New Radiohead Album – Pay What You Want

All the kids are talking about it, so I thought I’d join in. Radiohead is selling its new album In Rainbows for whatever price you’d like to pay. Check out the site for online orders for In Rainbows.

Coincidentally, I’m also reading Freakonomics at the moment. The authors discuss incentives at lengths–that’s what drives business, the economy, and most of human behavior, they claim. One example used in the book is of a bagel seller who puts a basket of bagels and a box in business offices. The employees are on the honor system to pay for the bagels they eat. The return rate is something like 87%, so the owner of the business can make regular plans around revenue and costs and such.

Without any predetermined price on the new Radiohead album, maybe fans will be motivated to pay more than you’d think out of good will, or maybe they’ll just pay for the download to ensure the band will stick around?

This isn’t the only time such a payment model has appeared. When you decide to buy an album for download from Magnatune, for instance, you can choose the price you’d like to pay. Very counter-intuitive business idea. I wonder if such models can sustain.