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October 17, 2007

Even Free Can’t Compete With Music Piracy

Nick Gonzalez

39 comments »

radiohead_inrainbows.pngThere’s been a lot of speculation over the future of the music industry and the conversation has begun to shift from “Can they sell DRMed music” to “Can they sell music at all”. Last week Radiohead ran one of the biggest tests of legally distributed free music by letting users name their price for “In Rainbows”, their latest album.

However, free doesn’t seem cheap enough. Despite the potentially free download, over 240,000 users got the album from peer to peer BitTorrent networks on the first day of release, according to Forbes. Since then, the album was downloaded about 100,000 more times each day, totaling more than 500,000. By comparison, Radiohead pushed 1.2 million sales of the album through their site, including pre-orders. File sharing networks are expected to surpass legal downloads in the coming days.

While the numbers may seem drastic, it’s really more a tale of how late to the game the music industry has been. Piracy networks have been growing over the past couple of years, despite the industry’s declared “war” on illegal file sharing. The networks have grown into easy-to-use distribution methods for digital music — even easier than what Radiohead offered. Users could easily grab “In Rainbows” while downloading music from other artists. Radiohead couldn’t be as compelling by only offering their own music and requiring users to take the time to set up an account.

But Radiohead doesn’t have that much to be sad about. The band gets to keep all the proceeds of their digital experiment and has distributed about six times more albums than their last release, which sold 300,000. That seemed to be enough to get EMI thinking harder about changing. Forbes obtained a email form EMI’s chairman saying “The industry, rather than embracing digitalization and the opportunities it brings for promotion of product and distribution through multiple channels, has stuck its head in the sand. Radiohead’s actions are a wake-up call which we should all welcome and respond to with creativity and energy.” So it seems there’s still hope yet that those legal war chests will be put to use on some innovations.

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Comments

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  1. Andrew

    October 17th, 2007 at 5:02 pm

    There are rumors that Radiohead ran out of mp3s on their website

  2. Jorge

    October 17th, 2007 at 5:02 pm

    Free doesn’t cover the marketing costs that went into making Radiohead famous enough to pull this off.

    This method is great if the band doesn’t plan on making money off anything except live performances. It’s also great if the band doesn’t plan on any sort of marketing drive except for web-based word of mouth. TV, Radio, and other promotional expenses measure in the low tens of thousands for *unknown* artists, and in the millions for established acts.

    This will be the death of the RIAA, if this comes to pass, but it will also be the death of quality mega-bands.

    YouTube is the prime example: the high-quality stuff gets viewers, but very few. The absolute shit (like that Britney Spears crossdressing apologist) will end up with almost all the exposure.

  3. Sean

    October 17th, 2007 at 5:16 pm

    @ Jorge - Part of the reason for that is the bite-sized nature of YouTube combined with the cyclical nature of ordering content by ‘most viewed’ metrics. People show up for 5 minutes while at work, view whatever’s popular, move on. Crap rises, like the current wave of random hot-girl videos with no real value.

    As for bands, mega-promotion brings us Southern crunk-copycats and, “I’m Britney bitch.” Radiohead was promoted and backed, but like the web, content is king. They earned their place.

    What about Panic at the Disco? They were signed before they ever played a major gig. If memory serves me, they only had one or two gigs period before being fast-tracked to MTV stardom.

    People will promote what they like, and when enough people like something it becomes a mega-band. Labels used to be necessary in an offline world, but now all it takes is one guy starting a website out of his house in Atherton to reach millions ;-)

  4. Scott Truitt

    October 17th, 2007 at 5:40 pm

    I have to wonder if Radiohead didn’t realize that In Rainbows would be leaked soon and quickly p2p’d into the hands of anyone who wanted it. For free. Seen in that light, their ploy to get some money for the mp3s is clearly a very shrewd move, and likely very lucrative even if most people pay very little for it.

    I wrote more about this idea here: http://www.tankt.com/2007/10/1.....y-pillows/

  5. AllMyMac.com

    October 17th, 2007 at 5:48 pm

    Coming from a former door guy at a live music venue. Collecting cover charges doesn’t really pay too well. Unfortunately the music industry is inevitably commercial (selling tangible products).

    Yes, iTunes DRM’s are doomed in the long haul…

  6. Derek

    October 17th, 2007 at 5:57 pm

    Seriously? How are those numbers you sputtered scientific?…. Who tracks the world of torrent downloads? I followed your cited link, and even the author of your citation, LISTS NO CITATION. I’m already drafting an email to Forbes to have that article retracted unless they can PROVE the numbers the author came up with. A search right now, reveals less than 10,000 AND there is no cumulative tracking done, this is moment by moment. Secondly did you try to download the album!? If you were able to get it with in the first 2-3 days YOU WERE LUCKY. It took me that long until I COULD even get that. Torrent would have yielded the song to me in moments. Come on Nick, give us some real material to read.

