Overall, forty-seven of the top forty-eight artists who toured in 2017 netted more income from live performances than from record sales and streaming.
For most musicians, live concerts pay the bills. Streaming is unlikely to change this balance. While Fleetwood Mac may be right that players love you only when they’re playing, it is not too much of a stretch to also say that they make money only when they’re playing. And, as if to prove the point, although its members are in their seventies, Fleetwood Mac embarked on a tour of more than fifty cities in 2018 and 2019. 27
The Disconnect
Musicians, like many other businesses, sell multiple products, the most important of which are live performances and recorded music. In economics terms, musicians are multi-product businesses. Apple, the largest company by market capitalization at the time of this writing, is another example of a multi-product business. Apple sells devices, such as iPhones, computers, and iPads; it sells music through Apple Music; and it sells books through Apple Books.
Musicians are distinguished, however, by the fact that they earn relatively little of their income from their most popular product, recordings. This disconnect distinguishes musicians from other entertainers as well. Movie actors make most of their income from acting in movies, which is how their fans enjoy and consume their art. Some professional athletes make money from endorsing products or starring in films, but they typically earn most of their livelihood in the form of salary for playing their sport, which is how their fans engage with their work. Perhaps the comparison that comes closest to musicians is book writers. They earn most of their money from book advances and from royalties for selling books, but occasionally they leverage their popularity or expertise to earn significant income from the lecture circuit.
As file sharing and piracy cut into musicians’ record sales in the late 1990s and early 2000s, the disconnect between how fans consumed music and how musicians made a living grew to possibly unsustainable proportions. The gap is likely to narrow in the future, however, as streaming and social media enable musicians to interact directly with their fans and create stronger links between live performances and recorded music.
Taylor Swift is a pioneer in this regard. Fans can increase their chances of being able to buy a ticket to one of her concerts by watching the pop singer’s music videos, joining her email list, or purchasing her albums or merchandise. Such tie-in sales are a natural way for musicians to leverage their connection to fans through recorded music to increase their income.
Technological developments could also narrow the lines between recorded music and live performances, assuming that licensing agreements permit it. A comparison to sports is instructive. In professional sports, most of the revenue that teams earn is generated from selling television and cable rights to broadcast live games.28 Revenue from the gate for live sporting events is the equivalent of a live concert—but there is rarely an opportunity for musicians to earn additional money from recording or broadcasting their live shows. In the future, it would make economic sense for fans to purchase recordings and videos of live events, and for more artists to experiment with live-streaming their concerts to increase revenues.
Personalization may also be coming to recorded music, just as personalized medicine is the frontier in health care. The multitalented singer and musician Jacob Collier has offered to personalize music for his patrons on Patreon. Fans submit a recording of their lyrics, and Collier puts it to music and harmonizes it. Not surprisingly, the music ends up sounding much better once the Grammy Award–winning musician is done. Other musicians offer to sing “Happy Birthday” or other songs for a customer, for a price.
To narrow the disconnect between the money earned for live events and that earned from recorded music, record companies will have to change their business model, which typically prohibits the resale of live recordings. Alternatively, artists could become more independent of their labels. Radiohead’s Thom Yorke advises young musicians, “First and foremost, you don’t sign a huge record contract that strips you of all your digital rights….If you’re an emerging artist, it must be frightening at the moment. Then again, I don’t see a downside at all to big record companies not having access to new artists, because they have no idea what to do with them now anyway.”
Most music superstars still sign on with one of the three major record companies (Universal, Warner, or Sony) or one of the large indie labels. The most notable recent exception is Chancelor Jonathan Bennett, better known as Chance the Rapper. The Chicago-born twenty-five-year-old is charting his own course by remaining an independent artist. He releases his albums (which he calls mixtapes) for free, and makes money touring and selling merchandise. He has the distinction of being the first artist to win a Grammy without selling physical copies of his music. Chances are that more artists will follow this route, even if most continue to take the safer route of signing with a major label.
The Time of Your Life
Although music represents a small percentage of economic activity, it looms large in our daily lives. The poet Carl Sandburg once wrote, “Time is the coin of your life.” In the currency of how we spend our time, music is unquestionably an economic heavyweight.
Time use is difficult to measure. Still, surveys find that more than 80 percent of Americans report that on a typical day they listen to music. And those who listen to music spend two to four hours a day listening to it, on average.29 Streaming services provide a more precise estimate of the amount of time that subscribers spend listening to music on their platforms. Pandora, for example, finds that active listeners spend about twenty hours a month streaming music. Since streaming represents about a third of all time spent listening to music, that equates to at least two hours a day of music listening in total.
Music is most often a secondary activity, however, playing in the background while people commute, work, do homework or chores, exercise, or socialize at a bar. Even so, music occupies more of people’s time than any other leisure activity except television—and music is often playing in the background on the movies and television shows we watch.
