Recently Radiohead experimented with the release of their latest album by allowing fans to download their latest album as digital mp3 files AND set their own price …

Internet monitoring company Comscore extrapolated from their users (that willingly let them track their online usage) that 38% paid zero for the tracks … and also that “American fans were the most generous, paying on average $8.05 (£3.85), compared to the $4.64 (£2.22) paid by those outside the US.”

Ultimately, Comscore believes the average price was around $6 USD.

That’s actually a HUGE amount per CD as NO artist signed to a regular music label contract get that much back from each CD sold!

If they are a major, major star, they get maybe $3 or $4 a CD and that’s just a handful of artists, most better known artists make around a $$2 to $2.50 a CD and 95% of a label artists probably make around $1-$1.50 a CD.

And the record labels seem to love the PHYSICAL CD because it allows to better hide them in inventory, calling them promotional or listing them as being returned.

For instance, the CD’s sold at CD clubs (Columbia House) are counted as PROMOTIONAL meaning the artists makes nothing except songwriting royalties … that’s one reason you don’t see the Rolling Stones at the CD clubs. Back in the heyday of the CD clubs, the labels loved a band that was obscure and would suddenly burst onto the scene because not only did they pay low royalties for regular sales but up to 25% of sales were to the record/CD clubs so it was essentially free to the labels.

But wait, the check is not in the mail yet. First they deduct your ‘advance’* for the production costs to make your CD (plus the interest of “loaning” you the advance) INCLUDING the production of the CD itself & its booklet, artwork and shipping to stores. Then there are the additional promotional expenditures for advertising and paying others to get airplay … THEN they’ll start to think about cutting you a check … though only after they check inventory and gauge returns, damaged, etc … ALL CHARGED TO YOU, the artist.

* Only in the music industry are artists charged for studio time and every last scrap of promotions cost … if you are acting in a movie, the studio doesn’t charge you for the film stock if you require 55 takes … if your book bombs, they don’t ask for your advance back nor do they charge you for the printing of your book … only in the music industry does the artists pay for nearly EVERYTHING …

So when the BBC says that thousands paid “nothing” for the tracks, that is really not so different than the normal course of action.

So, presuming Radiohead sold 1.2 million albums, they have made over $6 million dollars already … of course, they still have to pay for production of the tracks and the cost of the server & website to handle all that traffic but if they were still signed o a label, they would probably have to sell about 5 million CD’s to think about seeing $6 million dollars back from the label after all the costs are charged to them … here, Radiohead did not have to pay for the CD production costs nor “promotional” expenses plus the money is after a few days or hours is credited to their bank account earning them interest … so the reality is that they are WAY ahead revenue wise.

Of course, not every artist can pull this off nor would they want to take the chance. Most artists are happy to get an ‘advance,’ and don’t bother with the rest of the CD payback if any because the real money is in touring and merchandise sales … so while most established artists might not want to give fans a sliding scale in being able to buy their latest, in reality – they don’t really need the labels anymore … plus most fans would be happy to pay $6 to $8 for a digital “CD.”

Interestingly enough, the record labels know that is the “right” price. Once you sign up for a record/CD club deal – after you get your “free” and buy the obligation CD’s – if you calculate and buy it correctly, it works out to be around $6 a CD …

LINK to buy the RADIOHEAD “CD.”