• by Cory Treffiletti , Featured Contributor, October 3, 2007

Once again, the music industry is getting screwed. Oh, well.

If you blinked, you might have missed it, but Radiohead announced this week that their new release, "In Rainbows," would be made available for purchase online for whatever you wanted to pay for it.

Yes -- Radiohead is accepting donations for the release of their new album. If you want to pay $20 or you want to pay $2, it's up to you! This name-your-price model is a new one and one that not everyone can agree with, least of which the record labels that still try to mandate the way the systems will work. A number of artists regularly make music available online for free and a number of artists use multiple digital distribution models to sell records, but this one is very new. It is the exact polar opposite of how The Eagles released their newest album only through Wal-Mart. Wal-Mart had exclusive rights and they could mandate the price they would charge. In the model being adopted by Radiohead, the consumer has truly achieved the power in the relationship and completely devalued the record labels.

Radiohead is unique. They are a mainstream act that is widely praised by critics and still manages to sell millions of albums. The industry looks forward to a new release from Radiohead, but not this time. This time they are looking for any reason that this new method will fail. Of course, people could decide not to pay at all for the download and just steal the music and not pay Radiohead, but the fans of the band will certainly pay something since they know all the money goes directly to the band.

It is widely believed that releasing albums is becoming the least profitable part of the record industry, at least for the artists themselves. Many artists aren't lucky enough to own their publishing rights and some artists make very little revenue from their albums. Their money comes from touring and merchandise sales and appearances as well as from corporate sponsorship. Most artists can't rely on the last two and they focus their efforts on touring and playing live for the fans, where their percentage is much higher than that in album sales. Radiohead's model is interesting because it completely devalues the promotion and packaging that the labels offer artists in exchange for the lion's share of revenue from album sales and shifts all attention to playing live, which will undoubtedly be the next announcement -- that of a Fall/Winter tour.

Of course, being the world's most popular critical darling works in Radiohead's favor. People like me will write about this announcement and promote the album, and Radiohead will get the type of coverage that a standard album release would get, without the costs from the labels. People will still buy the album, for whatever they feel is appropriate and the band won't need to share costs with a label, probably thereby increasing their margins on the release. By having a built in fan-base, Radiohead can pull this off -- but most other artists can't. Will this model become one that is widely adopted by the industry? Probably not. Is it another nail in the coffin of the current model? Definitely.

As more and more artists find ways to supplement their "day-job" income, these new revenue models will become more interesting. If you cut out the middleman, you can afford to charge less. Then you can focus your revenue efforts on your clothing line and your own artist development, such as most of rap and now the rockers are doing like Pete Wentz from Fall Out Boy.

The model is going to change 180 degrees in the next 10 years, so start placing your bets now on how this will work out.