Taylor Swift Makes Less Money Than She Deserves – 6/21/2023 – Paul Krugman

Like almost all countries, Sweden has been experiencing high inflation recently. Consumer prices rose 9.7% last year, reflecting several factors: big spending to support families during the pandemic, Covid-related supply chain disruptions, the Russian invasion of Ukraine and Beyoncé.

It is serious. Beyoncé kicked off her latest world tour in Sweden last month, and it’s been widely claimed that a large influx of visitors to her first two shows caused a large, albeit temporary, rise in hotel and restaurant prices, enough to have a noticeable effect. on Swedish inflation in general.

I haven’t seen similar reports about the other major concert tour underway, but I wouldn’t be surprised if Taylor Swift’s concerts are producing increases in hotels and restaurants in the cities where she performs. Live music is big business.

But why is it so big? How has that changed in the long run?

See, I know there are more important issues out there. However, we’ll pause here, primarily because I find music economics fun to think about, and also because the concert business offers some interesting lessons about the sometimes perverse role technology can play in determining revenue.

In particular, as I’ll explain, the real conundrum here is why Taylor Swift doesn’t make even more money.

It is not the first time that I write about this subject. Inspired in part by the work of my late former colleague Alan Krueger, I’ve actually weighed in on Taylor Swift in historical perspective before. However, her latest tour is her biggest yet, and I also believe I have some new ideas about what might be going on.

So Taylor Swift makes a lot of money. Being a congenital cynic, I would like to attribute her fame to marketing, but the sad truth is that she is a highly talented songwriter and musician with remarkable stage presence; watch the video below, showing his solo performance at one of NPR’s Tiny Desk shows. Even if you’re not a fan, you have to admit that she’s good.

Still, there are many talented artists. Why do some earn so much? There is a standard economic theory about this, presented in a famous article by the economist Sherwin Rosen, “The economics of superstars”. [A economia das superestrelas].

Rosen argued that modern technology means that the potential reach of performers is much greater than when live performance was the only way to entertain audiences, so that a musician (or, say, comedian) who was, or it was considered, a little better than its rivals could earn large sums performing in mass media, selling records and so on.

However, on the surface, that’s not what’s happening with Taylor Swift or Beyonce. They are earning huge amounts not mainly from record or streaming royalties, but from concerts – which, by the way, is normal.

One of the lessons I learned from Alan Krueger is that musicians have always made their money mainly from touring; this was true even during the CD era, when record companies were making a lot but giving artists very little. It’s even more true now, in this age of streaming.

However, there are live performances and then there are live performances; ticket sales for each of Swift’s shows are expected to range from $11 million to $12 million. What technology explains this?

The answer, if you think about it, is that cutting-edge technology known as a microphone, which makes it possible for an artist to perform live in front of tens of thousands of people.

To be precise, the enabling technology is the most advanced contemporary microphones and sound systems, which make it possible for fans at stadium and arena shows to really hear the musicians (and the musicians themselves to hear themselves); these systems had not yet been developed when the Beatles played their famous show at Shea Stadium, which was virtually inaudible because of the screaming.

But here’s the thing: hugely lucrative tours by music superstars are nothing new. They go back at least to the 1950s – the 1850s, when Jenny Lind, the “Swedish Nightingale”, toured the United States under the auspices of none other than PT Barnum. Lind played 95 shows, with cumulative ticket sales of over $700,000 (R$3.3 million), or over $7,000 (R$33,400) per show.

That might not seem like a lot, and Lind got considerably less than that – PT Barnum took a big chunk. (Swift – who is also a great businesswoman – is getting more than just ticket sales, as promoters expect to sell a lot of merchandise as well.)

However, consumer prices in the early 1850s were about a fortieth of what they are today, so in real terms Lind’s ticket was not as trivial as it might seem. (Data here unfortunately blocked).

No doubt even that understates how successful Lind was by modern standards. How much people are willing to spend to attend a major cultural event presumably depends on what they can afford, and the US is, even adjusted for inflation, a much richer country now than it was 170 years ago. In dollar terms, per capita GDP is now about 600 times what it was in around 1850. If we adjust for per capita income, each of Lind’s shows grossed the equivalent of about $4.5 million ( BRL 21.5 million) today.

Taylor’s shows are taking in more than double that, but why not more? After all, Lind performed in concert halls that needed to be small enough that people could hear an unamplified (but trained) human voice. It is filling stadiums with a capacity of 50,000 or more.

As I said, the real question, no doubt, is why the singer isn’t earning even more.

One answer could be that, due to the size of the venues, Taylor Swift tickets are not as rare as Jenny Lind tickets were at the time, although this is offset by the fact that the US population today is much larger than it was. in 1850.

Another answer, and I suspect a better one, is that live shows play a more limited role today than they did 170 years ago. Back then, they were the only way to listen to music, or at least professionally performed music.

Nowadays, music, including videos of live performances, is universally available. Live shows are still a special experience; as regular readers know, they are one of my greatest pleasures in life. But they serve a smaller niche of demand than before.

Anyway, beyond her music, Taylor Swift is giving us food for thought — a reminder that the effects of technological progress can be more complex than you think, and that the technologies that matter most may not be what you think either.

The column will be on a quick vacation. See you all again on July 4th.