With Radiohead, Less is More
Seems like Radioheads name your own price model has been able to net him more money then if he went through traditional retail channels – even though the average album price was $6.
Radiohead’s name-your-own-price sale of its new In Rainbows album has generated lots of commentary, especially since comscore released data claiming that 62% of customers set their price at zero, with the remaining 38% setting an average price of $6, which comes to an average price of $2.28 per customer. (There are reasons to question these numbers, but let’s take them as roughly accurate for the sake of argument.) [...] To see why this might be true, imagine that there are 10 customers willing to pay $10 for your album, 100 customers willing to pay only $2, and 1000 customers who will only listen if the price is zero. (For simplicity assume the cost of producing an extra copy is zero.) If you price the album at $10, you get ten buyers and make $100. If you price it at $2, you get 110 buyers and make $220. Lowering the price makes you more money.
Buy an Album for $2?! Sign me up! I think prices like that would kill all piracy.