  7. Samuel Sidler

    October 17th, 2007 at 6:00 pm

    I think you’re missing one important point: On release day, Radiohead’s site was flooded with requests making it nearly impossible for some people do get the new album. I, personally, downloaded the album from a P2P client then went back a day later to officially “buy” it. If Radiohead had kept up with demand, there might have been less P2P downloads.

    I do agree that P2P as a platform for finding and downloading music is way easier than downloading the same music from a website. That probably paid a part in it as well.

  8. Nick Gonzalez

    October 17th, 2007 at 6:05 pm

    Calm down Derek, Forbes lists Big Champagne as their source for the information. They track illegal downloading on the internet.

    Sam - good point. I’m personally just going to buy the CD release.

  9. Aaron

    October 17th, 2007 at 6:09 pm

    To clarify what Sean said:

    “What about Panic at the Disco? They were signed before they ever played a major gig. If memory serves me, they only had one or two gigs period before being fast-tracked to MTV stardom.”

    P!ATD posted a link to their Purevolume page, which had demos they recorded by themselves with Garageband, on Pete Wentz’s (Fallout Boy’s bassist) blog. He signed them to his label and they put out an album… then played support on a bunch of tours and steadily gained fans. Six months after the album came out, the major distributor realized they had a hit on their hands *and then* pushed it to MTV. So it wasn’t a direct A -> B type of thing.

    In my opinion, they were pushed because they had some unique things to offer potential fans - a rare occasion in recent memory where a major label recognized such a thing and promoted it. Granted, they’re playing pop music, but it’s interested pop music and they wrote it themselves barely out of high school. That’s pretty impressive.

    Still, it’s an example of a smart move by a talented band leveraging the internet to get what they need.

    That was a MAJOR tangent, but I’m a fan of the band and I dislike the notion that their popularity can be explained away by saying that they were signed and then instantly MTV decided to make them stars.

  10. andrew

    October 17th, 2007 at 6:19 pm

    Radiohead’s website adds too many steps to download the album. Bit torrent websites do not ask for your personal information and only take a couple clicks to download making it much more attractive.

  11. Steve Ballmer

    October 17th, 2007 at 6:20 pm

    The iPoders (theives) will alweays try to skirt the law. We the forces of civilazation will fight them. Join Us, boycott iTombs!

    http://fakesteveballmer.blogspot.com

  12. Morgan

    October 17th, 2007 at 6:23 pm

    Personally, I think this exercise points out the legitimacy of pursuing music thieves with legal action. When you can buy an album legitimately for $1 or whatever it is, and you instead make the choice to steal it, you are just a plain thief– not a music ’sharer’, not an ‘evangelist’, just a thief. It puts the lie to the entire argument that somehow piracy is a rebellion against the labels, or inflated prices, or anything else. It’s always been garbage.

    It’s no different than any other intellectual property. Most copyrights and trademarks are, in fact, ‘free’ to duplicate and make use of (photos, logos, information, etc.). It doesn’t make it right, it doesn’t make it even slightly more legal, and it doesn’t presage the march towards free of me slapping ‘Apple’ onto products I produce.

    The choice is still, and has always been, choose to listen within the terms given by the producer, or choose to break the law.

  13. Morgan

    October 17th, 2007 at 6:25 pm

    Or choose not to listen, of course. That’s the one most people just refuse to accept as a choice. Forgot.

  14. Another Andrew

    October 17th, 2007 at 6:36 pm

    It’s not bad news for Radiohead if some people get the MP3s without using Radiohead’s bandwidth. After all, they were giving away the MP3s in the first place. There servers were probably relieved that other people were giving them away in the second place.

  15. ChrisD

    October 17th, 2007 at 6:37 pm

    Sorry, I have to view this posting as very snarky. The title is sensationalist and basically says “well, you just can’t do anything about P2P”. That’s about as insightful as saying “well people are buying oxygen tanks because air is free”.

    I don’t think it was Radiohead’s intentions to prevent illegal filesharing, it was as they said it was: let’s see what would happen if….

    As Comic Bookstore Owner might saw: Worst TechCrunch post ever!

    There is no doubt that Radiohead’s experiment was wildly successful and was able to “take money off the table” from both the record labels as well as people who may have (but didn’t) gotten an illegal download.

  16. Cesar Cardoso

    October 17th, 2007 at 6:52 pm

    “Even free can’t compete with music piracy” because of the recording industry war against their own customers. If they haven’t declared war in 2000, now we should have had a healthy non-DRM’ed digital music marketplace.

    Sorry, Nick, trolling post.

    (and yes, I bought the album.)

  17. Jessica Mah

    October 17th, 2007 at 7:00 pm

    So what there’s P2P music sharing going on still?

    Radiohead = True passion.

    All of you techies and entrepreneurs aren’t 100% about the money making… same thing applies to radio head.

    Cheers to them and the entire recording industry!

    ~ Jessica Mah

  18. Marcus

    October 17th, 2007 at 7:09 pm

    I don’t care much for forbes, it’s a reminds me how greedy people are.

    I also don’t think it’s worth the money for 160kpbs MP3, when a CD sounds much better to me and costs only $3-5 more.

  19. Nick Gonzalez

    October 17th, 2007 at 7:11 pm

    Morgan - The propriety of copyright law has been a matter long debated all the way back to the Statue of Anne.

    I think music’s current state needs a more pragmatic approach than continuing the debate over intellectual property rights. Piracy is here and the costs of enforcing these laws seem extremely expensive, even just domestically. It took the RIAA a long time and a lot of money to bring just their first case to court. That doesn’t even consider the costs of enforcing it internationally.

  20. Mark

    October 17th, 2007 at 7:24 pm

    A number of people have admitted to getting the album on bitTorrent because the site was so bogged down the day of release, and some of those people said they went back and paid for the album after.

  21. Fabian Schonholz

    October 17th, 2007 at 7:51 pm

    Look … behavior is hard to change. And probably not everybody knew about what Radiohead was doing. I think the experiment is a success. We just need to see if it is repeatable with a little more marketing and probably more infrastructure so the experience is good for consumers.

  22. David

    October 17th, 2007 at 8:03 pm

    Derek,

    Those numbers are from BigChampagne, which has been tracking P2P transfers for quite a while. Their clients include most of the major record labels. Their methodology is pretty solid (their CEO gave a presentation to some people at my company including me).

    David

  23. Shannon Clark

    October 17th, 2007 at 8:42 pm

    to echo some other comments, I know of a number of people who have gotten their copy via P2P but have ALSO paid for it via Radioheads website.

    A key and not fully explored point here is that unlike nearly all other groups, Radiohead has now given their fans a clear way to send them a direct signal of support, tailored to that individual fan’s own budget.

    I am probably going to buy the digital album, likely for about $10 - in no small part because lots of my friends have been raving about the album and I want to support Radiohead’s move. I hope that besides releasing the raw number of sales they also release some details about average price and other stats (and ideally release the full dataset to researchers for other analysis).

  24. Tim G

    October 17th, 2007 at 8:50 pm

    I downloaded the album off of p2p on the first day because I could not get to the over loaded servers to buy it on day one, I have since been able to go back and pay $5 for it. So these numbers are way off, there are three people I work with that all did the exact same thing, someone ought to rethink these numbers.

  25. Paul Brian

    October 17th, 2007 at 8:55 pm

    Aaron, Panic! at the Disco still signed with a label, Decaydance Records (an imprint of Fueled by Ramen). Fueled by Ramen distribute through Atlantic Records. Although Pete Wentz came into contact with them via the Internet (LiveJournal apparently) you still need to question what role Atlantic ultimately had in their success. I’d suggest, since Atlantic physically got the record into stores (because they had these previously existing relationships and huge distribution network), it’d be a hell of a lot.

    I’m still torn by this whole ‘free’ music idea. Not because I support what the industry is doing to these artists but simply because I can’t see another viable way for a) these artists to make any money doing it on their own and b) why another company would get involved in sales, marketing and distribution if they’re not going to get a descent share of the pie.

    In my opinion, people who illegally download the tracks via P2P networks or illegally burn a copy from a friend don’t truly appreciate the artist at all (okay, if you went back and legally bought it you’re forgiven). Yes these people appreciate the music but not the effort it took to create and promote it. It’s this attitude that has to change - the attitude that the Web largely supports, that even though we see tremendous value in a product/service, we shouldn’t have to pay for it. “Just add advertising and make it free”.

    To me this Radiohead effort is a little overrated. If it weren’t for their previous popularity they wouldn’t have generated the huge amount of press that made this effort of theirs a success (or is it?). And who was responsible for their previous success? A fair chunk of it a record label (or multiple labels). I’d like to know what they actually made from their 1.2 million sales. Are the sales (remember you could have paid 0 pounds for this) greater than what they would of made on their previous album (selling 300,000 for a fee)?

    Either way, I think the industry does need to change. It’s going to be fun to watch it go through this process. And no, I don’t know the perfect answer either.

  26. Mark Krynsky

    October 17th, 2007 at 9:07 pm

    Just like Sam & Mark said the site was crippled on the morning of the release and you couldn’t buy it even if you wanted to.

    It looks like they took the “House of Cards” track to heart which has the lyrics “Infrastructure will collapse” which is what happened when i tried to buy it today

    I got it off Bittorrent in the morning and was able to finally pay for it when I got home that night.

    Even then it was a very poor ecommerce experience as well that didn’t appear to have much thought put into the process.

