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Radiohead’s Warm Glow

[smaller]By EDUARDO PORTER

Published: October 14, 2007

nytimes.com[/smaller]

I didn’t pay anything to download Radiohead’s “In Rainbows†last Wednesday. When the checkout page on the band’s Web site allowed me to type in whatever price I wanted, I put 0.00, the lowest I could go. My economist friends say this makes me a rational being.

Apparently not everybody is this lucid, at least not in matters related to their favorite British rock band. After Radiohead announced it would allow fans to download its album for whatever price they chose, about a third of the first million or so downloads paid nothing, according to a British survey. But many paid more than $20. The average price was about $8. That is, people paid for something they could get for free.

This phenomenon is not new. It’s called tipping. We do it when we go to the restaurant or the barber, or when we ride in a taxi. Though one could argue there are real tangible reasons for this payment — like not losing an ear the next time we get a haircut — the practice of paying more money than we are legally bound to do is still mystifying in an economic sense. For instance, why tip a cabdriver you will probably never see again?

“Since we economists don’t understand tipping, we can’t really say whether this new scheme will work,†Greg Mankiw, a Harvard professor of economics, said in an entry on his blog. He is not the only economist who is fascinated by the phenomenon. His Harvard colleague, Dani Rodrik, asked his blog readers, “Has Radiohead gone bonkers?†He concluded, “Not at all.†Radiohead will make money. But those who are paying for the download may truly be nuts.

One could argue that rationality isn’t everything. Radiohead fans might just be altruistic beings who out of the goodness of their hearts would like to give some money to a spectacularly successful and probably stinking rich rock band. But somehow, that doesn’t work as an explanation.

Or does it? Some economists suspect that what is going on is that people get a kick from the act of giving the band money for the album rather than taking it for free. It could take many forms, like pleasure at being able to bypass the record labels, which many see as only slightly worse than the military-industrial complex. It could come from the notion that the $8 helps keep Radiohead in business. Or it could make fans feel that they are helping create a new art form — or a new economy. People who study philanthropy call it the “warm glow†that comes from doing something that we, and others, believe to be good.

Mr. Rodrik tested some of this with an experiment of his own. He offered his blog readers the opportunity to get a copy of his new book on globalization and economic growth for whatever price they wanted to pay, and said proceeds would go to the charity Save the Children.

The response suggested that “warm glow†is in demand. A third of the people offered nothing. But the average bid was $21, and he received bids for as much as $145, more than four times the list price. The most interesting part was to hear bidders explain themselves. Those who bid little felt it necessary to provide a reason, like being a poor student. But those who bid high justified it too: many said they liked saving children.

This is all good news for Radiohead, which has boosted its indie credibility, while all the attention might actually boost its revenues. The band also offered online a package of two CDs, two vinyl records and a booklet for about $80, and it plans to release “In Rainbows†as a single CD in January for fans who would rather hear the music with a better resolution than the medium-quality MP3 file available for download.

It is also potentially comforting news for the recording business. The industry has been struggling to find a business plan that will work in an online market in which — despite billions invested in antipiracy measures — fans can pretty much get their music for free if they want to.

Today, music lovers are left but two options: pay list price for an album, or perform what a fan might call a free download and a record company would call theft. Radiohead’s experiment suggests a third way out: let fans pay what they want and give them lots of touchy-feely reasons to want to give as much money as they can.

New York Times online

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  • 4 weeks later...

Radiohead to Release `In Rainbows' on CD

NEW YORK (AP) - After the digital release of Radiohead's latest album sent shock waves through the music industry, the band announced Monday that "In Rainbows" will have an old-fashioned release.

A physical version of the British alt-rockers' seventh studio album will hit music stores Jan. 1. (Earlier Monday, the band had announced Jan. 2 as the release date.) ATO Records Group will put out the disc in North America, where it will bear the band's imprint: TBD Records.

Which label would land the right to distribute "In Rainbows" had been a matter of considerable speculation after Radiohead concluded their long-term contract with music giant EMI Group.

The band made the album available for download via their Web site last month, letting fans determine how much to pay. In a study released last week, consumer research firm comScore Inc. found that 62 percent of the people who downloaded "In Rainbows" in a four-week period opted not to pay a cent. The remaining 38 percent paid an average of $6, according to comScore.

The results of the study were drawn from data gathered from a few hundred people who are part of the firm's database of 2 million computer users worldwide. The firm, which has permission to monitor the computer users' online behavior, did not provide a margin of error on the study.

Radiohead's digital release of "In Rainbows" was hailed by some as a shrewd move at a time of industrywide declining CD sales. Others viewed it as a publicity stunt that amounted to the band giving away its music.

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