Is Taylor Swift Underpaid?

Like almost every other country, Sweden has recently suffered from high inflation. Consumer prices have risen 9.7% in the last year as a result of multiple factors: a large volume of spending to support households during the pandemic, the disruptions in supply chains due to covid, the Russian invasion from Ukraine and Beyoncé.

Seriously though: Beyoncé kicked off her latest world tour in Sweden last month, and many have argued that the huge influx of visitors to her two concerts caused a significant, if temporary, hike in hotel and restaurant prices, large enough to have a noticeable effect on inflation in the country as a whole.

I haven’t heard similar statements regarding the other major tour currently underway, but I wouldn’t be surprised if Taylor Swift’s concerts are firing up activity at hotels and restaurants in the cities where she performs. Live music is big business.

But why is it so big? And how has it changed over time?

Let’s see, I know there are more important issues in the world. Let me linger on this one though, mostly because it amuses me to think about the economics of music, but also because the concert business offers interesting lessons about the sometimes perverse role technology can play in when determining income.

In particular, as I’ll explain below, what’s really puzzling is why Swift isn’t making even more money.

This is not the first time I write about this topic. Inspired in part by the work of my late colleague Alan Krueger, I have actually considered Swift from a historical perspective. Now, the artist’s latest tour is her most important to date, and I also think I have some new ideas about what might be going on.

Let’s see: Swift makes a lot of money. Being a skeptic by nature, I would like to attribute her fame to marketing hype, but the sad truth is that she is a highly talented lyricist and composer with a remarkable stage presence. Even if you don’t count yourself among her fans, you have to admit that she is really good.

However, there are many talented artists. Why do a few earn so much? There is a standard economic theory on the matter, expounded by the economist Sherwin Rosen in his famous article “The Economics of Superstars.” Rosen argued that, due to modern technology, the reach of artists is much greater than when live performance was the only way to entertain an audience, so if a musician (or, in his example, a comedian) is, or is considered to be, slightly better than his rivals could earn large sums by performing in the mass media, selling records, and so on.

But, on the surface, that’s not the case with Taylor Swift or Beyoncé. They earn large sums, but not mainly from the rights to records or live broadcasts, but from concerts, which, by the way, is normal. One of the lessons I learned from Krueger is that musicians have always made money mostly from touring. This was the case even in the CD era, when record companies were cashing in hand over fist, but sharing very little with the artists, and even more so today, in the age of streaming.

However, there are live performances and live performances. Ticket sales for each of Swift’s concerts are expected to be between $11 million and $12 million. What technology explains this?

The answer, if you think about it, is the cutting-edge technology known as a microphone, which allows an artist to perform live for tens of thousands of people. To be more precise, the technology that makes it possible is microphones attached to the most advanced contemporary sound systems, thanks to which fans present at concerts in stadiums and arenas can really hear the musicians (and the musicians hear each other). themselves). These systems had not yet been developed when the beatles they gave their famous concert at Shea Stadium, which was almost inaudible over the shouting.

But here’s the thing: hugely lucrative tours by music superstars are nothing new. They date back at least to the 1950s… of the 1800s, when Jenny Lind, the swedish nightingale, toured the United States under the auspices of none other than PT Barnum. Lind gave 95 concerts, with cumulative ticket sales exceeding $700,000, or more than $7,000 per concert.

That may not sound like much, and Lind got quite a bit less, while PT Barnum got a hefty cut. (Apparently Swift, who is also a very good businesswoman, gets in more than her ticket sales, as the promoters anticipate selling a lot of promotional items as well.) Now, consumer prices in the early 1850s were about one fortieth what they are today, so in real terms what Lind collected for tickets is not as insignificant as it might seem.

Presumably the amount people are willing to spend to attend a major cultural event depends on what they can afford, and the United States is, even adjusting for inflation, a much richer country than it was 170 years ago. Expressed in dollars, GDP per capita today is about 600 times higher than it was around 1850. Adjusting for income per capita, each of Lind’s concerts grossed the equivalent of about $4.5 million today. .

Swift’s concerts gross more than double this amount. But why not more? After all, Lind performed in concert halls that had to be small enough for people to hear an unamplified (albeit trained) human voice. Swift fills stadiums with a capacity of 50,000 people or more.

As I said, the real question is why the artist doesn’t earn even more money.

One answer might be that the sheer size of the venues means that Taylor Swift’s tickets are not as rare a commodity as Lind’s were back in the day, though this argument is countered by the fact that the population of the United States is much larger. more numerous today than in 1850.

Another answer, I suspect a better one, is that live concerts play a more limited role today than they did 170 years ago. Back then they were the only way to hear music, or at least music performed by professionals. Today, music, including videos of live performances, is available to everyone. Live concerts remain a special experience; as my regular readers know, they are one of my main pleasures in life. But they serve a smaller demand niche than before.

In any case, her music aside, Swift provides us with food for thought by reminding us that the effects of technological progress may be more complex than we think, and that the most important technologies may not be the ones we think.

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