At no time in human history have there been so many different ways to listen to music. We can choose from YouTube, Pandora, Spotify, Facebook, iTunes, Amazon Echo Dot, iHeart, and satellite radio, not to mention vinyl records, FM radio, and CDs. The average person listens to music on about four different formats today. Traditional radio still occupies the largest share of music listeners’ time, although it is declining fast.30 Smartphones and computers are now the most widely used listening devices.
The growth of streaming is enabling people to spend even more time listening to music. From 2015 to 2017, Americans increased the amount of time they spent listening to music by 37 percent, according to Nielsen.31 And not surprisingly, streaming services report an increase in the amount of time subscribers spend listening to music.
As music is made more easily accessible, some economists and pundits have argued that the enjoyment of additional listening time is likely to diminish, due to what economists call the law of diminishing marginal utility. The law of diminishing utility is not a physical law, like gravity, but a tendency for the value derived from additional consumption of most goods and services to decline after a certain point. If you can put only a few songs on your playlist, as opposed to having all the songs ever recorded at your disposal, you will probably choose the songs you put on it more carefully.
Weighing against diminishing returns is the tendency for musical tastes to change as people listen to more music. The more a listener is exposed to a given song, for example, the more he or she tends to like that song (up to a point).32
Music Spillovers
Music has many spillover effects for individuals and communities, some monetary and even more non-monetary. A music festival is an example of monetary spillovers. Business and workers who are not directly connected to the music industry ben
efit when a town such as Manchester, Tennessee, or Indio, California, hosts a music festival. Restaurants, bars, and hotels experience additional demand, and the local workers who set up the stage and equipment and staff the local restaurants, bars, and hotels benefit as well. A major festival such as Bonnaroo or Coachella can put a little-known town on the map. As a result, towns often compete to host music festivals, because of the increased economic activity and publicity that they generate. Indeed, El Dorado, Arkansas, is investing $100 million of public and private funds to build the Murphy Arts District, with a 7,500-person amphitheater and 2,000-seat music hall, in an effort to rejuvenate the city and retain population.
There is an entire ecosystem that benefits from the music industry that is not counted directly in the music economy. Radio stations, device manufacturers such as Sonos, Bose, Beats, and Apple, and rock videographers all benefit from the music economy. Music drove the success of the iPod and later, to a large extent, the iPad and iPhone. These types of monetary spillovers are not unique to the music industry. Sports teams, auto manufacturers, and movie studios, among others, create monetary spillovers. Even allowing for these spillovers in the music ecosystem, however, the music industry remains relatively small economically compared with other industries.
Of greater importance are spillovers that affect us on a personal, cultural, and societal level, beyond dollars and cents. Renditions of “Amazing Grace” comfort us in times of trouble; “The Star-Spangled Banner” binds our nation together; and “We Will Rock You” rallies arena or stadium sports fans. Erik Kirschbaum makes a credible case that Bruce Springsteen and the E Street Band’s concert before 300,000 people in East Berlin in 1988 helped topple the Berlin Wall.33 Although not all external benefits of music are positive—I still resent the student in the dorm room next to mine blasting music all hours of the day and night—and music can be (and has been) enlisted for evil causes as well as good ones, the positive effect of music on our psyches and in support of social causes is what extends its impact far beyond its monetary contribution to the economy.
Holding On to Humanity
The Sirius XM radio host Eric Alper recently took to Twitter to ask, “What album or song or musician has changed your life?” Some three hundred people quickly responded.34 A wide range of emotions and a diversity of music poured out, including David Bowie, Linkin Park, Nirvana, Metallica, Big Bang, Joni Mitchell, Kiss, Mozart, Queen, Elvis, Dylan, Beck, Björk, Billy Joel, Ani DiFranco, Pearl Jam, Pink Floyd, Tori Amos, Marvin Gaye, Neil Young, Miles Davis, Prince, Michael Jackson, and Janet Jackson. Here are some of my favorite replies:
“Impossible to answer but I can’t imagine where or who I’d be without The Beatles.”
CHRISTY COLLINS OF CALIFORNIA
“Bruce Springsteen. And to say he changed my life is an understatement.”
FLYNN MCLEAN OF QUEENS, NEW YORK
“Beyoncé’s ‘Flawless’ and ‘Formation’ basically get me through #chemo and therefore have probably literally helped save my life.”
ANYA SILVER OF MACON, GEORGIA
“Tom Petty ‘Won’t Back Down.’ Saved my life.”
MEL MARIE
“In 2017, definitely @lorde’s ‘Melodrama’—got me out of a deep, black hole this year.”
KRISHNA N. PATEL
“ ‘Fools Rush In’: danced to it at a wedding with my husband on first date: fell in love: still being fools.”
