Radiohead’s “In Rainbows”: the ultimate price discrimination

Inrainbows 

Pretty much everyone knows that if you want to get Radiohead’s latest record you can either buy a luxury box for 40£, or download it from the web for as much as you’ld like to pay for it, from zero upwards. 

Now the first figures are coming, and supposedly 68% downloaded it for free,  while some 17% paid 1-4$, 6% paid 4-8, 12% paid 8-15$, and the remaining 4% paid more than 15$ (but Radiohead are denying these figures)

This sounded good enough for some people to call this experiment a failure, but the real news is not the 68% of (allegedly 1.2 million so far) people who got for free something that was out there for free.

The real news is that 32% that decided to pay the same thing that they could have for free, in the very same form, at the very same time, the very same way. Same music, same mp3 format, same time for downloading…

This is really the ultimate price discrimination.

If you look at other forms of price discrimination, the product is never quite the same. Take air travel: yes, you move from point A to point B leaving at the same time and landing at the same time, whether you travel business or economy. But the service, the food, the comfort of the sits, they’re very much different, because otherwise there would be no legitimation for the different pricing.

Radiohead’s “In Rainbows” is different, in a way that is very 2.0: the consumer is setting the rules, and this means that the producer has no need to legitimate the price. It’s all up to us, and some 400.000 people have responded by paying for something that the rational consumer from “first-year microeconomics course” would never consider paying for.

Final Burp: it’s an example of art stepping backwards in time from business to patronage, and sometimes stepping backwards is not necessarily a bad thing

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6 responses to “Radiohead’s “In Rainbows”: the ultimate price discrimination

  1. I think this experiment is saying pretty much nothing to date. For sure it’s not a failure for it’s just not fair to compare with CD sales (68% not paying, uh? And how many people downloaded for free their previous album?).
    The big questions are:

    1) was this much-hyped experiment boosted by people that WANTED it to work to inspire other bands to join the game?

    2) Could this work for less famous bands? (I doubt it)

    Check this post of Scott Adams (creator of Dilbert) on the subject http://online.wsj.com/article_email/SB119388143439778613-lMyQjAxMDE3OTAzMTgwODExWj.html

  2. Oh and BTW the service here WAS different for people who payed differently.
    Because (the music industry is a great example for this simple truth) what you buy is not the music, it’s:

    a) the pleasant feeling to support your favourite artist
    b) the idea that you’re changing the industry with a little amount of money
    c) the right to say I was among the ones who bought it while drinking with some friends
    d) the feeling that you’re NOT a theft despite your 2000+ dowloaded tracks on iTunes (it’s not an expensive album, it’s an almost free redemption)
    e) … what else?

    And if you look at those points you can see why I doubt this system can be sustainable: 3 of 4 are a first-time-only benefits

  3. I’ld say that the service was the same (same download, same speed), but the emotional value of the product/service was extremely different.
    But I very much agree that no.3 is a first-time-only benefit (not sure about no.4, I’ld say you would regularly need to buy a record, to make up for all the thousands songs you’ll keep downloading: after all, christian catholics agree that earthly redemption needs to be received on a regular basis)

  4. This is agency thinking my friend: i.e. you didn’t do the math. If I substitute a once-in-a-while purchase to a regular purchase, either your cost structure changes dramatically or… well, you’re bound to go out of business.

  5. Simo,

    by regular purchase I didn’t intend that you’ld have to regularly buy THE same record, because that’ld make you a dumb ass.
    I’m saying that you would regularly buy legal version of some records you like, to make up (ethically) for the many you’ll keep downloading for free.
    In a way, legally buying only your favorite records means making you feel less of a thief, and also stating the difference between what you consider really good pieces of work (that deserve money) and the rest of the noise that you download just to get more infos on the artist, or because you never know (the stupid chick you’ve been flirting with might actually like Britney…)

  6. Pingback: Freeconomics « Final Burp

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