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Rockonomics: The Economics of Popular Music



Alan Krueger





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Then 1999 arrived, the file-sharing site Napster launched - and the world changed overnight.

Alan Krueger, the Princeton economist and co-author of the 2005 paper Rockonomics: The Economics of Popular Music, describes the post-Napster music industry using what he calls the "Bowie theory". Back in the 80s and 90s, Krueger explains, most artists made most of their money from music sales, using tours as promotional vehicles for their latest album. U2 sold 14 million copies of The Joshua Tree in its year of release, earning the band around $37 million in the US. The original 111-date Joshua Tree tour grossed roughly the same, at $40 million.

Post-Napster, the link between recorded and live revenues has been severed, a trend spotted by David Bowie in 2002 when he told The New York Times, "Music itself is going to become like running water or electricity. Artists better be prepared for doing a lot of touring, because that's really the only unique situation that's going to be left."

Crispin Hunt agrees. He experienced a brief flash of fame in the 90s as the singer in Britpop band Longpigs, best known for their indie anthem "She Said". He became a successful songwriter after the band broke up, writing hits for the likes of Lana Del Rey, Ellie Goulding, Florence + the Machine, Jake Bugg and Rod Stewart. It's a living, he explains, but the post-Napster world of streaming services and online video hasn't rewarded the songwriter.

"If I'd written songs that reached the same chart position in the 80s or 90s, I wouldn't be talking to you now," he grins wryly. "I'd be by the pool in LA. But as long as Spotify pays, on average, between $0.006 and $0.008 per stream, and while YouTube's royalties are cloaked in secrecy, that's impossible to imagine. I recently had a song on BBC Radio 1's C-list - that's six plays a week. In the same week, a Jake Bugg track I wrote had 12 million views on YouTube. I earned £75 for six plays on Radio 1 and £65 from 12 million YouTube plays. The only way to make money is to be able to sell out 2,000-seat or larger venues. Any tour, any gig, for any size of band has basic running costs - transport, crew, PA. Unless you sell over 2,000 tickets you're losing money."

In 1999, recorded music in the US - the world's biggest music market - earned an inflation-adjusted $20.6 billion, according to the Recording Industry Association of America. In 2015, auditors PwC estimated global music-industry revenues from recorded music, whether sold or streamed, totalled around $15 billion. Across that same period, the live touring industry saw the kind of expansion rarely seen outside Silicon Valley, with US concert ticket sales tripling in value between 1999 and 2009. In 2016, live music took more than $25 billion per year in ticket sales and another $5 billion in sponsorship - around double the global revenues for recorded music and larger than the GDP of Iceland.

For artists, the difference is stark. U2's album sales have been in decline since The Joshua Tree, from Achtung Baby's eight million in 1991 to, in 2009, No Line on the Horizon's 3.4 million copies sold. Ticket sales, meanwhile, have been rising: 1992-1993's Zoo TV tour, supporting Achtung Baby and Zooropa, saw box-office revenue top $151 million; 2009-2011's 360° tour took a record-breaking $736 million. The Joshua Tree's 2017 tour has fewer than half the dates of the 360° tour, but it took $62 million in its first month.

"Live music is competing for the same entertainment dollar as movies, box sets, restaurants, nightclubs and theme parks," Winky explains. "Shows have had to become spectacles to compete but the relationship between fan and star is incredibly intimate. Our challenge is, how do we wow tens of thousands of people? If you're sitting at the back of the hall, how do we deliver the artist to you in a way that feels intimate and personal? Otherwise, you're not coming back."












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