The Brand That Lets Customers Set the Price

On October 10, 2007, Radiohead did something that seemed suicidal.

They released their new album, In Rainbows, on their website. No record label. No distributor. No iTunes. Just a download link and a question.

How much do you want to pay?

There was a blank box. You could type in any number. Zero was acceptable. One penny was fine. A thousand dollars would also work. The choice was entirely yours.

This was one of the biggest bands in the world. They had sold millions of albums. They had played stadiums. And now they were trusting their fans to pay whatever they felt like paying.

Gene Simmons of Kiss called it insane. "I open a store and say 'Come on in and pay whatever you want.' Are you on fucking crack?"

The music industry watched in horror. Surely this would prove that music was worthless. That people would take everything and give nothing. That the only thing preventing mass theft was the inability to steal.

Instead, something strange happened.

The Numbers

The majority of people who downloaded In Rainbows paid nothing.

According to data that leaked later, about 62% of downloaders chose not to pay. They typed in zero, hit enter, got their music.

But 38% paid something. The average payment among those who paid was around $6. When you averaged across everyone, including the freeloaders, the payment came out to about $2.26 per download.

This sounds like a disaster until you compare it to the alternative.

If Radiohead had released In Rainbows through a traditional record label, they would have received approximately $2.25 per album sold. The label would have taken the rest.

If they had sold exclusively through iTunes, they would have received about $1.40 per album.

By letting customers pay whatever they wanted, Radiohead made more money per download than they would have through conventional channels. And they kept all of it.

But that wasn't even the interesting part.

When Warner Chappell, Radiohead's publisher, revealed the results a year later, they confirmed something remarkable: Radiohead made more money from In Rainbows before the album was physically released than they made in total from their previous album, Hail to the Thief.

The pay-what-you-want experiment had outperformed the traditional model.

Three Million Sales

After the initial download period ended, Radiohead released In Rainbows through conventional channels. CDs in stores. iTunes downloads. The usual.

The album debuted at number one on the Billboard chart. Number one in the UK. Number one on the United World Chart.

Three million total sales.

One hundred thousand people bought the $80 deluxe box set, which included the album on CD, two vinyl records, an enhanced CD with additional tracks, and artwork. That's eight million dollars from the box set alone.

The conventional wisdom was that giving something away for free would make it worthless. That if people could get music without paying, they would never pay again.

The opposite happened. The free download created so much buzz, so much goodwill, so much press coverage, that it drove record sales higher than they might have been otherwise.

People who paid nothing for the download bought the CD. People who paid $5 online bought the $80 box set. The album wasn't devalued. It was elevated.

What the Freeloaders Taught Us

The 62% who paid nothing are interesting.

You might assume they were just greedy. That they saw an opportunity to get something for free and took it. That they proved Gene Simmons right about human nature.

But researchers studying pay-what-you-want pricing have found something more nuanced.

Some of those people weren't fans. They were curious browsers who downloaded the album because it was free, listened once, and never thought about it again. Under traditional pricing, they wouldn't have bought it at all. The band didn't lose their money. The band never had their money.

Others genuinely couldn't afford to pay. Students. Unemployed people. Fans in countries where six dollars represented a significant portion of weekly income. For these people, pay-what-you-want was the only way to access the music legally. Without it, many would have pirated the album anyway.

And some paid nothing because they planned to buy the physical release later. They weren't stealing. They were sampling.

The freeloaders weren't a bug in the system. They were part of the system. They created buzz. They recommended the album to friends. They filled concert venues. The fact that 62% paid nothing didn't mean the model failed. It meant the model worked differently than traditional sales.

The Psychology of Reciprocity

Why did 38% of people pay when they didn't have to?

Economists would expect this number to be close to zero. Rational self-interest says you should pay the minimum required to obtain a good. If the minimum is zero, you pay zero. That's just math.

But humans aren't rational. They're social.

When Radiohead said "pay what you want," they weren't just offering a transaction. They were extending trust. They were saying: we believe our music has value, and we believe you'll recognize that value.

This triggers something psychologists call reciprocity. When someone gives you something, you feel obligated to give something back. Not legally obligated. Socially obligated. The discomfort of receiving without giving is enough to motivate payment.

It also triggers something researchers call self-image maintenance.

Studies on pay-what-you-want pricing have found that people don't just ask "what's the minimum I can pay?" They ask "what does my payment say about me?"

Paying zero says something. It says you're cheap. It says you don't value the artist's work. It says you're the kind of person who takes advantage of generosity.

Most people don't want to be that person. So they pay.

The Surprising Finding

Here's where it gets strange.

In one study on pay-what-you-want pricing, researchers compared two conditions. In one, people could name their price for a product. In the other, the price was fixed and low.

You'd expect more people to buy under pay-what-you-want. After all, they can get it for less.

But that's not what happened. Fewer people bought under pay-what-you-want.

Why? Because of the self-image problem.

When the price is fixed, there's no moral calculation. You're not making a statement about your values. You're just paying the listed price like everyone else.

But when you can pay anything, you become responsible for the amount. And some people, rather than face the discomfort of paying "too little," simply opt out of the transaction entirely.

They'd rather have nothing than feel like they underpaid.

This is why pay-what-you-want doesn't work for everything. It works when people already trust the brand. When they want to signal that they're the kind of person who supports artists. When the act of paying is partly about identity, not just acquisition.

Radiohead had decades of goodwill. Their fans wanted to prove they valued the music. Pay-what-you-want gave them a way to demonstrate it.

What Came Next

Within three years, the pay-what-you-want model had spread across the gaming industry.

Humble Bundle launched in 2010. Same concept: pay what you want for a collection of video games, distribute the proceeds between developers and charity however you choose.

The first Humble Bundle raised $1.27 million in ten days.

By 2014, Humble Bundle had raised $50 million for charity. By 2021, over $200 million. The platform had discovered what Radiohead demonstrated: people will pay for things they don't have to pay for, especially when the transaction feels meaningful.

Restaurants experimented with pay-what-you-want. Panera opened several "Panera Cares" cafes where customers set their own prices. Museums made admission fees voluntary. Therapists offered sliding scale arrangements where clients determined their own rates.

Not all of these worked. Pay-what-you-want fails when there's no relationship, no trust, no identity stake. If you offer pay-what-you-want pricing on a commodity product from a brand nobody cares about, you'll get mostly zeros.

But when people feel connected to what they're buying, when payment becomes an expression of values rather than just an exchange of value, the model can outperform traditional pricing.

The Real Innovation

Radiohead didn't invent pay-what-you-want. Buskers have been doing it for centuries. Donation boxes exist in every church and museum. The concept was ancient.

What Radiohead did was apply it at scale, with full transparency, during a moment when the music industry was collapsing.

They proved that trust could replace enforcement. That if you stop treating customers like potential thieves and start treating them like partners, many of them will rise to the occasion.

This was a radical idea in 2007. The music industry had spent years fighting customers through DRM, lawsuits, and increasingly aggressive copy protection. The assumption was that people would steal if given the chance, so you had to make stealing impossible.

Radiohead tested the opposite hypothesis. They made legal acquisition easier than piracy and trusted people to pay fairly.

The result wasn't chaos. It was connection.

The Limit of the Model

Thom Yorke said something important after In Rainbows: the experiment was a one-off.

Radiohead never did pay-what-you-want again. Their next album, The King of Limbs, was released through conventional channels.

This wasn't an admission of failure. It was an acknowledgment that pay-what-you-want works under specific conditions.

It works when you have something to prove. Radiohead needed to demonstrate that people valued their music in an era when music was being devalued. The experiment proved it.

It works when the novelty generates press. In Rainbows received more media coverage than any Radiohead album before or since. Much of that coverage was about the pricing, not the music.

It works when you're established enough that people already want to support you. An unknown artist offering pay-what-you-want would likely get nothing. People pay for what they love.

But as a permanent model? As the only way to do business? It has problems. It creates decision fatigue. It makes customers uncomfortable. It only works when people care.

The genius of In Rainbows wasn't that pay-what-you-want is always the best model. It's that sometimes, under the right conditions, trusting your customers completely is the most profitable thing you can do.

What We Do at Soar

This is what we study.

The psychology. Why do people pay when they don't have to? What transforms a transaction into a relationship?

We help brands figure out their version of this.

If you're thinking about pricing, positioning, or the relationship between what you charge and what your customers feel, book a call with our team.