In recent years, economists have been drawn to the music industry like lawyers to a car wreck. Napster, Grokster, digital sampling, and Chinese piracy have thrown the industry into chaos. Economists have realized it’s the best place to study what happens when new technologies disrupt established industries. They have also realized it’s really fun.
[…] Why are Cher concerts so expensive? How have falling record sales and the rise of downloading affected big-name stars? And what’s the deal with scalping?
[…] Rockonomics has its limits. Numbers can only tell us so much about a singer’s appeal. And there are questions about the consumer behavior surrounding popular music that not even all the Beautiful Minds assembled at Princeton could begin to attack. Celine Dion, for example, outearned Rod Stewart in the rockonomics survey. Krueger and Connolly asked, “On what objective, cardinal metric is Celine Dion only slightly more talented than Rod Stewart?” Hey, the economist who can find some “objective, cardinal metric” that proves Celine Dion possesses any talent at all should be nominated for a Nobel Prize.
The paper in question: Rockonimics: The Economics of Popular Music
This paper considers economic issues and trends in the rock and roll industry, broadly defined. The analysis focuses on concert revenues, the main source of performers’ income. Issues considered include: price measurement; concert price acceleration in the 1990s; the increased concentration of revenue among performers; reasons for the secondary ticket market; methods for ranking performers; copyright protection; and technological change.
More interestingly, the section on file sharing cites a paper I need to find:
Gayer and Shy (2004) present a model of an artist and her publisher, and show that the artist’s revenues are greater under file sharing since the more revenue comes from live concerts, which get better publicity from the distribution of songs on P2P networks.
Lots of cool math to work through, but here’s the closing paragraph, with some familiar thoughts:
This short paper highlights the fact that the recent wave of litigations against individuals who illegally use copyrighted material may not be to the best interest of the artists whose recordings are being pirated. Alternatively, artists should reconsider whether to surrender their copyrights to publishers when signing a recording contract. In view of the present model, artists may be better off by signing an exclusive recording contract with one publisher while not surrendering their copyrights. Under this arrangement, the artists themselves will make the decision whether and to what extend enforcement of their intellectual property should be pursued.