concept in the 70s and 80s, and David Bowie, who "went public by securitizing his catalogue in 1997. That said, this skeptical listener sure finds it interesting, if not slightly ironic, that Radiohead, avowed crusaders against globalization and the premier flag-waving anti-corporate band of the last decade have gone and bought into this notion of band-as-corporation