The Economics of the International Live Music Business€¦ · The Economics of the International...

36
The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger

Transcript of The Economics of the International Live Music Business€¦ · The Economics of the International...

Page 1: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

The Economics of the International Live Music Business

Alan B. Krueger

@Alan_Krueger

Page 2: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

Division of Music Revenue, U.S.A., 2017

Artist Concert Earnings

13%

Touring Costs & Fees20%

Merchandise, Concessions, Parking

5%

Sponsorshp10%

Streaming27%

Digital Downloads8%

Physical7%

Sync1%

Publishing9%

Source: Alan Krueger.

Page 3: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

Gross income by source for top 35 artists who toured in 2016 (Mil. USD)

Average of Top 35

Page 4: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

2018 Music Industry Research Association (M RA)

Musician Survey

Page 5: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

2018 MIRA Musician Survey

• Survey of 1,227 musicians conducted April 12-June 2nd.

• Target Population: Individuals who earned a living as a musician or composer, or who were endeavoring to earn a living through making music.

• Sample: MusiCares’ Clients (62%) and American List Council (30%) + Referrals (8%)

• Many questions taken from national surveys, so can compare to general public; focus on sources of income, mental health, drug use, challenges and opportunities; data available to MIRA Members; more details at: www.theMIRA.org.

Page 6: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

Top 10 Genres Performed in Last Year

• Classical 37%

• Jazz 35%

• Pop 35%

• Folk 31%

• Blues 31%

• Country 28%

• Christian 27%

• Adult Contemporary 24 %

• Independent 23%

• Mainstream Rock 23%

Page 7: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

Note: Column 2 is the average share of music-related income from each source, taken overmusicians. 𝑠 = 𝑖

𝑛 𝑠𝑖/𝑛 where 𝑠𝑖 is musician i’s share of income from the source.

Page 8: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

Income Earned from Live Performances, By Genre

74,8%

88,0% 88,7% 87,8%

93,0% 92,3%

68,8%

86,4%89,1%

92,4%

25,1%

46,0% 45,6% 46,5%

56,3%53,5%

23,3%

41,6%

50,1% 51,6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Classical Jazz Pop Folk Blues Country Christian AdultContemporary

Independent MainstreamRock

Perc

ent

% Had Live Performance Income % Earned From Live Performance

Percent with Incomefrom Live Performances

Avg. Percent of Income

Page 9: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

Median Income Earned from Live Performances, Conditional on Positive Income

$5.000

$10.000

$7.000 $7.000

$10.000 $10.000

$4.000

$7.750$8.000

$6.500

$0

$2.000

$4.000

$6.000

$8.000

$10.000

$12.000

Classical Jazz Pop Folk Blues Country Christian AdultContemporary

Independent MainstreamRock

Page 10: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

Basic Economics of Pricing Tickets for Live Events• Note: Very much a superstar market. Top 1% of performers earn 60% of total

concert revenue worldwide. And top 1% have highest prices and most refined pricing stratgegies

• Price Discrimination – Segment audience (e.g., into better and worse seats) and charge more for those with higher willingness to pay.

• Dynamic Pricing – Like Airlines • But social aspect of concerts constrain pricing: 1) More enjoyable for musicians

and audience if show sells out; 2) Fairness considerations – artists don’t want to be seen as gauging their fans.

• Leads to underpricing, especially of best seats• Also leads to arbitrage opportunities for “scalpers” or ticket brokers and a

secondary market for tickets • Krueger Theory: Over time, entertainment events (concerts, sports, plays, etc.)

begin to behave like a commodities market. Consumers come to accept price system as a mechanism for rationing.

Page 11: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

Bowie Theory: Complementarities

Page 12: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

The Pollstar database by the numbers:

• 820,792 performances from 1981 to 2017

• 68,153 unique headliners

• $125 billion in revenue

• 101 countries and over 6,000 cities

• All 50 US states

• 50,901 performances in 2016

• $9.6 billion in revenue reported in 2016

Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Page 13: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

13Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Page 14: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

Limitations:

• Coverage increased over time,

especially outside of North America

after 1996

• No information on secondary market

• No information on concessions,

parking, merchandise, sponsors, etc.

