Monday, October 1, 2007

The Economist on Radiohead

Probably the most insightful take on the head-scratching new business strategy for the band's latest album:

Once one understands that, it becomes clear that all music purchases are essentially conducted on the honour system. Those of us who purchase music in stores or from iTunes are paying money for items we could get for free--and we're sacrificing consumer surplus as a result. The difference in Radiohead's approach is that it allows buyers to self-price discriminate. Many buyers are willing to pay $10 or $15 when they could easily get the album for free, but others are not. Those listeners will either download the album--steal it, in industry parlance--for nothing or go without. With a flexible approach, however, a listener willing to pay $5 but not $10 for the album may well choose to send Radiohead some money rather than opt for the free download.

No comments: