It’s kinda cool when the National Bureau of Economic Research (NBER) turns its gaze in our general direction. And it’s especially cool when their work takes such a radical turn from economic policy, currency dynamics, stock markets, and international trade to talk about Rock and Roll.
Rockonomics: The Economics of Popular Music, co-written by Princeton industrial economist Alan Krueger, explores the dynamics and drivers behind live concerts in popular music, focusing along the way on pricing, concentration of revenue among performers, secondary ticket markets, copyright, and technological change.
Sure, the paper focuses exclusively on the commercial touring market. But even the basic economics of live performance are useful to any working cultural manager that ever puts on a show. This paper begins with those basics:
As an economic good, concerts are distinguished by five important characteristics:
- although not as extreme as movies or records, from
a production standpoint concerts have high fixed costs and low marginal costs;- concerts are an ‘experience good,’ whose quality is only known after it is consumed;
- the value of a concert ticket is zero after the concert is performed;
- concert seats vary in quality;
- bands sell complementary products, such as merchandise and records.
Those five qualities make for some funky behavior in pricing, production, contract relationships, risk-sharing, and industry structure. If you can skip over the über-wonky stuff like the formula below (which has something to do with mixing a perfect martini, I think), it’s well worth a read:
And if you find that you’re totally hooked on the economics of arts, entertainment, and culture, don’t stop there. Take a look at the following longer tomes:
- The Economics of Art and Culture
by James Heilbrun and Charles M. Gray - Economics and Culture
by David Throsby - Creative Industries: Contracts Between Art and Commerce
by Richard Caves - Entertainment Industry Economics: A Guide for Financial Analysis
by Harold L. Vogel
Wonk away!
Thanks for the plug, Andrew. The 3rd edition is currently underway. By the way, the equation has nothing to do with a perfect martini. The clue is the frequent appearance of all those Q’s, which of course represent tonic (quinine water). The P’s represent, out of respect, Plymouth Gin, one of the earliest brands. So the topic clearly is gin and tonic, and the equation demonstrates that this concoction is an optimal accompaniment (complement) to a summer rock concert. Bottoms up.