Radiohead is selling the download version of their new album In Rainbows for whatever you want to pay for it, including a price of zero. When you go to buy it on their website, they just ask you to put in the price that you want to pay. It’s an interesting concept that plays on people’s honesty. I wish they will release the data about what people were willing to pay, but I suspect they won’t. It would be interesting to see how many people paid a positive price, the average price paid, and whether anyone paid more than what the equivalent price would be on a download service such as iTunes.

It would also be very interesting to monitor how much this album is swapped on file-sharing networks. If people can legitimately download the album for a voluntary price, will they stop paying for it? It’s important to realise that the price of an illegally downloaded song from a file-sharing network is not zero. There’s inconvenience and risks such as getting computer viruses, and getting sued by the RIAA. Thus, in theory, at a price of zero everyone should prefer downloading the album from Radiohead’s website rather than pirating it. And in fact, many people who would have pirated it should be willing to pay a positive price to download it from Radiohead’s website. The key question is: will that extra revenue make up for the lower prices paid by people who would have bought the CD anyway?

From a personal perspective, I would certainly feel a bit guilty to take the download for a price of zero, and would probably choose to pay a positive price. As a benchmark I should pay an amount equal to the value of the guilt that I would suffer if I set a price of zero. On top of this, music consumers seem to have a lot of negative feelings towards record companies for charging what some people feel are high prices, and for restricting people’s use of music that they purchased by using DRM technologies. A cynic might say that Radiohead is trying to capitalise in this, and generate some goodwill for not being greedy. Maybe consumers will reward their public spirit by not pirating this album so much and voluntarily pay a price for it. Also, the download version is only one out of two CDs that you get if you buy the CD version. So part of this strategy could be interpreted as advertising — if people really like the downloaded album then they might go and buy the boxed version to get the second CD.

Overall, it’s a very interesting experiment and I hope some economic analysis of the outcome can be carried out.