Fortune: Radiohead was dumb to ditch iTunes, make more money

I read an interview in this month's WIRED with David Byrne (of Talking Heads) and Thom Yorke. Yorke stated they (Radiohead) have made more money from In Rainbows than they have all their other albums collectively. This is despite only 40% of the people actually paying for the album.

Bad decision? I think not.

This album is on iTunes now, btw. No other Radiohead on iTunes, just In Rainbows.


http://phobos.apple.com/WebObjects/MZStore.woa/wa/viewArtist?id=657515

the only "dumb" decision anyone made regarding this album was paying for it when it was being given away free.

radiohead isnt a charity doing great things for the world last i checked.

Dear Fortune Readers,

We're a generally idealess "financial" magazine that ultimately doesn't provide reliable profit ideas to our readers. We are also one of the caretakers of the monolithic wall street establishment that cringes every time someone makes a profit that is *not* directed through us or our advertisers.

And of course we're going to tell Radiohead that they were dumb for making a profit by excluding all the big names. And any other established bands should avoid doing what Radiohead did because that would ruin the business of our advertisers.

And don't you small bands get any ideas about doing what Radiohead did either. And don't contact them to ask them if they'll help you. Because if you did that, then we'll put *you* on the list next year!!! Then where will you be???

We're here for you, and don't want you to make the mistake that Radiohead made.

Love,

EMI, Warner, Sony

A lot of people missing the point. Your focus on dollars and cents is not what this is about. Radiohead did this because they can. They are financially set and can take this risk. Listening to artist like Aimee Mann talk about it, the entire process is more fulfilling doing it on your own, which makes any financial loss, more worthwhile.

Politically - Radiohead did this because they wanted to break reliance on the labels. They wanted to tell the labels that they need to change how they do business or be relegated to the ranks of the 8-track or reel-to-reel.

It's all about principle - and rich people can afford principles.

How is it that the record labels lose out when Radiohead will still be releasing this album on a regular CD?

@Mike Cornett and Frank Furter - you are correct.

This is about the future of distribution of music that can be converted into Digital (MP3, etc.) fils. That is, ALL recorded music.
Its certainly interesting to hear that Radiohead had an old contract that gave them NOTHING from digital sales.

But I am confused here - if Radiohead had a crap contract for digital releases, but they managed to release the album without the record label, as a digital download, why not use iTunes?

Or do they still owe the record label money?

Record companies as stated by Mike and Frank above, have traditionally acted as Banks, lending money, and PR companies, publicising record releases, and also as manufacturers of the actual physical CD.

The model has been so bad financially for the bands, and so good financially for the companies, that it is now finally crumbling. About time.

The public noticed that prices for CD's went up instead of down, when production costs were much lower than vinyl.

This may have fuelled a certain anger that helped free downloads take off.

Now we find that Artists werent getting any cash for digital downloads. Amazing.

The current model is doomed - ask any music fan what they think of record companies - I doubt that the record companies have more than 5 years before extinction.

Any decent (!) investment bank would give a band good terms on a loan if they were reasonably sure that the music would sell.

Small investments in your local band might be an idea....

NB - I used to work in the Record Biz - a bunch of lazy fatcats that regarded the artists as stupid children who wouldnt spend the money on anything but booze and drugs. This attitude helps when you are deliberately NOT paying money owed to the bands.

Every record company is embroiled in legal action over non-payment of cash to bands.
It was regarded as normal to withhold the money.
If you think the record biz is bad/greedy/evil etc. you dont know the half of it!

Apparently most Radiohead fanboys don't understand how iTunes payout works...Major Artist payout is actually better than this, but for an indie artist, iTunes pays out $.70 per dollar. Therefore a $10 album would have gotten them $7. iTunes digital distribution is a lot more attractive and open to the public than finding a website to send some magical amount to a random place...

Just distribution alone, they would have made more sales, and at $7 per album, they'd make more money, still bypassing a record company. Oh wait, more than $7/album since they are a major artist.

Where's the reasoning now?

Only thing I got to say about "IN RAINBOWS" is I can't remember a single track from it... and I'm a fan.

Hence, I say 'meh' to this release.

However... I encourage everyone to do the combo playlist w/ OK Computer.

I liked how Radiohead did this. They made more money, I got their album... um... dirt cheap. Hell, It's my first Radiohead album. I didn't even listen to their music before this, but I thought "this is progressive! I'm going to give them a chance". Glad I did.