Is Taylor Swift underpaid?
LIKE almost every other nation, Sweden has been experiencing high inflation recently. Consumer prices have risen 9.7 per cent over the past year, reflecting multiple factors: large spending to support households during the pandemic, Covid-related disruptions of supply chains, Russia’s invasion of Ukraine, and Beyonce.
Seriously. Beyonce kicked off her latest world tour in Sweden last month, and it has been widely argued that a huge influx of visitors attending her first two concerts caused a major, if temporary, surge in hotel and restaurant prices, big enough to have a noticeable effect on Swedish inflation overall.
Look, I know that there are more important issues out there. But let’s take a break here, mostly because I find thinking about the economics of music fun, but also because the concert business offers some interesting lessons about the sometimes perverse role technology can play in determining incomes. In particular, as I’ll explain, the real puzzle here is why Swift doesn’t make even more money.
Still, there are many talented artists. Why do a few earn so much? There’s a standard economic theory about that, laid out in a famous paper by economist Sherwin Rosen, The Economics of Superstars. Rosen argued that modern technology meant that the potential reach of performers was much larger than it had been when live performance was the only way to entertain an audience, so that a musician (or, in his example, a comedian) who was, or was perceived to be, even a bit better than his or her rivals could earn large sums by performing on mass media, selling records, and so on.
But on the surface, that’s not what’s happening with Swift or Beyonce. They’re making huge sums not mainly from record or streaming royalties but from concerts – which is, by the way, normal. One of the lessons I learned from Krueger is that musicians have always made their money mainly by touring; this was true even during the CD era, when record companies were making money hand over fist but passing very little on to the artists. It’s even more true now, in this age of streaming.
The answer, if you think about it, is that cutting-edge technology known as the microphone, which makes it possible for an artist to play live to tens of thousands of people.
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To be more precise, the enabling technology is microphones plus more advanced contemporary sound systems that make it possible for fans at stadium and arena concerts to actually hear the musicians (and for the musicians to hear themselves). These systems hadn’t yet been developed when the Beatles gave their famous Shea Stadium concert, which was largely inaudible over the screams.
But here’s the thing – hugely lucrative tours by music superstars aren’t a new development. They go back at least to the ’50s – the 1850s, when Jenny Lind, the “Swedish nightingale”, toured America under the auspices of none other than PT Barnum. Lind did 95 concerts, with cumulative ticket sales of more than US$700,000, or more than US$7,000 per concert.
That may not sound like much, and Lind received considerably less than that – PT Barnum took a large cut. (Swift – who is also a very good businessperson – is reportedly receiving more than the revenue from ticket sales, because promoters expect to sell a lot of merchandise too.) But consumer prices in the early 1850s were about 40 times lower than they are now, so in real terms Lind’s ticket take wasn’t as trivial as it might seem.
The amount people who are willing to spend to attend a big cultural event presumably depends on how much they can afford, and America is, even adjusted for inflation, a vastly richer country now than it was 170 years ago.
In dollar terms, per capita gross domestic product is currently about 600 times as high as it was circa 1850. If we adjust by per capita income, each of Lind’s concerts took in the equivalent of around US$4.5 million today.
Another, and I suspect better, answer is that live concerts play a more limited role now than they did 170 years ago. Back then they were the only way to hear music, or at least professionally performed music. Nowadays, music – including videos of live performances – is universally available. Live concerts are still a special experience; as regular readers know, they’re one of my chief pleasures in life. But they serve a smaller niche of demand than they used to.
In any case, aside from her music, Swift is giving us food for thought – a reminder both that the effects of technological progress can be more complex than you think, and that the technologies that matter most may also not be the ones you think.
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