    That said I still applaud Radiohead and hope other bands follow in their steps. Albeit a little more cautiously.

  27. Brandon

    October 17th, 2007 at 9:47 pm

    When the downloads directly from Radiohead are only 160kbps.. and someone has a leaked promo copy/etc… of COURSE people are going to get the V0 or 320kbps or FLAC versions off of bittorrent..

    isnt that quite obvious? many bittorrent users (especially private sites) will not settle for crappy 160kbps files (yes you can tell the difference until 192 where it levels off except for some music where you can tell the difference up to 320kbps/lossless formats). in general MP3 terms, 160kbps files are subpar and 192 and up are “considered” cd quality (even though technically they are not).

    Piracy is here to stay and theres no stopping it.

  28. Henk

    October 17th, 2007 at 11:27 pm

    I bought it 2 days ago from their website. Took me 3 minutes. And made me feel really good :)

  29. Spiros D

    October 18th, 2007 at 3:11 am

    What point are you trying to make with this post exactly ? I will have agree with Derek, there is no way on the face of this planet on accurately tracking how many times an album had been downloaded via BT: any number you present is sheer speculation. Personally i am deeply disappointed in TC due to this article, instead of trying to think of positive things to say about a brave new move that happened in the industry you are trying to invalidate it by throwing numbers and going down the ‘piracy is bad mkay’ path.

  30. EJ Fox

    October 18th, 2007 at 3:18 am

    I downloaded In Rainbows off BitTorrent- and here’s why.

    I want In Rainbows to succeed. Of course I could have gotten it off Radiohead’s site for free. However when Radiohead is looking over the numbers, or listing off the numbers to other people, I don’t want to be another statistic in the ratio of people who downloaded-but-didn’t-pay. I’m not a big Radiohead fan, I’d never really delved into their albums before. However after BitTorrenting the album (for free) I bought it from the site (for $11).

    I’m juking the stats for the industry- one less exploitative person for the anti-free-music people to latch onto as to why this didn’t work.

  31. Gig Production Industry Insider

    October 18th, 2007 at 4:44 am

    Oh stop your gripping, guys!

    This was a fantastic success for both Radiohead and P2P, as EMI’s chairman observes.

    To ’sell’ 6x their previous album (at a much reduced retail price but probably more profitable to the band) *and* have millions more copies floating around via p2p for a negligible outlay means their experiment will go down in history as the beginning of the end of the established recording industry.

    And from what I’ve picked up, pre-orders for their (expensive) ‘physical’ release are doing very well too.

    I’m immensely pleased with the outcome too — and I don’t even like Radiohead…

  32. chris

    October 18th, 2007 at 7:39 am

    Their album goes platnium in a week, outselling their previous album by a factor of 6. They prevent the leaked version from escaping into the wild (and, even more significantly, prevented the unmastered tracks from leaking, like what happened with Hail to the Thief). And they kept 100% of the profit from their mp3 sales, as opposed to the $1.50-$2.50 per album they would have gotten through a label.

    By all relevant metrics, this “experiment” was a complete success. And they got a LOT of people to question many assumptions underlying the current business model, including the “going rate” for a new album of ~$15, the necessity of buying a physical CD at all (granted this has been questioned more and more since iTunes’ debut), the fact that a large band needs millions of marketing dollars budgeted to “support” a new release, and the utility of a big label machine in the current business environment.

  33. Steve Elbows

    October 18th, 2007 at 11:25 am

    That 300,000 figure for sales of their last album was how many it sold in the first week. We need to wait longer to see how overall sales compare.

    I agree with comments about promotion. When the death of the music industry first became a talked about thing, many years ago now, it became clear that there was a new era in distribution unfolding. But when it comes down to mass marketing, the picture is not so clear. Sure some stuff will go viral on the net without an expensive mainstream media campaign, but even then some of this is due to mainstream media coverage.

    In the longterm I am quite interested to see what happens to mass media, if it keeps declining then at some point the era of mass marketing may fall apart and Im not sure if that means the death of all things mega.

    Or perhaps nothing so radical will happen, and all we will see is one type of middlemen getting replaced with another.

    Actually I suppose my great hope for the internet helping music, would be that talented musicians who would previously have given up and got other jobs after being ignored by the current system, might find a way to generate enough money directly to carry on making music. How they get noticed by enough people is the issue, talent will go a long way but not usually far enough, distribution isnt a problem anymore, effective hype is.

  34. Nate

    October 18th, 2007 at 12:08 pm

    chris has got it dead on. i too think that this was a big success story for radiohead.

    also, i want to take issue with the author’s characterization of P2P or bittorrent as “illegal downloading.” the author is, as far as i know, not a lawyer, nor does he intend himself as a shill for a particular industry lobby. he may want to refrain from legal pronouncements in the future, especially when they are not vital to his point.

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