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Making money by giving it for free: Radiohead's pre-release strategy for In Rainbows

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  • M. Bourreau
  • P. Dogan
  • Hong, S
Abstract
In 2007 a prominent British alternative-rock band, Radiohead, pre-released its album In Rainbows online, and asked their fans to “pick-their-own-price” (PYOP) for the digital download. The offer was available during an 8-week window, soon after which the digital and CD albums were commercialized at pre-set prices. In this paper, we use weekly music sales data in the US between 2004 and 2012 to examine the effect of Radiohead’s innovative strategy on the subsequent sales of the band’s albums. We find that Radiohead’s PYOP offer had no significant impact on CD album sales. Interestingly, it yielded a higher percentage change in the digital album sales compared what would have been obtained with a conventional release. This suggests that the increase in sales due to the vast media attention generated by the offer strategy must have dominated the cannibalization effect. Consequently, the PYOP offer had a positive impact on sales revenues, even if one assumes no revenues were obtained directly from the PYOP downloads. However, this “success story” does not readily apply to similar strategies adopted by other bands. We show that Nine Inch Nail’s free provision of its new album, The Slip, decreased digital album sales.
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  • M. Bourreau & P. Dogan & Hong, S, "undated". "Making money by giving it for free: Radiohead's pre-release strategy for In Rainbows," Working Paper 85936, Harvard University OpenScholar.
    • Handle: RePEc:qsh:wpaper:85936
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    Cited by:

    1. Mustonen, Mikko, 2019. "Direct publishing and the bargaining between the author and the publisher," Information Economics and Policy, Elsevier, vol. 48(C), pages 40-47.
    2. Bazen, Stephen & Bouvard, Laurence & Zimmermann, Jean-Benoît, 2015. "Musicians and the Creative Commons: A survey of artists on Jamendo," Information Economics and Policy, Elsevier, vol. 32(C), pages 65-76.
    3. Gerpott, Torsten J. & Schneider, Christina, 2016. "Buying behaviors when similar products are available under pay-what-you-want and posted price conditions: Field-experimental evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 65(C), pages 135-145.
    4. Gerpott Torsten J., 2016. "A review of the empirical literature on Pay-What-You-Want price setting," Management & Marketing, Sciendo, vol. 11(4), pages 566-596, December.
    5. Di Domenico, Giandomenico & Premazzi, Katia & Cugini, Antonella, 2022. "“I will pay you more, as long as you are transparent!”: An investigation of the pick-your-price participative pricing mechanism," Journal of Business Research, Elsevier, vol. 147(C), pages 403-419.

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    JEL classification:

    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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