In many ways, it’s never been easier for small-time musicians to break out and build devoted followings; Pandora, Spotify, and iTunes offer tons of obscure music to fans, obliterating the old barrier of the tightly curated record store, while Twitter and Facebook carry even the smallest bands’ promotional messages, nuking advertising and PR costs.
But this sort of disruption has yet to significantly affect the live performance business, according to data newly compiled by a leading rock-and-roll economist. Niche acts apparently retain as tiny a share of concert receipts as they did a decade ago. That apparent stasis is particularly troubling for independent artists given the growing importance to the music business of concerts, which have become a last bastion of big profits as real prices and total sales of recorded music fall under pressure from online file sharing and cheap streaming services.
Over the past two weeks, Princeton economist Alan Krueger has updated concert revenue data underlying his two landmark rockonomics papers from 2004 and 2005 (one a solo act, the other produced as part of a band). The papers showed, among other things, that top artists markedly increased their share of concert revenue over 20 years, with the top 1 percent taking 56 percent of revenue in 2003 versus 26 percent in 1982. The eight-year-old papers garnered fresh attention earlier this month when Krueger, who between gigs chairs the president’s Council of Economic Advisors, cited them during a talk at the Rock and Roll Hall of Fame: “Rock and Roll, Economics, and Rebuilding the Middle Class.”
The talk was noted by Krueger’s fellow Princeton economist Paul Krugman, who wondered on his widely read New York Times blog whether technological changes might have diminished superstar musicians’ share of ticket sales in the intervening 10 years. “A lot has happened,” he wrote. “Basically, the music business has been hugely disrupted by the Internet … Radio play matters much less, the audience has fractured, performers can build a following on Pandora and Youtube.”
In short, Krugman wondered whether the concert business would get its own version of The Long Tail, the phenomenon in which the advent of essentially frictionless digital distribution and warehousing magnifies the economic importance of niche creators once excluded from most of the market by scarce shelf space in stores.
Krueger tells Wired this appears not to be the case. From February through June of this year, the top 1 percent of acts garnered 56.3 percent of total concert revenue, versus 56 percent in 2003, based on Krueger’s distillation of a database compiled by concert industry magazine Pollstar, to which Krueger was given access for his earlier studies and current update. (In case you’re wondering, Pollstar says the top grossing musical acts of 2012 were Madonna, Bruce Springsteen, and Tim McGraw.)
“These numbers bounce around from year to year, but I see no evidence that it has become less of a superstar economy since I last published on it,” he says. “I thought the fact that prices for the top acts had continued to grow very quickly supported the idea that inequality hadn’t fallen.”
“I see no evidence that it has become less of a superstar economy since I last published on it.”
Why hasn’t inequality fallen in the concert business? Krueger thinks that the industry remains dominated by superstars thanks to some of the same trends that should theoretically be helping niche indie bands: “Technology and globalization, and an erosion of norms that compessed income and prices” explain continuing superstar dominance, he says. When he talks about norms, Krueger is referring to a taboo against rockers charging as much for tickets as the market will bear, a taboo discussed in his 2004-2005 papers and recent Rock and Roll Hall of Fame speech. Rock performers, along with rappers and all sorts of other musicians, are supposed to be socially conscious artists rather than exploitive capitalists, so jacking up prices hurt their images. Besides, holding ticket prices artificially low also helped to promote CD and record sales. As CD sales fell and online piracy spread, artists stopped worrying so much about their images, and there’s plenty of reason to believe this trend continued well after 2003; from 2003 to 2012, U.S. recorded music revenue fell about 40 percent, according to Recording Industry Association of America numbers.
“I suspect it is the same in movies, despite the ability for people to make and distribute indies and documentaries more easily,” Krueger says. “I doubt Spielberg fears competition from someone making movies with their iPhone.”
Not so fast: Spielberg recently predicted an imminent “massive implosion” in the movie industry thanks to competition from the internet. He might not have been referring to amateur filmmakers shooting on iPhones, but there are reasons to believe competent indie professionals could eventually grow their industry footprint, both in movies and in music. While big names in the concert business have had a lot of headroom to raise ticket prices over the last 20 years, top acts will eventually hit market pricing and not be able to hike ticket prices further. Maybe at that point smaller, internet-centric bands will start taking a larger share of concert receipts, and the live performance industry’s long tail, hidden for years by superstar price hikes, will start showing.
When I asked Krugman why the data seems to show continuing dominance by superstars, he wondered whether niche, long-tail style artists might be performing in small venues that don’t bother reporting to Pollstar, or in festivals with multiple acts, whose reporting can get glitchy. “I have no idea,” Krugman says, “but when you have an anomaly that’s always the first question to ask.” Krueger replies that “small venues are included. More importantly, the universe of coverage hasn’t changed much over the last 10 years. I don’t think it is an anomaly.” (Krueger’s first batch of Pollstar data was based on 232,911 reports encompassing 270,679 performances, and at one point Krueger indicates that the set includes a substantial number of venues with fewer than 2,000 seats; excluding them from one calculation changed the statistical significance of the results. But neither he nor Pollstar has said how many venues Pollstar tracks or given a breakdown of venues by size. Pollstar says on its website that it gets its data “primarily from the agents, managers and promoters,” who tend to be attached to larger acts, so it’s possible the database is an issue.)
Ticketmaster CEO Nathan Hubbard says Krugman is on to something, calling Pollstar’s data “deeply flawed for this study” because it excludes small venues and “is self reported by the individuals who are judged by it. Foxes guarding hen houses!”
Beyond total failure for new technologies, or issues with Pollstar’s reach, there are other possible explanations for continuing superstar dominance of concert revenue, starting with the fact that the long tail is a digital phenomenon and the concert business is primarily a physical one. Services like iTunes and Spotify have brought broadcast royalties and recorded music sales to the internet, but, with a few exceptions on services like Ustream, no one’s selling live performances over the web. That means that a band out of, say, Minnetonka can leverage social networks and online music services to build a nice base of music buyers and fans around the world, but is stuck entirely in the old physical economy when it comes to live performances. Without live-show streaming sales, a band will struggle to translate niche fame into concert revenue, at least outside of the occasional gig in a big market like New York or Los Angeles, where a critical mass of fans can be reliably assembled together for a show. If people can eventually be convinced to pay for concert streams — Ustream is broadcasting Bonnaroo this year for free, but it’s easy to imagine them charging some day — the economic picture could change substantially for indie bands that are huge online but pipsqueaks in the concert business.
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Wow hipsters need to get over it, people go see Madonna in concert and pay $400 per ticket because she's an icon who has sustained a strong career for 30 years