• Limited information on price tiers –

average (revenue per ticket sold),

high and low price

Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Source: www. usatoday.com

Page 15: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

Pri

ce

Median of Revenue per Ticket, High Price, and Low Price Tickets, and Overall Inflation Rate, 1981-2017Note: Individual Events Weighted by Total Ticket Sales

CPI

High

Median Price

Low

Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Page 16: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

0,39

0,29

0,15

0,45

0,18

0,120,15

0,21 0,22

0,13 0,120,14

0,12

0,07

0,000

0,100

0,200

0,300

0,400

0,500

0,600

0,700

1981-86 1986-91 1991-96 1996-01 2001-06 2006-11 2011-16

Pro

po

rtio

nate

Gro

wth

Period

Proportionate Growth in Median Price, Five Year Intervals, 1981-2016

Median Price

CPI

Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Page 17: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,
Page 18: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

Avg. Primary Price = $81

Avg. Resale Price = $122

0

.005

.01

.015

Ker

nel d

ensi

ty

0 100 200 300 400 500Price paid for ticket (trimmed)

Primary Market Secondary Market

Histograms of Prices

More dispersion in resale market.

Secondary Mkt.

Primary Mkt.

Kern

eld

en

sit

y

Page 19: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

$0

$20

$40

$60

$80

$100

$120

Pri

ce

Prices are Growing Faster at the TopPrice of the 90th, 50th, and 10th Percentile of Concert Prices for all Artists and Shows in the U.S.

90th Pctl.

Median

10th Pctl.

CPI

Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Page 20: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

$0

$10

$20

$30

$40

$50

$60

1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Av

era

ge P

rice

Concert Prices Tracked Movie, Theater and Sports Tickets Until 1997Venue Laspeyres Price Index versus CPI-U for Movies, Theatre and Sports Events

Concerts Movies, Theater & Sports

Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Page 21: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

$0

$10

$20

$30

$40

$50

$60

$70

Pri

ce (

U.S

. D

ollars

)Median Concert Ticket Prices in The U.S. and in Canada

Median Canada

Median USA

Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Page 22: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

$0,0

$5,0

$10,0

$15,0

$20,0

$25,0

$30,0

$35,0

$40,0

$45,0

$50,0

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Ave

rag

e R

eve

nu

e P

er

Art

ist

(201

7 D

oll

ars

, M

illi

on

s)

Year

Average Annual Revenue for the Top 100 Artists by Revenue2017 Dollars, World Wide

Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Page 23: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

The Economics of Superstars • Sherwin Rosen (AER 1981)

• If undergoing heart surgery, willing to pay

a lot more for the best surgeon over the

second best surgeon; Same with music

• Imperfect substitutes Convex reward

function

• Plus, size of market Best can reach

more customers because of scale

economies

• Top talent/most popular earn a lot more

than the next level

• Luck looms large – stars have to align to

produce a superstar

Page 24: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100%

Pe

rce

nt o

f R

eve

nu

e

Percent of Artists

Lorenz Curve for 1987(Share of Revenue & Share of Artists, Worldwide)

1987

Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Top 1% Earned40% of Revenue

Top 5% Earned75% of Revenue

Bottom 95% Earned25% of All Revenue

Page 25: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100%

Pe

rce

nt o

f R

eve

nu

e

Percent of Artists

Lorenz Curves for 1987, 2002 & 2017(Share of Revenue & Share of Artists, Worldwide)

2017 2002 1987

Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

20171987

Top 1% Earned40% of Revenue

Top 5% Earned75% of Revenue

Bottom 95% Earned25% of All Revenue

Top 1% Earned60% of Revenue

Top 5% Earned85% of Revenue

Bottom 95% Earned15% of All Revenue

Page 26: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

$0

$200

$400

$600

$800

$1.000

$1.200

$1.400

$1.600

$1.800

17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59

Mil

lio

nen

Cumulative Revenue Over Career, Selected Artists (2017 Dollars, Worldwide)

Beyoncé Britney Spears Celine Dion Lady Gaga Madonna Mariah Carey Taylor Swift Whitney Houston

Note: Revenue adjusted for shows held before 1997 to account for under coverage of international shows.

Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Taylor SwiftBeyonce

Celine Dion

Madonna

Page 27: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

$0

$500

$1.000

$1.500

$2.000

$2.500

$3.000

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72

Millio

nen

Age

Cummulative Revenue, Select Artists (2017 Dollars, Worldwide)

Bruce Springsteen & The E Street Band Bruno Mars Dave Matthews Band Elton John

Eric Clapton Jay-Z Keith Urban Kendrick Lamar

Metallica U2

Note: Revenue adjusted for shows held before 1997 to account for under coverage of international shows.

Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

U2

Dave Matthews

Bruce Springsteen

Page 28: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

• October 2001 edition of Rolling

Stone’s Encyclopedia of Rock

and Roll

• Billboard Year-End Hot 100

Song’s Artists’ 1960 - 2017

• Consistent universe of artists

• 3,635 artists, from Abba to ZZ

Top; 2,161 in Pollstar database

• Represent 3.63% of total artists

in Pollstar database

• Responsible for 60.82% of ticket

sales, 1981 – November, 2017

28Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Consistent Universe of Artists

Page 29: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

0

2000

4000

6000

8000

10000

12000

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Sh

ow

s P

erf

orm

ed

Year

Number of Shows Each YearRolling Stones Encyclopedia & Annual Billboard Top 100 Songs' Artists (Worldwide)

Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Page 30: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

0

10

20

30

40

50

60

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Nu

mb

er

of

Tic

ke

ts S

old

(M

illi

on

s)

Year

Number of Tickets Sold Each YearRolling Stone Encyclopedia & Billboard Top 100 Songs' Artists (Worldwide)

Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Page 31: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

$0

$500

$1.000

$1.500

$2.000

$2.500

$3.000

$3.500

$4.000

$4.500

$5.000

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Tic

ke

t R

eve

nu

e (

$, M

illi

on

s)

Year

Total Ticket Revenue in 2017 DollarsRolling Stone Encyclopedia & Annual Billboard Top 100 Songs' Artists (Worldwide)

Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Page 32: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

0,75

0,77

0,79

0,81

0,83

0,85

0,87

0,89

0,91

0,93

0,95

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Ca

pa

cit

y U

tili

za

tio

n R

ate

Year

Capacity Utilization Rate for Concerts held by Artists appearing in the Rolling Stone Encyclopedia and the Annual Billboard Top 100 Songs (Worldwide)

Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Page 33: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

75%

80%

85%

90%

95%

100%

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Ca

pa

cit

y U

tili

za

tio

n R

ate

Year

Capacity Utilization Rate for Concerts held by Artists Appearing in the Rolling Stone Encylopedia or the Annual Billboard 100 Songs by Venue Size (Worldwide)

Venues < 2,000

Venues 2,000 - 9,999

Venues > 10,000

Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Page 34: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Ca

pa

cit

y U

tili

za

tio

n R

ate

Year

Share of Concerts held by Artists Appearing in the Rolling Stone Encyclopedia or the Annual Billboard 100 Songs by Venue Size

Venues < 2,000

Venues 2,000 - 9,999

Venues > 10,000

Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Page 35: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Year

Share of Tickets Sold by Artists Appearing in the Rolling Stone Encyclopedia or the Annual Billboard 100 Songs by Venue Size

Venues < 2,000

Venues 2,000 -9,999

Venues >10,000

Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Page 36: The Economics of the International Live Music Business€¦ · The Economics of the International Live Music Business Alan B. Krueger @Alan_Krueger. Division of Music Revenue, U.S.A.,

Conclusions & Future Research Directions

• Concert prices have continued to grow faster than consumer price inflation

• Arena shows have rebounded – Healthy Market for Live Music

• Live market is even more of a superstar affair

Future Research

• Estimate price differentials by city holding artists constant, and link to wages, income, etc.

• Link with streaming data by city/performer

• Model career trajectories