Zoo Station

Last year, I spent quite a bit of money watching U2 live in concert. Lots of people complain about how expensive U2 tickets are, when in fact U2 are probably the most reasonably priced rock n'roll artists out there today, besides the jam bands. What's more, U2's cheapest tickets are also the best seats in the house (inside the heart, ellipse etc). I skipped the Stones last year because tickets were outrageously priced and there was no point paying $100 bucks to get altitude sickness watching the Strolling Bones. The same story holds true for Madonna's recently announced concert tour. Part of this is merely the economics of demand and supply (U2 also does many more shows than the Stones), but there is another point to be noted, namely that the big ticket artists (Madonna, U2, Stones, McCartney, Elton John etc) actually make more money today from live concerts than they do from CD sales. This effectively means they're making tons more money than the chart-toppers. [It also helps that the big-league artists are also able to negotiate much better royalty terms on the CD sales and publishing] Robert Plummer has more on the economics of it all, quoting extensively from the work done by Princeton economist, Alan Krueger.

Since the start of the 1980s, the superstar effect has become more pronounced in rock and pop, with a small number of performers taking an ever larger share of the spoils. Research into the market in the US, where the trend started, has found that in 1982, the top 1% of artists received 26% of concert revenue. By 2003, that figure had gone up to 56%. Over the same period of time, the cost of US concert tickets has been outpacing the country's inflation rate. From 1981 to 1996, gig-goers found prices going up by 4.6% a year, while the consumer price index increased by 3.7% annually. Since then, ticket prices have soared. From 1996 to 2003, they rose by 8.9% a year, as against inflation of just 2.3%. Similar sharp increases have been noted in Europe, including the UK.

These insights come from the work of an economist at Princeton University in the US, Alan Krueger, who has been described as "the world's first and foremost professor of rockonomics". He based his conclusions on an analysis of information provided by US trade publication Pollstar, which has collected data from venue managers since 1981. In a paper he wrote with Princeton graduate student Marie Connolly, he says concerts are now a much bigger source of income for major-league stars than CD sales. "Only four of the top 35 income-earners made more money from recordings than live concerts," the paper says. "For the top 35 artists as a whole, income from touring exceeded income from record sales by a ratio of 7.5 to one in 2002."
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But why has the rise in ticket prices been so sudden? Professor Krueger says there is no simple answer - but one explanation could be what he calls "Bowie Theory". He points out that sales of recorded music fell from 1999 to 2002, causing artists' income to decline. He believes record sales are down because many potential customers frequently download music free from the Web or copy CDs, either legally or illegally.
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Before the advent of illegal downloads, artists had an incentive to underprice their concerts, because bigger audiences translated into higher record sales, Professor Krueger argues. But now, he says, the link between the two products has been severed, meaning that artists and their managers need to make more money from concerts and feel less constrained in setting ticket prices. Professor Krueger says this tendency was spotted by David Bowie, who told the New York Times in 2002 that "music itself is going to become like running water or electricity".