Think of the $5 as marketing cost.
Much like Radiohead, Trent Reznor offered a new album online as both a free version and a $5 higher quality version. Now he is upset that only 18.3% chose to pay for it.
Why is this surprising? He offered a free version. If the quality was acceptable then why not download that version?
Radiohead merely asked fans to pay what they felt the album was worth; they didn't offer a free version.
Trent notes that nothing was spent on marketing:
Keep in mind not one cent was spent on marketing this record. The only marketing was Saul and myself talking as loudly as we could to anybody that would listen.
But that's not true. The marketing cost is the $5 per copy for the 81.7% of the people who didn't pay for it. They are listening to it - the basic equivalent of free radio airplay. If they like it they might buy more, or at least tell their friends about it. And they might pay to buy a ticket to a live performance. Isn't that the real goal? And an 18.3% royalty dwarfs what a record company would have offered the artist.
By the way, I would have loved to comment on the CNet story about this, but I'm not going to register just to add my thoughts.
TechCrunch and Mathew Ingram have more on the music tax aspect of this story.
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