Radiohead, In Rainbows, and the Inevitable Age of Pay What You Want Pricing
Updated: Sep 22, 2021
In 2007, alt-rock band Radiohead released their newest album, In Rainbows, through a Pay What You Want model. At checkout, fans were shown a blank field. This was where they could enter their own price for the album – anything from $0 to $100,000. The Pay What You Want model was revolutionary. Outside a few charity-related initiatives, few artists before Radiohead had the courage to try it. Many in the music industry called the model crazy. Some called it irresponsible.
Kiss frontman Gene Simmons slammed the stunt saying, “That’s not a business model that works. I open a store and say, ‘Come on in and pay whatever you want.’ Are you on f***** crack? Do you really believe that’s a business model that works?”
The press jumped on the story, too, theorizing on the implications Pay What You Want would have for future album releases and industry-wide music revenues. Did this move make any financial sense at all? Did Radiohead just ruin music monetization for smaller bands by making music worthless? Had Radiohead ever heard of torrent sites Napster and Pirate Bay… what were they thinking?! But like all news-related oddities, the In Rainbows buzz died down and for the most part remains a curious side-note in music history.
So why am I revisiting it 13 years later in 2020?
Because the music industry has fundamentally changed since In Rainbows. What was seen as a publicity stunt in the age of downloadable MP3s has now emerged as a legitimate pricing alternative in the age of streaming. In 2007, Radiohead used a Pay What You Want model because they could. They didn’t have to use it. They weren’t strapped for cash. It’s not even clear that they expected the album launch to perform better than more traditional releases. The fact that the band could upend the traditional music sales model was more important than its actual results. But now, 20 years later, both the music industry and American society have changed to such an extent that Pay What You Want might become the standard sales model for any band with under 10 million plays.
If you're a musician or any artist for that matter, imagine growing your audience exponentially. Imagine if that audience stayed loyal for life. And what if that same audience paid you for every piece of art you create from now until you die? This is the power of Pay What You Want pricing.
The fundamental economic issue facing all musicians in both the age of downloads and the age of streaming is, “How can artists sell content when all of it can be accessed for free?”
The early 2000s were the time of anti-piracy campaigns. Torrents had gutted music business profits. After Napster launched in 1999, sales of physical media dropped by 25% over the course of four years. Steve Jobs and Apple saw an opportunity and stepped in with iTunes. Seeing that economic efficiencies related to digital distribution had forever reduced the price of music, Steve Jobs hardballed record labels into slashing profits by adopting his $0.99 per song format. These competitively priced digital downloads were better than losing all revenue to piracy, but even so, music revenue has never recovered its highs of the late-90s CD era.
Of course, iTunes wasn't the only major adaptation of the modern music era. Streaming services and Pay What You Want models also emerged as the next stage of music evolution, and in the 2010's, streaming replaced iTunes and its downloadable file structure. Radiohead released their Pay What You Want album in 2007. Spotify launched in 2006. Both, however, seem to be reactions to the same set of incongruities in the music business, and both operate on the fundamental assumption that music can be had for close to nothing (whether artists or labels like it or not).
In fact, some argue that Spotify, Apple Music, and Pandora are more or less legal versions of Napster and Pirate Bay. Streaming must compete with “free,” which means their overall margins per play are extremely limited. The only way for an artist to make money is to achieve exorbitant levels of plays – volume is king. Fair or not, streaming companies have received harsh criticism for how much they pay their member artists. At current pay rates, any musician reaching less than 10 million streams a month might as well give away their songs for free. Low to mid-tier bands cannot rely on streaming for sustainable income.
A Time Magazine article reports, “Artists earn on average less than one cent per play, between $0.006 and $0.0084, to be exact, according to Spotify Artists.” $0.006 is not much money, and most musicians would like to find an alternative to streaming royalties.
In 2014, Taylor Swift pulled all of her music from Spotify in protest to streaming’s apparent devaluation of music. Swift said:
Music is art, and art is important and rare. Important, rare things are valuable. Valuable things should be paid for. It’s my opinion that music should not be free, and my prediction is that individual artists and their labels will someday decide what an album’s price point is. I hope they don’t underestimate themselves or undervalue their art.
Unfortunately for Taylor Swift, digital music is not rare. And digital music is what matters. Anyone with a WIFI connection can listen to any song ever recorded in history. The baseline price point for digital music is $0.
Therefore, to use Taylor Swift’s premise, if musicians cannot affect the rarity of their content, they must control its importance.
This distinction between music’s rarity and importance underscores the significance of Radiohead’s marketing experiment from 2007. Pay What You Want pricing models emphasize "importance" over other economic considerations like rarity, usefulness, and entertainment. In my view, an economy is a system that oversees the transfer of value between individuals. For all practical purposes, economic value is subjective. Sellers must determine how much to charge based on the value of the time, resources, and passion that went into creating the product. Buyers, likewise, must decide whether the product they want to buy is worth the price. In the case of Pay What You Want, the buyer is given the freedom to determine how much the offered product is worth.
The subjectivity of value is what accounts for buyers paying more than $0 for a digital album (even when they could get it for free). In the case of Radiohead, fans believed the music was worth more than $0 and wanted to pay for it. Therefore, Radiohead fans found value in both the product and the act of buying itself.
What is important to you?
Think on this question. Are people important? Institutions? Books? Albums? Personally, things that are important to me are things that touch on high-level needs like social standing, justice, and meaning. Importance is closely aligned with my priorities. Pay What You Want pricing asks the buyer to determine whether or not the product is important. Another way to phrase the question is to consider whether your life would be worse off if the product never existed (thus prompting you to purchase so that you ensure the product continues in circulation). Musicians need an income of some kind to continue creating new music. Fans realize this. By introducing the concept of importance, the pricing model engages the social needs of fans and gives the customer a sense of agency in an economy that’s becoming increasingly faceless and automated. Music and art are very effective at activating this level of value recognition in fans.
In this way, Pay What You Want pricing serves both the musician and the fan. It provides an alternative revenue stream for musicians crushed by streaming’s pitiful payouts, and it does so by providing the listener with a sense of agency in determining how important the music is to them. As long as bands create moving and intellectually engaging music, Pay What You Want will continue to expand as a reliable pricing model in 2020 and beyond.
This all sounds nice in theory...
Did Radiohead’s Plan Work?
First things first, did Radiohead make money off In Rainbows? They did. When all was said and done, In Rainbows made over $4 million in revenue. At the time, Radiohead wasn’t signed to a label, which means I can only assume the five-piece band kept a good portion of that money. In terms of gross revenue, it’s safe to say the album was a commercial success.
Moreover, MusicAlly writes, “Radiohead made more money before In Rainbows was physically released than they made in total on the previous album Hail To the Thief.” In fact, the last several Radiohead releases had sold in the hundreds of thousands, not millions, so the buzz-building nature of the band's release plan certainly lit a fire under consumers. This is an important distinction. Hail to the Thief was released under the traditional model and provides a rough comparison for the two pricing strategies. In Rainbows was also released in physical format, but physical sales were simply icing on the cake. Digital, Pay What You Want sales of In Rainbows blew Hail to the Thief’s total sales out of the water.
This isn’t the end of the story, however. The numbers become less impressive the more one dives into the actual Pay What You Want data. The average fan paid well below the cost of a regular CD. At the time, a CD in a record store sold somewhere between $10 and $15. In Rainbows brought in only $2.26 per album download.
Also, market research firm ComScore claims that only 38% of In Rainbows downloaders had paid, while 62% chose to get it for free. Rough estimates from Wired and NPR suggest that illegal downloads were double the number of legal downloads.
This means about 1/9 fans actually paid for the album. At first glance, this seems like a complete disaster. Yes, Radiohead might have made a few million from digital sales, but it seems as though they lost out on almost 90% of potential revenue. This fact wasn’t lost on music reporters and industry staples.
U2’s manager, citing the numbers above, said the strategy “to some extent backfired.” When asked whether he would incorporate some kind of Pay What You Want element in U2’s upcoming album release, he gave a firm, “No.”
The tension lies between gross revenue and potential revenue. $4 million split between 10 people (including Radiohead’s managers and other staff) is a nice paycheck. But it would have been even nicer to pull in $10 million, right? Perhaps In Rainbows alone isn’t enough evidence to settle the issue for whether Pay What You Want is a viable pricing strategy.
Other Research ON the Success of Pay What You Want MODELS
In deciding whether Pay What You Want is a viable pricing strategy for 2020 and beyond, it’s helpful to look at other examples of how the model performs in real-world scenarios. Radiohead were not the only ones to test the model in a commercial setting (as opposed to a charitable setting like when the West Virginia Symphony used it as a public enrichment campaign).
Looking at other data points helps contextualize Pay What You Want. Like any other pricing model (subscriptions, fixed pricing, revenue sharing, etc.), Pay What You Want works well with some kinds of goods and customer relationships. It fails with others.
In 2009, two years after the release of In Rainbows, researchers applied a Pay What You Want pricing model to other industries including a buffet, a movie theater, and a delicatessen selling hot drinks. It’s worth noting that the study explicitly references Radiohead, saying, “The most prominent, recent example of an application of PWYW is that of the rock band Radiohead. For two months, the band offered fans the chance to download its new album from its Web site and to pay as much as they wanted. The album was downloaded more than two million times, and the band reported afterward that this price format was profitable.”
An overview of the research reveals four important nuances for Pay What You Want strategies. First, “the survey data indicate that, on average, consumers paid approximately 86% [of the full price]” across all products: the buffet lunch, movie ticket, and hot beverage studies.
Second, the movie tickets performed the worst of the three products tested in the study. The study found, “Moviegoers perceive a recent increase in ticket prices and even evaluate them as unfair. In addition, we believe that altruism does not play a role when consumers pay a large theater chain rather than small businesses that need to get paid adequately to survive.” Since customers think theater chains have already jacked up prices beyond what's considered fair, they have no incentive to return any sense of fairness when choosing their own price points. More on this later.
Third, the delicatessen was a small business and reaped the benefits of a personal customer-owner relationship. “We find a significant impact of altruism…. Especially at the delicatessen, face-to-face interaction was particularly high. The owner of the delicatessen used to chat with his guests, so almost every consumer knew who they were paying. This might be an explanation of why altruism significantly influenced the final price.”
Finally, Pay What You Want pricing had a significant effect on volume, which made up for the 86% loss in price per item. The study reports that for the lunch buffet:
Except for one day, PWYW sales were higher than baseline sales, increasing by as much as 61.21%. Although the average price paid was significantly lower than the regular price (€6.44 versus €7.99; p < .01), the seller could realize more revenue by increasing the number of unit sales. Overall, we find an increase in unit sales of 61.14% (p < .01). The seller decided to retain PWYW as a pricing mechanism for the buffet lunch.
In summary, the study shows that Pay What You Want pricing works best for smaller businesses that create face-to-face interactions with customers. Customers are willing to pay closer to the original price, and any money lost to lower Pay What You Want prices is made back through an overall increase of customers.
Another study published in 2012 tried to explore how Pay What You Want pricing engages and affects a customer’s sense of identity. The examples in this study include paying for photos taken during a roller coaster ride, paying for a souvenir photo on a riverboat tour, and a buffet-style restaurant in Vienna.
The study’s main takeaway is that:
Choosing whether to purchase a product or service, and how much to pay for it, has a self-signaling value. People feel bad when violating the norm and thus would rather avoid the situation by choosing not to buy the product or service. If they do choose to purchase the product or service, they often choose to pay a ‘fair’ price that does not have a negative effect on their self-image.
Here, face-to-face interactions with strangers actually seem to push customers away from purchasing. The study confirms:
In the theme park experiment, fewer participants chose to buy the photo when we added the charity component to it. In the tour boat experiment, more people bought the photo when the price was relatively low and fixed than under PWYW. Finally, customers in our restaurant study chose to pay more when they were not observed. These three observations provide a clear indication that image concerns are at work.
Radiohead, however, did not fall into these traps. They weren’t asking for charity. They had a longstanding relationship with their fans and weren’t strangers by any means. And their digital distribution system allowed fans to make buying decisions anonymously.
Overall, the study remains optimistic for Pay What You Want: “Under PWYW, when people like a company, they may pay a price that feels right rather than simply the lowest price possible. Despite allowing customers to pay nothing for the product, the companies in our investigation retained their profitability.” Research thus suggests that if a company (or a band) wants to implement Pay What You Want pricing, they need to meet certain economic and social conditions.
Economic Conditions
Alexander Chernev, professor of marketing at Northwestern University, explains that Pay What You Want works best for products that have low marginal costs and the potential for high volume traffic. He says, “You can benefit because you can reach different types of customers. Some will pay nothing, but you might be able to gain customers that normally wouldn’t purchase the [product or service].” For Radiohead, they were able to distribute their music digitally with little to no overhead costs and a large potential customer base. Thus they fulfilled the economic conditions for Pay What You Want.
Social Conditions
Pay What You Want also requires social conditions that go beyond “liking” a brand. It requires a generalized pro-social attitude versus a pro-self attitude. According to one Forbes article:
[Researchers] asked participants how much money they would pay for a cookie sold at a local café. Those who elected to purchase a cookie paid anywhere from zero to $2, with an average price of 89 cents. At the same time, participants completed a questionnaire to determine their SVO. Sure enough, those with a pro-social orientation forked over an average of $1.22 for the cookie, while those with a pro-self orientation paid an average of 62 cents. ‘Just as we expected, people who were pro-self paid less, and people who were pro-social paid more,’ says Santana.
Compare these results to a Chinese restaurant that lost $15,000 in one week due to Pay What You Want. According to Psychology Today:
Last October (2016), a new restaurant in Guiyang China decided to try out PWYW pricing as a trial pricing strategy. Its motives relied on a give-and-take logic. The restaurant had just opened its doors and wanted to encourage as many customers to try it as possible. So it launched with a PWYW price promotion for a limited time. During this promotion, customers could order as much food as they liked and pay whatever they wanted after the meal. No questions asked. Like most trial pricing schemes, the restaurant expected to lose a bit of money but gain new customers who would come back.
The launch failed. It seems as though the Chinese restaurant forgot a fundamental advertising principle: human beings make decisions emotionally and then use logic to justify those decisions. The restaurant assumed customers would embrace “a give-and-take logic.” But logic is not emotional, it’s intellectual. The Chinese restaurant did not develop an emotional pull with customers – there was no social bond – before implementing Pay What You Want pricing.
The Psychology Today article also notes, “Similarly, when the band Radiohead famously released its album In Rainbows digitally with a 'digital tip jar,' it was a financial win. The band ascribed this success to its existing base of loyal fans.”
The Psychology of Pirating
Pro-social versus pro-self attitudes also affect a social phenomenon quite close to the heart of the music industry: piracy. As U2’s manager pointed out, the album release wasn’t a great commercial success because pirated downloads were nearly double all legal downloads, paid or unpaid. This isn’t an issue limited to 2007 and pre-legal streaming. It might seem logical that as steaming increases, digital piracy decreases. However, “results from a Logit model show that college students who are frequent users of music streaming are also more likely to download music illegally.” Even in 2018, “17 million stream-rippers live in the U.S., up from 15 million in 2017.” Worldwide, 23 percent of respondents use illegal stream-ripping sites, which create downloadable files of music “ripped” from online streaming sites. Overall, Americans made over 17 billion visits to pirate sites in 2019.
The question isn’t, “How can we stop internet piracy?” Given the Internet’s porous nature, defeating piracy is a fool’s quest. Instead, the question becomes, “How can artists convince fans to pay even when they don’t have to?” Or perhaps “convince” is not the right term since, as we saw with the Chinese restaurant, Pay What You Want isn’t based on logic or argument. To overcome the effects of piracy, artists must create an emotional bond with their fans so that they want to pay. Bands must demonstrate their importance.
Studies show that the most pirated artists are pop/mainstream. While these numbers should be taken with a grain of salt (it could very well be that the most popular music is also the most pirated music), it may be the case that fans don’t feel a social responsibility to superstars the same way they do to smaller acts. Superstars are the Walmarts of the music industry. People are much more likely to shoplift a t-shirt from Walmart than they are from a mom and pop store.
