In the latest of his Lefsetz Letters (not yet online) Bob Lefsetz touches on the strategy behind Radiohead’s pay what you want album release:
How do acts establish a direct connection with their fanbase? How do they entice listeners to join their e-mail list, with authentic e-mail addresses? That's the number one lesson of Radiohead's In Rainbows. Give away something desirable and you get the right to make contact with your fans thereafter. At MIDEM the co-manager of Radiohead said the In Rainbows release allowed the band to collect 3 million e-mail addresses, and ultimately play to 60,000 in San Francisco as opposed to 25,000 the previous time through. And isn't live where it's at?
Well, folks, I feel vindicated. As I previously wrote,
I think people are missing a crucial point about Radiohead’s name your own price strategy. It is not all about giving listeners what they want, namely DRM-free music that’s free (or nearly so); it is also about giving Radiohead something it apparently wants (and that it could not get working through a major label): deep information about its listener population beyond the hard-core fans (i.e., those who’ve already joined the Radiohead fan club), including in particular information about which listeners are good candidates for up-selling strategies aimed to move more Radiohead merchandise, tickets, and other Radiohead-related products and services.
This was at a time when Lefsetz (among others) was deriding Radiohead’s actions as playing for tips, a notion I thought was particularly wrong-headed. I don’t claim to be any great expert on the music business, but I think I called this one exactly right.