Making Money by Giving It for Free: Radiohead's Pre-Release Strategy for In Rainbows

34 Pages Posted: 20 Jun 2014 Last revised: 9 Sep 2014

See all articles by Marc Bourreau

Marc Bourreau

Telecom ParisTech

Pinar Dogan

Harvard University - Harvard Kennedy School (HKS)

Sounman Hong

Yonsei University

Date Written: June 1, 2014

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 for three months, after which the band released and commercialized the album, both digitally and in CD. In this paper, we use weekly music sales data in the US between 2004-2012 to examine the effect of Radiohead’s unorthodox strategy on the band’s album sales. We find that Radiohead’s PYOP offer had no effect on the subsequent CD sales. Interestingly, it yielded higher digital album sales compared to a traditional release. Our findings suggest the PYOP strategy generated higher sales revenues overall, even if one assumes no revenues were obtained directly from the PYOP channel. 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, resulted in lower revenues from the album’s digital sales.

Keywords: Pick-your-own-price, Music industry, Cannibalization, Market expansion

JEL Classification: L82

Suggested Citation

Bourreau, Marc and Dogan, Pinar and Hong, Sounman, Making Money by Giving It for Free: Radiohead's Pre-Release Strategy for In Rainbows (June 1, 2014). HKS Working Paper No. RWP14-032. Available at SSRN: https://ssrn.com/abstract=2456663 or http://dx.doi.org/10.2139/ssrn.2456663

Marc Bourreau

Telecom ParisTech ( email )

46, rue Barrault
Paris Cedex 13, F-75634
France

Pinar Dogan (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-496-6757 (Phone)
617-496-5747 (Fax)

HOME PAGE: http://scholar.harvard.edu/pdogan/home

Sounman Hong

Yonsei University ( email )

Seoul
Korea, Republic of (South Korea)

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