We’ve seen a similar phenomenon occur during some of the social protests of 2020. After participating in the burning of a used car lot, one masked man referred to the fact that the car lot owners didn’t care about their customers and sold lemons. That was his rationale for burning the business to the ground. This quote about the 2020 Chicago riots also made its way around the internet: “Anything they wanted to take, they can take it because these businesses have insurance.”
An Atlantic article explored various motivations behind looting, referring to a 1968 study that shows, “Those in the looting group also have varied motivations…. Vandalism during protests focuses on objects and buildings that are ‘symbolic of other values.’ For example, people are more likely to attack symbols of authority—such as the CNN building or police cars—than apartment buildings.”
Andrea S. Boyles, a sociologist, recounts an interview with a looter where “he didn’t care about the looting of the store, especially if it had insurance. He had spent money at stores in his community, [the man] told her, but when he himself was low on cash, he had no one to turn to. Looting, to him, resulted in only mild suffering for a store owner who did little to alleviate the suffering of the community.”
Justified or not, it seems as though people are much more likely to loot buildings and destroy property if they perceive the victims as abstract, able to recover from injury, and symbolic of social forces reducing thier own qualities of life. The same mindset shows up when people are asked about piracy.
Debate.org has logged a fascinating collection of responses around the question, “Is internet piracy a bad thing?”
According to the anonymous (and non-scientific) poll, 39% of respondents said YES and 61% said NO. Strangely, many responses in the YES actually supported the NO position, perhaps because users thought the question asked, “Should people participate in internet piracy?” Accounting for this confusion, we can estimate that 35% believe internet piracy is wrong while 65% believe it is morally acceptable.
Here are a few sample responses from each category. (Sic applied to all entries).
Internet piracy is not bad
“No one lost money. Piracy is copying digital content. If I steal your shiny new car, I hurt you and now you are at a loss. If I were somehow able to copy it, and leave the original there for you then you neither lost nor gained anything. You actually helped someone out! Digital media cannot be stolen. If I really respect a program or a piece of music, I will purchase it to help the creator out.”
“No absolutely not. As a college student I don't have a lot of money. Getting stuff for free is thus my way of getting the stuff I want. With the money saved, I can buy other stuff for which money has to be paid. So, I love piracy. It's the only way that I can get everything.”
“To me it's just a ploy for large companies to gain monopoly over everything, in this case, a person's right to choose to pay or not pay for an item that is nothing else than a copy.”
“Say I pirated a Star Wars movie. Do you think that the multi billion company will miss 30 or 40 dollars? I think not. Now on the other side of the coin pirated videos movies etc. From a small company is very bad for everyone.”
“Piracy is a way of opting out of the Entertainment Industry without missing out. It can be a way of sending a message to the Out-of-Touch-Elite that they have forgotten who pays/paid for their lifestyle = $6 Million per episode of Game of Thrones, $1 Million per episode per star for Big Bang Theory. Piracy is a time-honored tradition of sticking it to the "Entitled Class."
“Do what you want. Do what you want, 'cause a pirate be free, YOU ARE A PIRATE! Yar har, fiddle di dee, being a pirate is alright to be, do what you want 'cause a pirate be free, you are a pirate!”
Internet piracy is bad
“I'm a massage therapist who works for myself. Piracy would like someone coming in to get a massage from me and then running out of the office without paying. Sure, they didn't steal a physical product from me, but they stole my time and labor and creativity.”
“Artists and actors work to get paid. Piracy, in the long run, steals their money. What I'm trying to say is ‘Piracy is online stealing.’ The only difference between physically stealing something and piracy is the fact that the thief is not on the internet. Also, it OFFENDS the artist. Basically, if you were to pirate someone (fictional example), the artist would think, ‘My work is not good enough because some people aren't willing to pay for what I do.’"
“Yes, when you pirate you are stealing all potential sales from what you took. The artists could have made money on that song that you pirated.”
“All yourself, why didn't the distributor sell it for free? People work on electronic projects to make a living. Stealing these electronic works robs them off their living.”
We see that responses to piracy break down along differing conceptions of justice. Those who think internet piracy is acceptable believe they are interacting with large corporations or distant elites flooded with cash. The “pirates” are the ones suffering the real injustice since they are worse off than the rich content creators and don't even have the choice of whether to pay or not. Even when considerations become wholly self-centered – “I want a free mp3, so I’ll download it for free” – they believe the injustice done to the company is so minuscule that it hardly matters. These would be the pro-self participants in the Forbes cookie experiment.
