This is the third part in a multi-part series looking back at Radiohead’s landmark release, In Rainbows.

In Rainbows Redux Part 1: Pre-release buzz, piracy, pricing, and bit rates.
In Rainbows Redux Part 2: Radiohead morning, management missteps, and reading the early numbers.
In Rainbows Redux Part 3: Conclusions
In Rainbows Redux Part 4: In Rainbows Reviewed

As much as I’ve already written about In Rainbows, new topics and new angles on topics I’ve already covered, continue to emerge. At some point I have to wrap things up. Here are some final observations:

1. The Customer Is King Three days after Radiohead launched the In Rainbows website and offered fans the chance to name their own price to download their new album, the RIAA won a $220,000 verdict against a Minnesota woman for illegal file sharing. Radiohead respected the customer and trusted them to do the right thing. They didn’t expect everyone to buy their album for $10, instead, they counted on enough people to spend $10 to cover those that didn’t, and the early numbers show that their trust was not misplaced. Meanwhile, the RIAA’s less than consumer friendly tactics involve scaring consumers to do the right thing with their assumption being that people will be so frightened by lawsuits that they will go back to buying music. Who would you rather give your money to?

2. The Customer Is King The two major mistakes Radiohead and their team made with In Rainbows: the mid level bit rate, and the comments by management, “If we didn’t believe that when people hear the music they will want to buy the CD, then we wouldn’t do what we are doing,” both could have and should have been avoided. If the files were encoded at 192, then I’m sure people would have complained that they weren’t 256, and if they were encoded at 256, people would have complained that they weren’t 320. The simple solution to minimize consumer dissatisfaction would have been to let them know the quality of the digital recording before the download was purchased, not in an email one day before the release. Similarly, if you’re management and your band just pulled in millions from a digital release, why make such an inane statement the day after the release? Maybe it was out of context. Maybe you had the band’s best financial interests in mind. None of that matters. It was the 1.3 million people who downloaded the album that are your customers, and they are far more important than any prospective label deal or any future release.

3. There’s Money In Those God Darned Ones and Zeros There’s still money to be made in recorded music and it isn’t in ringles, USB singles, enhanced features, or bonus tracks. There’s money to be made in plain old music. Gone are the days where you can work the traditional channels and hope that all your work during the lead time will come together in one glorious buzz worthy buzz leading consumers down gold lined aisles to the wonderous sounds of registers ringing and cash drawers clanging. Instead, as Radiohead showed, it’s going to take a little creativity. By creating a condensed pre-release buzz and by circumventing the traditional distribution channels, Radiohead have already taken in millions. Even if that average is closer to $3 or $4, and the number of downloads is lower than 1.3 million, Radiohead still had massive numbers in their first week of release.

4. Stating The Obvious Labels still play an important role in young bands by providing the capital needed for recordings and touring, but for established acts, the old model has shown itself to be obsolete. So obsolete, that I’m willing to wager that if In Rainbows was handled in a traditional manner, it would have been far less successful.

5. The MP3 Is the Endgame Considering the number of downloads already serviced by Radiohead’s website, there’s hardly a need for a standard release. One thing that Radiohead’s management failed to realize when they talked of the need for a physical release, is that for many people MP3s are the endgame. Once a cd is purchased, ripped, and loaded onto an MP3 player, its primary job is to sit in a jewel case and collect dust as back up data. In a recent Freakonomics discussion on the future of the music industry, Frederic Dannen explained how every evolution in music formats – from 78s to LPs, LPs to cassettes, cassettes to CDs, and CDs to MP3s has been fueled by convenience not quality. For some, the quality may still be an issue three or four months from now, and maybe they’ll be enticed by a bonus track or two to spend another $14 on Radiohead, but the majority of In Rainbow’s purchasers will hardly see the need to buy In Rainbows a second time.

6. How Do You Compete With Free? As stated earlier, I don’t believe the free music model can be sustainable, and if I did have the answer to this question I wouldn’t be sitting here in my Lakewood apartment wearing an Adidas tracksuit, sipping coffee, and debating whether or not I should ever get out of my comfy clothes. Ok, maybe I still would be wearing my comfy clothes in my Lakewood apartment, but I’d have a much healthier bank account. In addition to the million or so legal downloads distributed by Radiohead’s website, In Rainbows has been doing heavy traffic on the bittorent networks, as well (500,000 in the first week alone). Is there a magic price point that can compete with free? Probably not, but there may be a lower price point that will entice more people to legally buy music. Once Team Radiohead analyze the data of their name your own price sale, they will likely find the price people are willing to pay for downloads is significantly lower than the current standard of $9.99 (iTunes) or $8.99 (Amazon) per album.

7. The Social Much of the success of In Rainbows comes from the fact that as social beings, us humans like to be a part of big events. For music fans, tech fans, and other curious net folk, the release of In Rainbows was a big event. The band treated it like an event. You had to register, but once you registered, you couldn’t get the goods. You had to wait ten days before you could get the actual downloads. Those ten days between the initial announcement and the actual release, provided the time needed to make In Rainbows a cultural phenomena. Look, we all knew In Rainbows would find its way onto the illegal trading sites after its release, but in addition to the reasons I had previously outlined concerning why I would pay money for In Rainbows when it could be had for free, there was the sense that this was something I wanted to be a part of. Radiohead were being daring and different. They made an event out of something that existed purely in the realm of ones and zeros, which is no easy thing to do.

8. Stating The Obvious II No matter how you slice, dice it, or julienne it, The In Rainbows Experiment has to be considered a success. It created an enormous buzz on the internet, embraced new ways of doing business, solidified the MP3 as the format of the future, put another nail in the DRM coffin, made the traditional record release obsolete, and made the band a good deal of coin. In Rainbows will go down as a landmark album, and I feel confident in saying so, without even considering whether the music itself is any good or not. Additionally, while the In Rainbows Experiment may be difficult for another band to replicate (there’s that small matter of Radiohead being huge before all this In Rainbows hullabaloo) it will lead to more innovation and experimentation in how albums are produced, priced, and distributed. Consumers, bands, and an ailing industry will all benefit.

Continue to , Part 4: In Rainbows Reviewed

Back to Part 2: Radiohead morning, management missteps, and reading the early numbers.