Solving the Mystery of In Rainbow’s Average Download Price (Part 1 of 2)
Over the past 14 months, Radiohead has been harboring financial performance data like proprietary research, especially the Average Price paid per download which many in the industry are looking to for a benchmark. Back in October Radiohead revealed the first bit of meaningful information about the success of their pay-what-you-want experiment with their album In Rainbows. NME reported that In Rainbows through downloads alone, made more money than their previous album Hail to the Thief. By itself, this fact confirms that the experiment was a success; when combined with the boundless resources of the internets it is the final clue in the mystery of In Rainbows average download price. There were some polls that were done early on, but these were done during the early part of the download window, which would skew the data towards the price that would be paid by a more dedicated fan that would likely pay more.
The most important information that was revealed in the NME report is that Radiohead made more money from In Rainbows downloads than all “Hail to the Thief” sales. Using this pie chart from Billboard magazine and the sales figures from Hail to the Thief Radiohead’s total profit from Hail to the Thief can be determined and thus, we know at least how much profit In Rainbows made. What I have compiled below, is a poor man’s (read: anyone who is not comscore or BigChampagne) method of determining the In Rainbows average price per download*.
*Does not include the millions of torrent downloads
First you take the cost breakdown from Billboard
Then find total revenue from Hail to the Thief take the # albums sold multiplied by the Album Price. 11.72% of the total revenue goes to the artist and that gives you the total profit Radiohead made from Hail to the Thief. We know that Radiohead made at least this much.
For the next part, we make an assumption that because of the digital distribution there is no label, album pressing, retail markup and everything else that goes with a physical release through a label, only the recording and production costs. From the Billboard table (again), we can estimate that it costs $1.08 per album for the only cost associated with digital distribution, Recording and Production. We also know that there were 1.2 million downloads* of the album and $1.97M in profit which comes out to $1.64 in profit a download for Radiohead bringing us to the $2.72 average price per download.
Many in the industry have been pressuring Radiohead for the Average Price paid for anyone that didn’t just pay $0.00 (stealing in the eyes of the industry). So, just for fun I figured out the average price for anyone that didn’t “steal” the album. I show the average price assuming different percentages of downloads were for $0.00. (ComScore initially found that 62% paid $0.00)
[The second part of his analysis will be posted tomorrow and will feature why the In Rainbows-type scheme would only work so brilliantly for Radiohead. (Pictures of excel link to actual file.) - Aaron]