Those who think internet piracy is not acceptable, on the other hand, hold to a sense of empathetic justice. These are the pro-social class. They almost always imagine the artist as an individual struggling to make ends meet. They see another person on the other side of the transaction. Of course, this image of the struggling artist is not always accurate either. Millionaire superstars and parasitic record labels also exist on the other side of music transactions. But the main reasoning is that someone on the other side is suffering injury (as opposed to an abstract entity).
Interestingly, this breakdown of piracy opinions mirrors the 62% of Radiohead fans who obtained In Rainbows for free through the official site and the 38% who paid.
What’s even more interesting is that 38% of people paid even though Radiohead wasn’t a fringe act. It’s one thing to give a Patreon donation to an online artist with 50 Instagram followers. In this situation, the artist is truly struggling to live off their art. But Radiohead had put out 6 albums before In Rainbows. Their previous four albums had hit #1 on the UK music charts. Their previous three had cracked the top 5 in the US charts. For all intents and purposes, Radiohead was not an underground, struggling act and could have been seen as a celebrity elite.
Remember that by mid-2008, In Rainbows had sold 3 million copies. “This number comprises physical CDs, box sets, and every download (even £0.01 ones). 100,000 of the purchases were fancy £40 ‘disc boxes,’ which alone makes for a handsome profit,” the Guardian reports. With CD sales numbering 1.75 million, we can estimate paid digital downloads around 850,000. 850,000 digital sales is more than the population of Wyoming (approximately 580,000 people in 2019).
Yet for all their success, Radiohead had avoided the image of the big, corporate, elite entity. Somehow, they had created a “personal” bond with their fanbase. They had invested enough importance into their music so that fans would pay no matter what. They had fostered a "pro-social" environment.
This is the challenge for artists in 2020: to create a product that invests the artist-fan relationship with importance. It’s impressive to have 850,000 fans who will pay for an album. It’s even more impressive to have 850,000 fans who want to pay for an album. Creating a pro-social image seems to be the most effective way for artists to combat piracy.
What is at the heart of this pro-social bond? And how can other artists emulate Radiohead's persona?
Radiohead and Their Fans
Have you ever met a Radiohead fan? They have quite the reputation. For the record, I like Radiohead but I don’t love them. I’m happy to pick up a CD at a used bookstore, but I have never preordered an album or bought tickets to a concert. Yes, I’m writing this article about Radiohead and marketing, but marketing (and music in general) is more important to me than Radiohead. I’m not here to attack or defend Radiohead fans. But their polarizing persona is fascinating and relevant to this discussion of Pay What You Want pricing.
Columnist and comedian Katherine Timpf once said in a Fox News interview, "I don't even like [Radiohead], but the kind of guys I like have to be three things: strange, malnourished, and sad and those guys always like Radiohead."
Strange, malnourished, and sad – what a combo. Fans also have a reputation for being self-important and insufferable. One Redit user pointed to this Pitchfork review as proof:
The experience and emotions tied to listening to Kid A are like witnessing the stillborn birth of a child while simultaneously having the opportunity to see her play in the afterlife on Imax. It's an album of sparking paradox. It's cacophonous yet tranquil, experimental yet familiar, foreign yet womb-like, spacious yet visceral, textured yet vaporous, awakening yet dreamlike, infinite yet 48 minutes. It will cleanse your brain of those little crustaceans of worries and inferior albums clinging inside the fold of your gray matter. The harrowing sounds hit from unseen angles and emanate with inhuman genesis.
It's a review that feels nice... but doesn't make sense when you read it carefully. I don't know how to feel about having my brain cleansed of "those little crustaceans of worries." Of course, it's a bit pretentious to claim all other music is just "inferior albums clining inside the fold of your gray matter." Maybe this review was a joke. But others, who are not Radiohead superfans, haven't seen it that way. If it walks like a duck, quacks like a duck... it's pretentious.
