All Things Digital

Add top-selling British rock band Radiohead to the list of those who’ve questioned the validity of comScore’s panel-based traffic data. In a statement issued yesterday, the band disputed comScore’s claim that 60% of the people who downloaded its new album, “In Rainbows,” didn’t pay a cent for it.

“In response to purely speculative figures announced in the press regarding the number of downloads and the price paid for the album, the group would like to remind people that, as the album could only be downloaded from the band’s Web site, it is impossible for outside organizations to have accurate figures on sales,” Radiohead’s representatives said in a statement. “However, they can confirm that the figures quoted by the company comScore are wholly inaccurate and in no way reflect definitive market intelligence or, indeed, the true success of the project.”

Quite a rebuke. And one with which it’s difficult to disagree–though comScore did try its best. “For the Radiohead study, we observed the activity of nearly one thousand people who visited the ‘In Rainbows’ site, a significant percentage of whom downloaded the album,” comScore analyst Andrew Lipsman explained in a post to the company’s blog. “We ultimately observed several hundred paid transactions, all of which ranged between $0-$20, representing a very robust sample for estimating the average price paid per transaction. It’s true that any sample has natural variability, so these numbers are, in fact, estimates. However, when you have a relatively large sample falling within a narrow range of values (i.e. there’s a small standard deviation), the margin of error in the estimate is minimized. … We observed the actual online spending behavior from a robust sample of hundreds of individuals in order to produce an accurate estimate. If we didn’t have a reasonable sample from which to extrapolate, we wouldn’t have released the data. But we did, and we’re confident in what the data showed.”

At least until Radiohead releases official download figures for the album …

Depending on which side of the music industry you sit, the pay-what-you-like pricing plan under which Radiohead chose to release its new album, “In Rainbows,” is either another not-quite-killing blow to established music-industry business models or an ill-conceived, money-losing gimmick.

According to research outfit comScore, about 1.2 million people visited Radiohead’s “In Rainbows” Web site during the first 29 days of October and many of them chose to download the album. But only 38% were willing to pay for it. Of those, about 17% paid between a penny and $4; 12% paid between $8 and $12; 6% paid between $4.01 and $8; and 4% paid between $12 and $20.

In the end, the average amount paid for “In Rainbows” under the band’s “honesty box” pricing policy was roughly $2.26 per download.

“The stories to date about the ‘In Rainbows’ pick-your-price download offer have been much more optimistic,” said Fred Wilson, managing partner of Union Square Ventures. “I paid $5 and had no reluctance whatsoever to take out my card and pay. It’s a fantastic record, the best thing they’ve done in years. This shows pretty conclusively that the majority of music consumers feel that digital recorded music should be free and is not worth paying for. That’s a large group that can’t be ignored and its time to come up with new business models to serve the freeloader market.”

That’s certainly one way of looking at it. But there’s another as well: 38% of listeners who could have downloaded the album for free paid for it instead. And that’s something, isn’t it?

Doug’s a very special guy. He’s the last of the great music executives who came up through A&R. He’s old school. I like him a lot.”

–Apple CEO Steve Jobs on Universal Music Group CEO Doug Morris

The per-device royalties Universal Music Group receives for every Zune player sold were apparently substantial enough to buy CEO Doug Morris a bigger set of balls, because he’s out drumming up support for an industry-owned subscription service with which he hopes to loosen Apple’s grip on the digital music market.

The endeavor is called “Total Music,” and Morris has already approached Sony BMG Music Entertainment and Warner Music Group about participating. His proposition: a subscription-based music service for the hardware industry, one whose cost could be baked into the hardware that supports it. Under the Total Music model, hardware makers subsidize the cost of music, which consumers are then given for “free” when they buy a new digital media player. That’s more money up front for hardware makers, but it’s a wise investment because, as Morris reckons, they’ll make that money back and then some by selling many more devices.

Interesting business model. “If the object is to wrest control of the market from Steve Jobs,” said Gartner analyst Mike McGuire, “this is a credible way to try it.”

Sadly for Morris, it’s also one inevitably complicated by recent turmoil in the music industry. With Radiohead releasing its latest album as a pay-what-you-will digital download, Nine Inch Nails declaring itself a free agent, and Madonna about to dump Warner Music Group for a concert promoter, we’re clearly seeing a sea change in music discovery, distribution and consumption, one perhaps lost on an industry so hardened by years of CD price fixing. So while the music industry struggles so to wrest control of the digital music market from Apple, some of today’s biggest popular artists are crafting an entirely new business model.

Well, this is sure to set a cat among the pigeons who still believe they have a God-given right to control the retail distribution and pricing of music.

Recently freed of its contractual obligation to major label EMI Group, top-selling British rock band Radiohead is releasing its seventh studio album, “In Rainbows,” on Oct. 10 as a digital download (presumably in delicious 320kbps, DRM-free MP3 format)–and it is letting its fans decide how much, if anything, to pay for it. “It’s up to you,” a message on the preorder site for the album reads. Click through to the pricing screen and a subsequent message adds: “No really. It’s up to you.”

And it is. Fans are free to pay whatever they’d like–as little as one penny (US two cents), plus a 45 pence (US 92 cents) charge for using a credit or debit card. “I like the people at our record company, but the time is at hand when you have to ask why anyone needs one,” said Radiohead singer Thom Yorke. “And, yes, it probably would give us some perverse pleasure to say ‘F— you’ to this decaying business model.”

Question is, given a clear, legal alternative to downloading music for free, will fans choose to support its creators? Just in case they don’t, “In Rainbows” will also be sold as a “discbox,” which will feature the new album on CD and double-vinyl, as well as a second disc with seven additional songs, photos, artwork and lyrics. The materials will be packaged in a custom hardback book and slipcase and sold at a price wisely left up to the band: £40 (US $81.18).

And with that, Radiohead sidesteps the traditional music industry altogether. “This feels like yet another death knell,” an A&R executive at a major European label told Time magazine. “If the best band in the world doesn’t want a part of us, I’m not sure what’s left for this business.”