A Bank Stock Bets It Can Perform Better Than Radioheadhttp://www.fool.com/investing/general/2013/04/25/a-bank-stock-bets-it-can-perform-better-than-radio.aspx Dan Newman
April 25, 2013
In 2007, the band Radiohead released its album In Rainbows through its website and allowed fans to pay what they wanted for it. As an experiment in distribution and dependence on record labels, the outcome for one of the most beloved bands was unclear. One firm estimated that only 38% of fans paid anything, arriving at an average $2.26 per album downloaded -- far from the current typical floor of $10 per album. However, lead singer Thom Yorke responded that "in terms of digital income, we've made more money out of this record than out of all the other Radiohead albums put together, forever." Even so, the band ditched the pay-what-you-want model for its next album.
Even with Radiohead's questionable outcome with the scheme, Green Dot's (NYSE: GDOT) GoBank, launched in January, is offering checking accounts where its members decide what to pay as a monthly fee, between $0 and $9. Does this make any sense for the company to think customers will voluntarily pay?
A deeper look into pay-what-you-want
One study on the charitable aspect of pay-what-you-want found that it greatly increases the potential profit. In the study, researchers tested consumers' reactions when purchasing a photo taken while on a roller coaster with the differences between fixed price, fixed price with half going to charity, pay-what-you-want, and pay-what-you-want with half going to charity. The most profitable choice? Pay-what-you-want with the charity component. More consumers paid an average of $5.33 for the photo in that case.
Unfortunately for GoBank's chances, without the charity component, the average price per photo fell to $0.92.