Popular musicians Radiohead garnered a lot of publicity for releasing their last album, In Rainbows, under a "pay what you want" plan for the digital album. The band claims that people actually did pay a decent price on average, and that CD sales were not affected. From this perspective, it may even have been a profitable thing to do, when one considers how much free publicity they got for it.

I still think it's stupid.


The reason is that paying anything introduces friction into the transaction, and thus is a marketing hindrance. Also, there are two schools of thought regarding free music: (1) it's the end of the world, oh how will musicians ever make money, what on god's green earth is happening, etc; and (2) music is becoming free, but that will introduce other opportunities to make money -- hence the transition to 360 deals. If you're in the latter camp, as I am, than free music is not a liability or a curse; rather it's an asset to help you sell other stuff -- i.e. merchandise, touring, ringtones, endorsements, etc. So the mentality shouldn't be "oh man, look at all the money we're losing because of all the music piracy" but rather "hooray, now that everyone is free to share our music our endorsement revenue, merchandise sales, etc will soar!"

A common rebuttal to the free media revolution is the "but not everyone can go on tour" argument. Indeed, not everyone can go on tour -- in fact some musicians can't/don't go on tour. However, the idea that new revenue sources won't emerge, and won't benefit from the free distribution of media, is false. Consider, for instance, the gaming industry -- another exciting industry packed with opportunity and the ability to change the world in more ways than a simple gaming company may initially seem.

But, as in music, the gaming industry is still slow to embrace these inevitable transitions. The game Championship Manager recently announced it will try the Radiohead strategy of "pay what you want." Like music, gaming is fraught with piracy. However, gaming is even more social than music, and thus the opportunities for new revenue sources borne out of the social experience are even more abundant. Sale of virtual goods, P2P commerce, and in-game product placement are just some examples.

So I doubt Championship Manager's strategy here is going to work very well. I think it is also important to note that music is a somewhat special case; people LOVE their music, and will do irrational things like paying for what they can very easily get for free. I doubt video game developers can attract the same type of loyalty that musicians can, and so I doubt Championship Manager will be as successful as Radiohead was. More importantly, both those strategies are not consistent with the economic framework of what works best on the web.

The song for the post is "Paranoid Android" by Radiohead. Generally I don't like Radiohead on grounds that their music is not accessible enough; I don't know what the lyrics mean, the songs have no chorus....who has time for this type of stuff, I need simpler stuff with lyrics that make sense. But I do like "Paranoid Android." Would I pay for it? LOL, don't be silly, of course not. But I'll share it with you here for free. When Radiohead and other digital media producers begin to focus on using their media to build a community they can influence, the value to all in sharing this for free will become more apparent.