Tim Harford looks at Radiohead’s well publicised new direction in selling music — optional payments — and likens it to an electronic tip jar. That leads him to conclude that this isn’t a sustainable business model.
I have wondered whether a small change in the rules might make it more sustainable. When you are at restaurants (especially if you pay by credit card), there is room left for a tip. On a credit card, you have to actively not pay a tip by writing in the payment amount again and crossing out the tip. I think that it is this that makes tipping in restaurants sustainable. Take it away but, say, letting people deposit a tip later on or mail it in and we would find that tipping would quickly disappear.
Radiohead effectively opted for the latter policy on their site. In order to tip, you had to fill in credit card or other payment details. That was costly compared to just downloading the album for free. But what if they required people to put in payment details even if they chose to leave a tip of $0. My guess is that they would earn lots more as it then becomes trivial for people to tip a dollar or two.