How Much Is Music Worth in an Age Of Digital Freebies?(The Technologist)

On Oct. 10, the beloved British rock band Radiohead made history. The group had produced a new CD -- but didn't release it. At least not in CD form. Those who wanted to hear the feverishly anticipated studio album "In Rainbows" could grab the work only by downloading it from the band's Web site.

Here's the twist: there was no set price. Going to Radiohead's site, one was confronted with a blank field when it came to payment -- you could enter a figure from zero up to hundreds of dollars (everyone had to pay about 90 cents) and receive in return a code that would let you download the songs in unprotected form, listenable on iPods, Zunes or PCs. It was almost as if the band had taken to heart the title of its breakthrough work -- "OK Computer."

How much is music worth in an age when just about any song can be grabbed for free? The results from Radiohead fans don't really answer the question (and the band has yet to release official figures). But the experiment shows that real people don't agree with the record labels.

Online pricing until recently was fairly standard, thanks to the dominant seller, Apple. When Steve Jobs negotiated with the record labels prior to the iTunes Music Store's 2003 ribbon-cutting, he demanded a flat price -- 99 cents a song and (by and large) $10 for a whole CD. The labels went along. But now they are unhappy that Jobs makes more money selling iPods than they do selling songs, and they want the freedom to charge more.

Yet is 99 cents the magic number? No way. A couple of years ago, the music service Rhapsody funded a test: for a few weeks it subsidized a price cut of songs to 49 cents, and cut album prices from 10 bucks to five. Sales went up sixfold. It doesn't take a math major to figure out that when costs of the next copy are near zero, cutting prices and selling many more units is going to make you more money.

It seems weird for the labels to have these spats when their real problem isn't Apple, but the billions of songs traded online free. The labels' method of dealing with those services is to sue consumers who use them. Nonetheless, no one thinks that music file-sharing is going away.

That leads us to Radiohead. A ...