So early estimates are that Radiohead has made from six to ten million dollars on sales of their new album, 'In Rainbows'. This is significant because Radiohead eschewed the the traditional model of releasing through a record label and instead offered their album for download on their own website at a price of the individual's choosing. That's right, many of the 1.2 million people who downloaded the album from the official site chose to pay absolutely nothing. Most estimates have the average price paid at between $5 and $8 so obviously many people who have downloaded the album are paying for it.
Also telling is the fact that 500,000 people chose to skip the official website altogether and downloaded the album via P2P file sharing software. For these people having to register their email address on the site was too high a cost, or (less likely) they simply where not aware of the web site's existence. For some this could also represent complacency as they have simply grown accustomed to getting all of their music through the black market, unhappy with the high prices ($15-18 retail) and low quality of much of the music on offer.
What does all of this mean for the recording industry? Well the math is pretty simple, when the typical recording contract offers an artist pennies for each album sold even if Radiohead is only making $5 per album via this new distribution model they are still coming out way ahead in the bargain. Sadly Radiohead has decided that they will also release "In Rainbows" with a record label some time next year. Apparently they do not want to exclude the less tech-savvy among their fans from hearing the album. I have a feeling that the percentage of Radiohead fans that don't know how to download and play MP3's is pretty slim. We may end up looking back on this album as a lungfish in the evolutionary process towards a better model for music distribution but the great leap is certainly underway.
Recently other bands such as Nine In Nails, Oasis and Jamiroquai announced that they will be joining Radiohead in using the internet to cut out the middle man and connect directly to their fans. Individual band members from established bands have also started to use the internet as a way to test the waters of solo work. The technology, and more importantly culture have reached a maturation point where it is possible for an artist to communicate directly with their fans on a worldwide scale. If Andy Warhol were alive today I'm sure that he would be smiling.
Pundits have been quick to point out that this only works because Radiohead is already at the top. They rightly point out that a new band could never do something like this because no one has heard of them and thus the demand does not already exist. Certainly the record labels have used their vast marketing armies to great effect beating the market into submission. The reality is that the internet has changed all of the rules of the game, not just on the distribution side but on the marketing side as well. Social networking sites like MySpace and Facebook have proven that the simple point-to-point communication of word-of-mouth is every bit as effective as the labels' shotgun approach.
The internet is young enough that methodologies have not yet even be invented to measure the true impact of this new form of marketing. I'm going to go out on a limb and say that the millions of emails, blogs, forum posts, reviews and interviews have a greater impact on a band's album sales than that glossy full-page ad in Rolling Stone magazine. Anyone who doubts that the internet is the future of marketing need only look at the latest stock quote for Google.
To be sure a band with no recognition at all will have a hard time recouping their cost to make an album in the first place. In fact the initial barrier to entry into the music business is probably the single biggest reason why the record label's have survived this long. The adage that you have to spend money to make money applies to music just as it applies to any other business.
The solution, I contend, has been sitting right in front of us all this time. Established bands such as Radiohead can utilize the memetic power of the internet to create artist collectives. Using their websites and social networks as a sort of wellspring, established bands can start a stable of like-minded artists and use the low cost of distribution as a way of helping up-and-coming bands establish themselves. Seed money for studio time can come from the more established acts and the the up and coming bands can get exposure both on-line via recommendations and in real life by appearing as the opening acts for their patron bands.
Doesn't this you just turn established bands into record labels themselves? Yes and no. True, in this model established bands would fulfill many of the same roles as traditional record labels but the difference is one of scale and locality. A good metaphor would be the difference between letting the parishes of Louisiana manage relief resources versus letting FEMA try to manage them for all of the people affected by Katrina. One of these models is obviously more efficient and less susceptible to corruption than the other.
The internet obviates the bands and their affiliates of many of the responsibilities formerly held by the major labels. Instead of a worldwide distribution network consisting of shipping, routing and retail channels you can simply hire a hosting company to run your website. Instead of a global marketing department that spends millions of dollars on a few specially placed ads you can use the legion of internet users to help spread your message. Sites like Youtube and MySpace has already proven the power of the meme; if you make something that people want to watch/listen to/interact with and you lower the barrier to entry they will come to you in droves. The internet has lowered the barrier of entry tremendously, if the established bands can just help talented newcomers get over that first hill then the momentum of the internet is ready to carry them the rest of the way.
There is one essential ingredient for all of this to work. You have to make music that people actually want to listen to. If this model is less amenable to the kind of slick, marketing-manufactured pop bands that have become the label's raison d'être of late then we will be all the better for it. There will certainly still be fads, the near-zero barrier of communication means that fads are born, grow into huge phenomena and die out all with the blink of an eye. As many traditional marketing firms have learned the hard way, the marketing that the internet provides is more diffuse, more mercurial and thus more susceptible to the vicissitudes of culture.
Picture it, instead of a few dozen local radio stations cramming the same tired shlock down our ear canals we have the endless array of streaming radio stations, podcasts and ad-hoc downloads all a click away. Instead of walking into a big-box retailer on a Tuesday afternoon and choosing among the new releases of a few bands that are targeted at our demographic we can go to the portal of our favorite art collective any time, night or day, and immediately download music from groups of our choosing. The future truly is wide open.