Wired blogs a report on the disparate effects working on the release of Radiohead’s In Rainbows.

Radiohead’s “pay what you want” distribution gamble paid-off despite — or perhaps because of — rampant file sharing, according to new analysis from Will Page, chief economist at the MCPS-PRS Alliance, a British rights organization, and Eric Garland, CEO of Big Champagne.

Radiohead’s notorious release strategy for In Rainbows, which allowed fans to download it for an optional price with a valid e-mail address, was considered to have been a failure by some because the album became wildly popular on file sharing networks almost immediately upon its release.

But Garland and Page’s, “In Rainbows, On Torrents” report, slated to be released on the MCPS-PRS website on Friday, indicates that Radiohead’s strategy was a success nonetheless, contributing to the album topping the charts in both the UK and United States and a wildly successful worldwide tour. When it comes to judging whether an album is a success these days, the old metrics just don’t cut it.

Now, the last sentence seems pretty obvious to me and I’m not sure if I agree that the album was considered a failure. But the rest of the article crunches some interesting numbers.  And here’s the part most sobering if you’re in the music industry:

“The venue hypothesis suggests that even when the price approaches zero, all other things being equal, people are more likely to act habitually (say, using The Pirate Bay) than to break their habit (say, visiting www.InRainbows.com),” reads one section of the report. In other words, people tend to develop habits around the acquisition of music; once they find something that works, they tend to keep using it. As the paper mentions, “The Pirate Bay is a powerful brand with a sterling reputation in the minds of millions of young music fans.”

It’s also easier to use in a lot of ways, has a better and more complete selection, and, in a key way, offers a better product!

Not everything is on the torrent networks, of course, but you have to be impressed that you don’t have to deal with DRM and often have the choice of bitrate speeds, which iTunes doesn’t have. Also, with video, you don’t get those annoying FBI warnings and legal boilerplate about how the commentaries don’t reflect the opinions of 20th-Century Fox.

In other words, the free illegal product is better than the legitimate one.