The Economics of the International Live Music Business€¦ · The Economics of the International...
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The Economics of the International Live Music Business
Alan B. Krueger
@Alan_Krueger
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.
Gross income by source for top 35 artists who toured in 2016 (Mil. USD)
Average of Top 35
2018 Music Industry Research Association (M RA)
Musician Survey
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.
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%
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.
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
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
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.
Bowie Theory: Complementarities
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.
13Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.
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
$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.
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.
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
$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.
$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.
$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.
$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.
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
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
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
$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
$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
• 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
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.
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.
$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.
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.
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.
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.
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.
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