CINDY JOYCE
This hardly qualifies as a scientific study, but clearly many people believe music has changed their lives in a variety of profound ways, from chasing away the blues to reinforcing memories of good times. This conclusion is supported by neuroscience research and clinical studies, which have found that music influences neurobiological processes in the brain. A lot of us rely on music as a source of emotional strength, happiness, courage, and a sense of identity that we might not otherwise have been able to summon or tap into. As Harry Chapin put it in his song “Let Time Go Lightly”: “Music has been my oldest friend, my fiercest foe / ’Cause it can take me so high, yes it can make me so low.”
Social Causes
The eighteenth-century Scottish writer and revolutionary Andrew Fletcher is often credited with the saying, “Let me make the songs of a nation, and I care not who makes its laws.”* The line encapsulates the special power of music to shape the mood and spirit of a nation.
Musicians have, through their music and their personal efforts, promoted a variety of social causes. Here are a few notable examples:
Bangladesh George Harrison and his sitar mentor, Ravi Shankar, led two landmark benefit concerts in 1971, and produced a live album and a documentary film for Bangladesh that eventually raised $12 million in humanitarian aid for the new nation, which was overwhelmed by war, natural devastation, and millions of refugees.35
“We Are the World” A charity song written by Michael Jackson and Lionel Richie and produced by Quincy Jones in 1985 that raised over $60 million for humanitarian aid in Africa and the United States. A star-studded cast of more than forty singers appeared on the recording.36
Live Aid Benefit Concerts A pair of concerts organized by the Irish and Scottish musicians Bob Geldof and Midge Ure to raise funds for humanitarian relief for Ethiopia, which was suffering a famine at the time. Over $200 million in donations was raised.37
Countless artists have supported social causes. Nina Simone, Harry Belafonte, Pete Seeger, Mahalia Jackson, Aretha Franklin, and many others are identified with the U.S. civil rights movement. Through her music and political activism, Cyndi Lauper has been an advocate for LGBTQ rights and awareness. Bruce Springsteen has passionately supported numerous charities, including the 1736 Family Crisis Center in Los Angeles and the Community Food Bank of New Jersey. U2 frontman Bono was a co-founder of the ONE Campaign, an organization with more than seven million members committed to taking action to end extreme poverty. John Mellencamp, Neil Young, and Willie Nelson have been advocates for family farmers. Chance the Rapper has supported the organization My Brother’s Keeper.
Natural and human-made disasters often bring out musicians’ support. Marc Anthony, Jennifer Lopez, Ricky Martin, Selena Gomez, and others teamed up to raise millions of dollars for disaster relief for Puerto Rico after Hurricane Maria devastated the island. And Boyz II Men, Imagine Dragons, The Killers, Wayne Newton, Céline Dion, and other stars participated in the Vegas Strong benefit concert to raise money for the victims of the mass shooting at the Las Vegas Route 91 Harvest music festival.
Doing Well and Doing Good
The prevailing view in economics, as articulated by Milton Friedman, is that the business of companies should be to make money, not pursue social objectives. In Friedman’s words, “There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”38 But in music the objectives of maximizing profit and pursuing social objectives may not conflict; in fact, they often coincide.
One reason so many musicians support social causes is that activism is often good for business. It helps the musicians create a following and builds stronger connections with fans. This is not to doubt the sincerity of singer-activists’ motives, but only to highlight the obvious: being perceived as doing good can also be good for business.
In fact, many corporations have ignored Friedman’s advice and used their resources to actively support social causes. It is common for companies to make charitable contributions using funds that would otherwise go to shareholders, or to sometimes forgo lines of business that have negative societal consequences. In what may be a watershed moment, Laurence Fink, the head of BlackRock, the world’s largest asset manager, wrote a letter to CEOs of top companies in 2017 arguing that “society is demanding that companies,
both public and private, serve a social purpose.” He further warned, “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”39
Troubled Water: A Price for Social Activism?
Do musicians pay a steep price for social activism that is out of sync with their fans? There is no sign that Beyoncé or Kanye West paid an economic price for criticizing President Bush’s decision to go to war in Iraq; to the contrary, their stars rose after they criticized the president.40 But their political statements were largely aligned with the views of their fans. After Irish singer Sinead O’Connor tore up a photo of the Pope on Saturday Night Live in 1992, her career crumbled, and it never recovered.41
A good test of this question occurred on March 10, 2003, just before the start of the Iraq War, when Natalie Maines, lead singer of the country music band the Dixie Chicks, announced at a concert in London, “Just so you know, we’re on the good side with y’all. We do not want this war, this violence, and we’re ashamed that the President of the United States [George W. Bush] is from Texas.”42 The reaction to Maines’s comment was swift and severe. Some radio stations pulled the group’s music off the air, and protestors collected and then destroyed the band’s CDs. Several country artists, including Reba McEntire and Toby Keith, harshly criticized the trio. Members of the band received death threats.
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