The Economics of the International Live Music Business Alan B. - PowerPoint PPT Presentation

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

Division of f Music Revenue, U.S .S.A .A., ., 2017 Sync 1% Publishing 9% Artist Concert Earnings Physical 13% 7% Digital Downloads 8% Touring Costs & Fees 20% Streaming 27% Merchandise, Concessions, Sponsorshp Parking 10% 5% Source: Alan Krueger.

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

2018 Music In Industry ry Research Association (M (M R RA) ) Musician Survey

2018 MIR IRA Musician Survey • Survey of 1,227 musicians conducted April 12-June 2 nd . • 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 over 𝑜 𝑡 𝑗 /𝑜 where 𝑡 𝑗 is musician i ’s share of income from the source. 𝑡 = 𝑗 musicians.

In Income Earned fr from Live Performances, By Genre Percent with Income 100% from Live Performances 93,0% 92,3% 92,4% 89,1% 88,7% 88,0% 87,8% 90% 86,4% Avg. Percent of Income 80% 74,8% 68,8% 70% 60% 56,3% 53,5% Percent 51,6% 50,1% 50% 46,5% 46,0% 45,6% 41,6% 40% 30% 25,1% 23,3% 20% 10% 0% Classical Jazz Pop Folk Blues Country Christian Adult Independent Mainstream Contemporary Rock % Had Live Performance Income % Earned From Live Performance

Median In Income Earned fr from Live Performances, , Conditional on Positive In Income $12.000 $10.000 $10.000 $10.000 $10.000 $8.000 $7.750 $8.000 $7.000 $7.000 $6.500 $6.000 $5.000 $4.000 $4.000 $2.000 $0 Classical Jazz Pop Folk Blues Country Christian Adult Independent Mainstream Contemporary Rock

Basic Economics of f 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 ry: 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.

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

Median of Revenue per Ticket, High Price, and Low Price Tickets, and Overall Inflation Rate, 1981-2017 Note: Individual Events Weighted by Total Ticket Sales $100 $90 High $80 $70 $60 Median Price $50 Price $40 Low $30 CPI $20 $10 $0 Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Proportionate Growth in Median Price, Five Year Intervals, 1981-2016 0,700 0,600 Median Price 0,500 0,45 CPI Proportionate Growth 0,39 0,400 0,29 0,300 0,22 0,21 0,18 0,200 0,15 0,15 0,14 0,13 0,12 0,12 0,12 0,100 0,07 0,000 1981-86 1986-91 1991-96 1996-01 2001-06 2006-11 2011-16 Period Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Histograms of f Prices .015 More dispersion in resale market. Avg. Primary Price = $81 Avg. Resale Price = $122 .01 Kernel density Primary Mkt. .005 Secondary Mkt. 0 0 100 200 300 400 500 Price paid for ticket (trimmed) Primary Market Secondary Market

Prices are Growing Faster at the Top Price of the 90th, 50th, and 10th Percentile of Concert Prices for all Artists and Shows in the U.S. $120 90th Pctl. $100 $80 Price $60 Median $40 CPI $20 10th Pctl. $0 Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Concert Prices Tracked Movie, Theater and Sports Tickets Until 1997 Venue Laspeyres Price Index versus CPI-U for Movies, Theatre and Sports Events $60 $50 $40 Average Price $30 $20 $10 $0 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Concerts Movies, Theater & Sports Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Median Concert Ticket Prices in The U.S. and in Canada $70 $60 $50 Median Canada Median USA $40 Price (U.S. Dollars) $30 $20 $10 $0 Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Average Annual Revenue for the Top 100 Artists by Revenue 2017 Dollars, World Wide $50,0 $45,0 Average Revenue Per Artist (2017 Dollars, Millions) $40,0 $35,0 $30,0 $25,0 $20,0 $15,0 $10,0 $5,0 $0,0 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Year 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

Lorenz Curve for 1987 (Share of Revenue & Share of Artists, Worldwide) 100% 90% 80% Top 1% Earned 40% of Revenue 70% Percent of Revenue 60% 50% Top 5% Earned 40% 75% of Revenue 30% 20% Bottom 95% Earned 25% of All Revenue 10% 0% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100% Percent of Artists 1987 Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Lorenz Curves for 1987, 2002 & 2017 (Share of Revenue & Share of Artists, Worldwide) 100% 90% 80% Top 1% Earned 40% of Revenue 70% Percent of Revenue 60% Top 1% Earned 60% of Revenue 50% Top 5% Earned 40% 75% of Revenue Top 5% Earned 30% 85% of Revenue 20% Bottom 95% Earned Bottom 95% Earned 2017 25% of All Revenue 1987 10% 15% of All Revenue 0% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100% Percent of Artists 2017 2002 1987 Source: Alan Krueger’s calculations based on the Pollstar Box Office Data.

Cumulative Revenue Over Career, Selected Artists (2017 Dollars, Worldwide) $1.800 Madonna $1.600 Celine Dion $1.400 $1.200 $1.000 Millionen $800 Beyonce Taylor Swift $600 $400 $200 $0 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 Beyoncé Britney Spears Celine Dion Lady Gaga Madonna Mariah Carey Taylor Swift Whitney Houston Source: Alan Krueger’s calculations based on the Pollstar Box Office Data. Note: Revenue adjusted for shows held before 1997 to account for under coverage of international shows.

Cummulative Revenue, Select Artists (2017 Dollars, Worldwide) $3.000 U2 $2.500 Bruce Springsteen $2.000 Millionen $1.500 Dave Matthews $1.000 $500 $0 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 Age Bruce Springsteen & The E Street Band Bruno Mars Dave Matthews Band Elton John Eric Clapton Jay-Z Keith Urban Kendrick Lamar Metallica U2 Source: Alan Krueger’s calculations based on the Pollstar Box Office Data. Note: Revenue adjusted for shows held before 1997 to account for under coverage of international shows.