Another Reddit user wrote, “It started with the band themselves. At the time Kid A came out, the band (and especially Thom) was aggressively pretentious, in contrast to their current studied aloofness. Every day they came up with a new way to say ‘we're too good’ or ‘we're too smart’ for rock.”
Or take this opinion piece from Vice:
You know that one friend who is REALLY into Radiohead? Like, the person who takes the day off from work to wait for Radiohead tickets to go on sale? You ever notice how that friend isn’t really into many other bands besides Radiohead? That’s because it takes so much effort to understand what is good about Radiohead that it’s impossible to have time to discover any new music.
Like I said before, I like Radiohead's music. I don’t buy into the blatant and heavy criticism of their fans. I think this Vice excerpt loses itself in dismissiveness and belligerence the same way the Pitchfork review loses itself in flowery language and self-importance. For all the apparent obnoxiousness of Radiohead fans, I realize that the music allows fans to engage in a deep exercise of meaning-making. Any alternative or avant-garde artform tends toward this: to create pretentious followers who are trying to be understood and heard. At its very core, Radiohead allows these fans to express and engage with a deep aspect of their own identities. And this is why the Pay What You Want stunt worked for them.
Douglas Markowitz, with the Miami New Times, writes a balanced and insightful piece of memoir where he explores how Radiohead's music and persona helped him navigate a difficult high school experience. I’ll let his experience speak for itself:
Unlike most bands' followings, Radiohead fans number in the hundreds of thousands, their fierce devotion to the group so extreme it invites ridicule from the uninitiated. Type "Radiohead fans are" into Google, and the top three suggestions are "pretentious," "smart," and "the worst..."
In the early days, the bandmates frequently communicated with fans on their own sites and message boards. They rarely seek legal action against fans posting bootlegs or leaks, and they've encouraged fans to produce art based on the band's music; last year, they held a contest asking for video vignettes paired with a clip of the song "Daydreaming" and posted the results on Instagram...
But perhaps more than anything, Radiohead fandom is simply a personality trait. The stereotypes about the band's devotees — pretentious, depressed loners — may be cruel, but they can also be accurate. Those descriptions, for instance, easily describe me in high school. I was the only person I knew who listened to Radiohead, and I liked it that way. I was obsessed with having the good taste to cultivate a sense of superiority. I had no close friends and didn't go out of my way to make any. I spent most of my time on the internet. I wanted only to escape suburbia. I was also miserable, and even today I wonder how much of it was caused by my surroundings and how much was my unwillingness to adapt. I longed to be understood while retreating into sounds I considered obscure.
The Future of Authentic Marketing
Radiohead's music allows millions of human beings to feel understood. Their music is unique, and therefore irreplacable. Ask a Radiohead whether it would make a difference to replace Radiohead with Coldplay. See how that goes over. Now, imagine doing that with your own favorite band. For some, it might feel like losing a friend or extended family member. Music is important.
I wrote this essay because I want to live in an interesting and beautiful world. I like to support artists that contribute to that vision. I, too, like to feel understood, and I support creatives that make me feel that way. I hope that creative people read this article and feel inspired to push the envelope of community-based commerce like we’re seeing on Patreon and Twitch. Personally, I am glad musicians like Radiohead exist, musicians that prod me out of the normal routines of pop and top 40s with strange and experimental sounds.
I also want to feel as though I have economic choice. With fixed pricing, a typical transaction asks, “Are you wealthy enough to pay for this?” That’s usually the end of the discussion, especially when most transactions take place digitally. Pay What You Want shifts the economic conversation toward asking the customer, “How much value has this brought you?” As we saw with the various justifications for looting, many people take an eye-for-an-eye approach operating on the assumption that if you don’t care about me, I don’t have to care about you. But Pay What You Want invites the customer to engage with the product no matter their economic situation. This shows care on the part of the artist. At the very least, the artist creates a social bond of trust by assuming the financial risk inherent in the transaction. The customer might never pay. It’s possible that no customer would ever pay. However, this assumption of risk lets the Douglas Markowitzs of the world feel understood as an angst-ridden teen – at no charge – while trusting he will pay it back in his adult years. Pay What You Want replaces economic gatekeeping with a welcome sign. And I think our culture needs more welcome signs.
