Has the digital copy increased the value of the scarce physical event? Or has the drop in revenue in the era of the digital copy unlocked the value that already existed?
Although Andrew Keen’s recent article about marketing in the digital economy at The Telegraph was excellent, there is one snag: The digital copy has not increased the value of live concerts, as he argued. “The irony of the digital commodification of content is that, while it destroys the value of the copy, it is actually adding to the value of physical events,” Keen wrote in the piece.
The average ticket price for the top ten grossing tours in North America rose to $151 from $48 in the last ten years, according to Billboard Boxscore. (See “What Should Concerts Cost?” in the March 7, 2009 issue of Billboard.) Blaming file-trading and piracy for higher prices provides an easy scapegoat, but it’s far more complicated an issue. Lower recorded music sales, a root cause for higher ticket prices, is merely one of the symptoms of the rise of the digital copy.
The value of concerts was always there. Now, however, there is greater incentive to use live music to replace revenue lost elsewhere. Since recorded music revenue has fallen so much over the last ten years, artists have demanded more, promoters have charged more, and a range of new products (VIP ticketing) and services (StubHub) exist to extract that value. That may sound like splitting hairs, but there is a big difference between revenue from live events (what is actually received from consumers) and the value of live events (what consumers are willing to pay for a product or service).
Research by Princeton economists Marie Connolly and Alan B. Krueger shows from 1981 to 1996, the average concert ticket price was nearly identical to the average price of sports, theater and movie tickets. Since 1997, years before recorded music revenues started to fall, the average concert ticket price grew much more than sports, theater and movie ticket prices. Over that same span, the top 1% of artists grew their share of total ticket revenue at the expense of all other artists.
One may argue the proliferation of digital copies (free, for the most part) has induced more people to attend live shows more often. That’s an attractive thought but one with little evidence. If free MP3s, music traded on P2P networks and the discovery tools of services like iLike were having a positive incremental impact, unit sales of tickets would be through the roof as fans discover more music and are better informed about concerts. At the very least, one could assume fans may buy more tickets because they are spending less on recorded music.
But are unit sales of tickets really growing, or does touring look better because the stars are able to better extract more money from their fans? The latter appears to be the better explanation.
Scarcity, Print Media and the Music Business
The print media business is the main topic of a guest post at paidContent by Nic Brisbourne, a partner at VC firm DJF Esprit. In the piece, Brisbourne addresses the scarcity model in print journalism, yet it applies to music and other parts of the entertainment world that are moving to digital copies.
The successful news company of the future will have to take all this on board and deliver it with a radically lower cost base than this industry is used to. In the digital world, the news industry, like many others, will be radically smaller. This contraction is partly a consequence of much reduced distribution costs, but is also a reflection of the fact that the monopoly rents Fleet Street enjoyed in the last century are a thing of the past. Witness how Craigslist has reduced the multi-billion dollar classifieds industry to nearer $100 million.
The key phrase there is “radically lower cost base.” Like newspapers and auto manufacturers, recorded music is currently and will continue to support a cost base far lower than what it did in the past. His post gives examples of low-overhead operations like Pitchfork and TechCrunch, online news organizations (more or less) that generate considerable sums of money from conferences and live events.
Fret not, creators of recorded media and other cultural items. The threat of the zero price point does not loom so large that you will be forced to host conferences and hit the lecture circuit. Handsome speaking fees and $3,000-per-head conferences are merely the icing on the cake for the top performers. People will pay for your goods. John Harris at The Guardian, for example, believes payments are important to societies.
If you can occasionally afford to buy films, books or software, you should do so. If you have kids, teach them that the creation of great things tends to take time, effort – and often, hard cash. To do so isn't to line up with Mandelson, Grainge and the analogue crowd: it's to understand that at the core of any sustainable culture, there's a crucial knot of ethics and pragmatism that the year-zero libertarians are set on undoing.