Radiohead's New Strategy: Pay What You Want

In a brilliant marketing and PR move, the British band Radiohead is offering their new album for download at any price you want. You just go to their site and fill in the blank. I paid 1.25 pounds for music I wouldn’t have otherwise bought, just because I could. This is a great innovation for artists who usually receive a small royalty for each album sold and make most of their income from concerts. Terra Bite, a small coffee shop in Kirkland Washington, has a similar model in which customers can pay whatever they want for lattes and muffins. However this strategy is ideal for digital music which must have very low marginal cost.

While the recording industry is trying as hard as possible to get their customers to hate them, e.g. suing college students and putting bothersome copy protections on their products, artists are finding better ways to market themselves. Madonna signed with a concert promoter instead of a record label and Yahoo! Music General Manager Ian Rogers recently promised that Yahoo! will no longer be involved with DRM. These people realize that winning customers is about marketing that is customer centric not profit centric.