Radiohead has adopted a “public radio” funding model for its new album, allowing downloaders to “pay what they want” for it. A few notes on the way to an observation:
Here’s what else they get: An excellent mailing and e-mail list. To buy (or receive gratis) the album from the website one must enter name, email (and no cheating, since download codes are sent via email), address, cell phone number. . . . Anyone see mass text messaging in Radiohead’s future?), etc. For Radiohead, this is a valuable list, I imagine. It may also be valuable to any number of direct marketers and online advertising companies.
2) The Point of Tipping: Since the payment to Radiohead was voluntary, is it a tip? Eduardo Porter says yes:
[A]bout a third of the first million or so downloads paid nothing, according to a British survey. But many paid more than $20. The average price was about $8. That is, people paid for something they could get for free. This phenomenon is not new. It’s called tipping. We do it when we go to the restaurant or the barber, or when we ride in a taxi. Though one could argue there are real tangible reasons for this payment — like not losing an ear the next time we get a haircut — the practice of paying more money than we are legally bound to do is still mystifying in an economic sense. For instance, why tip a cabdriver you will probably never see again?
Confirming this point of view, Greg Mankiw says “we economists don’t understand tipping.” But economist Robert Frank offers a pretty compelling explanation in line with other Darwinian dimensions of his thought. Here’s an excerpt from a recent book of his that addresses the point of tipping: