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

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

Dec 01, 2023 476 likes •871 views

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

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SLIDE 1

The Economics of the International Live Music Business

Alan B. Krueger @Alan_Krueger

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SLIDE 2

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

Artist Concert Earnings 13% Touring Costs & Fees 20% Merchandise, Concessions, Parking 5% Sponsorshp 10% Streaming 27% Digital Downloads 8% Physical 7% Sync 1% Publishing 9% Source: Alan Krueger.

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SLIDE 3

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

Average of Top 35

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SLIDE 4

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

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SLIDE 5

2018 MIR IRA Musician Survey

  • Survey of 1,227 musicians conducted April 12-June 2nd.
  • Target Population: Individuals who earned a living as a musician
  • r 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.

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SLIDE 6

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%
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SLIDE 7

Note: Column 2 is the average share of music-related income from each source, taken over musicians. 𝑡 = 𝑗

𝑜 𝑡𝑗/𝑜 where 𝑡𝑗 is musician i’s share of income from the source.

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SLIDE 8

In Income Earned fr 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 Adult Contemporary Independent Mainstream Rock

Percent

% Had Live Performance Income % Earned From Live Performance

Percent with Income from Live Performances

  • Avg. Percent
  • f Income
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SLIDE 9

Median In Income Earned fr from Live Performances, , Conditional on Positive In 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 Adult Contemporary Independent Mainstream Rock

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SLIDE 10

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.

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SLIDE 11

Bowie Theory ry: Complementarities

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SLIDE 12

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.

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SLIDE 13

13

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

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SLIDE 14

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

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SLIDE 15

$0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 Price

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

CPI High Median Price Low

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

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SLIDE 16

0,39 0,29 0,15 0,45 0,18 0,12 0,15 0,21 0,22 0,13 0,12 0,14 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 Proportionate Growth 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.

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SLIDE 17
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SLIDE 18
  • Avg. Primary Price = $81
  • Avg. Resale Price = $122

.005 .01 .015 100 200 300 400 500 Price paid for ticket (trimmed) Primary Market Secondary Market

Histograms of f Prices

More dispersion in resale market.

Secondary Mkt. Primary Mkt.

Kernel density

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SLIDE 19

$0 $20 $40 $60 $80 $100 $120 Price

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.

90th Pctl. Median 10th Pctl. CPI

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

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SLIDE 20

$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 Average Price

Concert Prices Tracked Movie, Theater and Sports Tickets Until 1997 Venue 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.

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SLIDE 21

$0 $10 $20 $30 $40 $50 $60 $70 Price (U.S. Dollars)

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.

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SLIDE 22

$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

Average Revenue Per Artist (2017 Dollars, Millions) Year

Average Annual Revenue for the Top 100 Artists by Revenue 2017 Dollars, World Wide

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

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SLIDE 23

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

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SLIDE 24

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% Percent of Revenue 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% Earned 40% of Revenue Top 5% Earned 75% of Revenue Bottom 95% Earned 25% of All Revenue

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SLIDE 25

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% Percent of Revenue 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.

2017 1987 Top 1% Earned 40% of Revenue Top 5% Earned 75% of Revenue Bottom 95% Earned 25% of All Revenue Top 1% Earned 60% of Revenue Top 5% Earned 85% of Revenue Bottom 95% Earned 15% of All Revenue

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SLIDE 26

$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

Millionen

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 Swift Beyonce Celine Dion Madonna

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SLIDE 27

$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

Millionen 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

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SLIDE 28
  • 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

28

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

Consistent Universe of Artists

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SLIDE 29

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

Shows Performed Year

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

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

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SLIDE 30

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

Number of Tickets Sold (Millions) Year

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

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

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SLIDE 31

$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

Ticket Revenue ($, Millions) Year

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

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

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SLIDE 32

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

Capacity Utilization Rate 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.

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SLIDE 33

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

Capacity Utilization Rate 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.

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SLIDE 34

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

Capacity Utilization Rate 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.

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SLIDE 35

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.

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SLIDE 36

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