Radiohead Case Study Write Up

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Week 1: Radiohead 1. Do you think Radiohead's plan to allow fans to name their own price for the downloaded version of In Rainbows is a good idea? Why and why not? Yes, I think that Radiohead’s plan is a good one. At first glance, it appears that this “name your own price” method would reduce the band’s profits. However, this strategy disrupts the market leaders’ (record labels’) business model by (a) targeting the least-demanding tiers of the market that are currently overserved and (b) using a disruptive business model that enables Radiohead to compete profitably while pricing at deep discounts. From the case, the current model releases artists’ albums both in stores and online. Online, customers have the option of purchasing singles in lieu of the entire CD. The fact that 95% of iTunes sales are singles suggests that albums are overserving customers that only desire certain songs; they aren’t willing to pay $14.99 for a full album, but will pay $0.99 per song. Piracy is another concern. Though not necessarily a substitute for album purchases, the case states that 20 songs are illegally downloaded for every 1 that is purchased; this large discrepancy suggests that some customers still value full albums, but are unwilling to pay $9.99 or more. Additionally, the recording industry is overserving consumer needs – previously, they played an important role in identifying new artists and marketing their music to fans. With the dawn of social media, there are other channels – websites, MySpace, and iTunes, to name a few – that provide consumers with the ability to search out emerging artists without the help of record companies. Considering the large portion of album proceeds that go to the record company, this lowers the value proposition of a record company-backed album, as the companies are now offering a lower value. Radiohead’s business

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