In this way, Pay What You Want expands the scope of authentic marketing. Conversations on authentic marketing often focus on the marketer, in our case, Radiohead. In all fairness, I would say that Radiohead acted authentically with In Rainbows. The Pay What You Want model aligned with their past initiatives to upload past concerts for free on Youtube, curate band-related content in their Radiohead Public Library, and engage fans in content creation. They have always focused on supporting their fanbase.
But the magic of Pay What You Want is that it creates a space in which buyer and seller both act authentically. It can be difficult for consumers to feel authentic in an economic system that gives the seller the initial power to set prices. A dictator may sincerely lock up millions of people based on ethnic or political beliefs. However, I would not call this an authentic experience for anyone other than the dictator. Why? Because the political prisoners at the other end of the “transaction” do not experience an authentic experience. Of course, all fixed pricing is a silent negotiation between seller and buyer, but choosing whether or not to buy – having choices limited by all or nothing system – should be considered a minimum threshold for customer agency, not an unchallenged status quo. We saw this sentiment come up in the internet piracy discussion.
In a broader sense, Pay What You Want falls in line with other cultural trends that are collapsing the distinctions between for-profit and non-profit businesses. The New York Times explored new trends in art patronage and found “a younger cohort of patrons, in their 30s through early 50s, has also begun thinking about artists like start-ups, for which ‘incubation’ periods are common.” Boundaries are collapsing. Concepts of value are breaking from the bonds of immediate and fixed financial compensation.
Economic choices are beginning to emphasize importance over narrower views of wealth.
As we can see, the Pay What You Want model provides at least two positive goods to the consumer. First, it makes the customer feel accepted because it allows the customer to engage as they are. It's a way of imbuing an economic transaction with a hint of unconditional love – a radical act. In the words of Nirvana and hymns alike, Pay What You Want says, "Come as you are."
Second, it gives the customer a chance to exercise personal agency within the transaction. It allows the individual to make a stand, to say, “I am not supporting this artist because I have to in order to listen to music. I’m doing it because I want to support art that allows me to feel understood. I want to facilitate a world that looks and feels this way.” Imagine if more economic transactions trained us to think this way, that we can ever so slightly make the world a more beautiful, interesting place.
Some might say that this pandering to self-identity is obnoxious and unhealthy. Perhaps it is. But which is sadder? To exist in an economic reality where all transactions are forced upon you as black-and-white dilemmas or to exist in an economic reality where you’re allowed to freely reciprocate value and be treated more as an equal with the seller? People willingly give money to make sure authentic voices exist. People willingly pay for art, ideas, and products that fulfill real social and meaning-making needs.
This brings us back to the earlier question of whether Radiohead’s Pay What You Want strategy was ultimately successful or not. In strictly financial terms, taking into account lost revenue from freebies and illegal downloads, we might say that In Rainbows neither underperformed nor overperformed. It made money, that much is clear. But in artistic terms, we can say that In Rainbows succeeded incredibly. Radiohead did what many musicians only dream of achieving – they proved their artistic independence. Without a record label, the band was able to activate fan support to the tune of $4 million. Not only did Radio prove their fans’ loyalty, but they also deepened and grew that connection. Returning listeners were treated to an authentic and meaningful buying experience. Plus, as research has shown, Pay What You Want almost always brings in new customers. Who wouldn’t try out a new album in such a welcoming setting with little to no buying friction? Radiohead made money and remained true to their artistic identity.
So, if you’re an up and coming band wondering how to make a living off your craft, consider using Pay What You Want pricing. Under the current models, you’re not going to make much money off streaming anyway. That $0.006 per play isn’t going to stuff your bank account. Why not then invest in the customer relationship from the beginning? Potentially offer your music for free while reminding fans that paying for (or toward) the music will support you art now and in the future. Capture the 35% of people who are pro-social, who believe that artists need to be paid for their work. Of course, this also means you must create music that’s deeply moving and engaging – it can’t be mediocre or fluff. You need to make important music for Pay What You Want to work. But you’re a musician. You haven’t sold out to a big label. And once you start turning the corner with Pay What You Want, you’ll know you have a lifelong source of income. You’ve become an important part of thousands of people’s lives. And they’ll pay you for providing, for being, for creating that experience.
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