Better Than New

The Sweet Sound of Disruption by morepete
October 10, 2007, 1:08 am
Filed under: Digital Life, Innovators, radiohead | Tags: , , ,


Did you hear that? The music industry’s business just got disrupted. And this time, it’s going to stick. Radiohead, a multiplatinum band from Oxford just released its new album, “In Rainbows” to tens of thousands of fans over the Internet without a hitch, just 9 days after announcing its existence and with nary a record label to be seen. This war was won quietly. Radiohead came, saw and conquered.

This is a very big deal — and not just because “In Rainbows” is Radiohead’s best album in seven years. No, this matters because they have completely eliminated the middle men between themselves and their fans. Forget iTunes. Forget record stores. Forget promoters. Just log on and start listening. Artist to fans, in one click. Every penny of revenue, straight to the artist.

It’s quite common these days to discuss Business Model Innovation casually, as if it were an everyday occurrence. It actually almost never happens, as the record industry has shown. For example, the iTunes business model is exactly the same as the one found in physical record stores: Labels license recording rights from artists, then reproduce recordings and send them to direct marketers, who sell to consumers. Everyone gets a small cut. All that changes between the digital download market and the physical market is the method of distribution. Here’s the business model for “In Rainbows”: Artist makes recording and sells it to consumers. Notice anything missing?

Radiohead will likely pair up with a record label to release a CD edition of “In Rainbows” next year, but they already have the ultimate bargaining chip — they’re fine working in direct sales. What else does the record industry have to offer? If their terms aren’t met (and I imagine those terms will include absolute right to the master recordings), they can walk away happily. This is a small gunshot across the bow of the record industry, but it could turn out to be the shot heard ’round the world. Many popular artists, including Nine Inch Nails and David Bowie, are waiting in the wings to leave their labels and follow Radiohead’s example by releasing their music directly to fans and keeping all revenue. For an established artist with a loyal following but few radio hits, record labels have nothing to offer at this point. Distribution costs nothing. Promotion is meaningless. Mindshare is everything. This, then, is the real promise of YouTube and other social media. Not just for unknowns to make it big — but for the bigs to finally be on top on their own terms.

At a certain point, the question will become not why Radiohead left EMI Records when they did, but why they didn’t leave years ago. What does this mean beyond the record industry? That remains to be seen. But if I worked in any content business, I’d get thinking quickly about how to change my model to feel more like this — and a lot less like Top 40 radio.