Radiohead's In Rainbows Leads to Digital Pot of Gold

San Francisco producers, label heads, and distributors say the biggest music story of the year isn't taking place onstage at the Fillmore or in the racks at Amoeba Music this week. It's happening on everyone's computer at Radiohead.com.

On October 10, the fifteen-year-old U.K. rock quartet Radiohead independently releases its new album In Rainbows for download only. Fans can purchase the music at the group's site without copy restrictions for whatever price they choose to pay. "It really is up to you," InRainbows.net states. Spend nothing or charge $1,000,000 to your credit card — it appears no offer will be refused.

The stunning In Rainbows announcement came in the form of a four-line Radiohead.com blog item on October 1, obliterating the standard six-month lead time for major label CD releases. The news ricocheted around the Net — appearing on MySpace, Facebook, and cell-phone-based blogging site Twitter within minutes — and out to those off the electronic grid. San Francisco remixer and producer Count (who worked on DJ Shadow's last album) reports word traveled fast: "I am on a tiny island in the South Pacific with no phone access, but I did hear about the Radiohead record," he says.

Corey Denis, veteran digital music exec at local label Reapandsow, also heard the news October 1 and says she was "really, unbelievably excited. I thought something was coming, but I had no idea what it would be. I didn't expect them to say, 'Name your own price.'"

Industry analyst Brian Zisk at San Francisco's Future of Music Coalition agrees Radiohead is making a huge move, and the group may net tens of millions of dollars with no middleman by the end of the week. What astonishes him is Radiohead's reinjection of anxiety and guilt into stealing music. He claims the standard downloader's defense of not paying because, "Well, the record company keeps all the money anyway," can no longer be made.

"[The Radiohead tip jar] changes the dilemma in people's minds when they evaluate whether it's appropriate to take it or not," Zisk says. "It personalizes the plight of the musician. ... Hail to the Thief [Radiohead's last album] might've actually been about us. Maybe they were saying, 'You're the ones stealing the music. You made us what we are. Hail to you.' Now, they found a way for us to tap in to something better."

According to a poll by the U.K.'s NME, fans are prepaying an average of $10 for In Rainbows. The Wall Street Journal estimates the cost to Radiohead is $3.40 per unit. So take $6.60 in profit, multiplied by a conservative million downloads, and Radiohead look like the smartest guys in the room. And that's before you factor in future CD sales in 2008, tour dates, licensing, or the $80 In Rainbows enhanced box set — which ships December 3 with bonus tracks, double vinyl, and killer art.

Over on the East Coast, Fader magazine founder and Cornerstone promotions chief Jon Cohen says In Rainbows' unique distribution and cost methods represent a huge "fuck you" to the majors. Cohen used to work for Capitol — Radiohead's former label — and he says the independent launch essentially tells the majors, "We don't need you. We have no faith in your methods."

Cohen adds there's no better band to make the industry innovate: "I think the majors are scared shitless right now. If they succeed — and I 100 percent think they will — it shows bands like a U2 or a Pearl Jam or a Dave Matthews Band that they can build their own infrastructure too."

It's the small and middle-tier bands that will still need labels for distribution, promotion, and licensing. Reapandsow's Corey Denis paid roughly $10 for her In Rainbows preorder, but she wouldn't recommend the business model for indie bands. "I worry it's going to inspire other artists to do the same thing, even though it might not be the right path," she says. "They might not be ready and they'll lose opportunities in other areas. Say a band with 52 fans puts out an album this way, they may not make much."

Ashwin Nevin, president of local file sharing company BitTorrent says such gambits can also backfire — alienating fans and losing money. "[Radiohead] could end up spending all their profit on bandwidth costs Wednesday," he says. Radiohead.com could provide a similar experience to August's PlayStation3 launch of Warhawk or September's Halo 3 launch on Xbox 360. Hundreds of thousands of people tried to sign on at once to experience the games, and company servers came to a smoking crawl. "The question is, has [Radiohead] built in that scalability?" Nevin asks.

If anyone can do it, Cohen says Radiohead can: They've been control freaks their whole careers. "They called the shots, from band management to every visual, to press, to their radio presence, to the art," he says. "More bands need to take their cues from them, because so many bands don't care as much about how they're handled and it affects the most important facet of their music -- the relationship to the fan."