Tuesday, December 12, 2017

Why old artists still hang around (and earn big)?

Recently I found this article showing top 25 earners of live concerts from 1990-2014. Old cracks dominate the list. All of them had their first album in the 1970s or 1980s (we didn't count Paul McCartney's Beatles years) except Coldplay (whose first album was in 2000). It implies that they continued to be actively touring for 30, 40 years.

One might guess that they earned most of it during the 1990s. Wrong. Even if we limit the observation to the 2000-2010 decade only, the list did not change much. It means the late comers like Beyonce, or Taylor Swift might earn big for a given year, and probably for years to come. But the old cracks are just not ready to retire.

On the other hand, the list missed the likes of Michael Jackson, whose last tour was in 1997 before he wrangled with law suits and health problems. Had the lists started five years earlier, he should have been there. Similarly, Guns N' Roses had long been absent due to break up and shake up. They did play under new line-ups during the 2000s, which were not enough to make them entering the list. But last year, their reunion made them second top earner behind Beyonce.

Some detailed observation on the list provide interesting variations. The top two, The Stones are U2, are quite alike; they played almost similar number of concerts, with almost similar audience and revenue per show. Bruce "The Boss" Springsteen, like Elton John, played in more but smaller concerts in terms of audience.

Only two artists - both are ladies - earned more than $100 per concert (sorry Roger Waters, you're just 3 cents short). Madonna, who performed less but earned more per concert. Celine Dion, who was the opposite, played in three times more concerts as Madonna, but the average audience was only a fifth.

Top 25 artists who earned the most from live shows, 1990-2014

No. Artist Gross revenue Attendance No. shows Average revenue Average attendance
1 The Rolling Stones $1,565,792,382 19,677,569 538 $79.57            36,575.4
2 U2 $1,514,979,793 20,536,168 526 $73.77            39,042.1
3 Bruce Springsteen $1,196,116,507 15,010,773 727 $79.68            20,647.6
4 Madonna $1,140,230,941 9,694,079 382 $117.62            25,377.2
5 Bon Jovi $1,030,082,884 12,333,668 578 $83.52            21,338.5
6 Elton John $786,791,043 12,164,513 956 $64.68            12,724.4
7 Dave Matthews Band $776,969,736 17,823,077 992 $43.59            17,966.8
8 Celine Dion $737,573,927 6,546,109 1,143 $112.67               5,727.1
9 Kenny Chesney $752,706,599 12,681,629 755 $59.35            16,796.9
10 The Eagles $702,110,908 7,720,760 484 $90.94            15,952.0
11 The Police/Sting $556,114,962 7,257,611 605 $76.63            11,996.1
12 Roger Waters $547,305,412 5,474,759 316 $99.97            17,325.2
13 Paul McCartney $505,534,809 5,248,175 220 $96.33            23,855.3
14 Billy Joel $499,978,726 10,408,169 577 $48.04            18,038.4
15 Rod Stewart $497,033,399 7,885,676 714 $63.03            11,044.4
16 Neil Diamond $465,448,371 8,870,666 643 $52.47            13,795.7
17 Metallica $432,816,245 8,388,374 468 $51.60            17,923.9
18 Aerosmith $417,573,638 8,405,069 582 $49.68            14,441.7
19 George Strait $405,034,063 9,736,580 584 $41.60            16,672.2
20 Jimmy Buffett $402,756,057 9,746,471 539 $41.32            18,082.5
21 Coldplay $378,359,252 5,394,616 315 $70.14            17,125.8
22 Toby Keith $361,256,245 8,608,696 711 $41.96            12,107.9
23 Cher $351,625,611 4,531,739 548 $77.59               8,269.6
24 Fleetwood Mac/Stevie Nicks $349,906,931 4,906,995 483 $71.31            10,159.4
25 AC/DC $337,879,092 5,387,353 316 $62.72            17,048.6

So why do those old artists still actively touring? Hard to single out one reason. But given the big money involved in the live music industry, who could refuse a piece of the cake? Even just to make a one-time bang like Led Zeppelin, or a last goodbye like Motley Crue.

For some, like U2 or The Boss, they are still in the job market, producing new records. So perhaps for them, 2010s is just the new 1980s.

Other motives are hard to quantify, like connecting to fans, nostalgia, or else. But for The Stones, the youngest of them, Ronnie Wood is 70, the reason for hanging around should be a simple one: because they can.

Sunday, December 10, 2017

Toilet news #235

I need to go to the toilet, she said. Sure, we have time. You can do it at the school as we drop the children, I replied.

But she refused. No way! I'm not gonna use school toilets! Kids toilets are a mess, don't you know that? Well, I said. There should be a guests toilet - or teachers toilet, right boys? Ugh, we're early, Dad, the front door might still be locked, responded one of the sons.

Alright, she said. Let's go to Coles. I know there's a clean toilet somewhere around it. It's only five minutes drive from here. I guess that's a better idea - I was gonna suggest peeing in the open, as I saw many bushes around the school yard, but I knew she would kill me.

Which all reminded me of this cool book about India. About why to some Indians, open defecation (not just peeing) is preferred to having latrines! About how it affects the underdevelopment in India (stunting and all). And about how they are related to the caste system.

And while still waiting for her, I remembered my paper too. In which I found that sanitation can be more critical than access to improved water facility in causing diarrhoea among children in Indonesia's less developed regions. One of the channels is .. open defecation. That is, even if your house has an improved water facility, if the toilet is poor, the chance of getting diarrhoea is high. And even if you have improved water resources and improved sanitation, but your neighbour defecate in the open (and your children play in that neighborhood and, as children do, forget to wash their hands properly), the odds of having diarrhoea is still high.

She's back.

Friday, December 08, 2017

Understanding today's music industry

Can’t recall when was the last time I blogged here. 2010? 2011? If I was to write a piece on music industry then, the view would be gloomy. Something like “the industry is dying”, “digital piracy is killing music”. Just look at this graph (credit to IFPI) :

The industry’s total revenue experienced a free-fall since 2000 – right, the MP3, Napster, peer sharing, piracy fiasco we heard back then. The free-fall stopped around 2010. It hasn’t been bouncing back, but the bottom may have been reached.

Remember that in 1980 The Buggles said video killed the radio stars? In fact, 1980 was just a beginning of the golden era of music industry. (And it was video – VHS and Betamax – who disappeared, not radio). So perhaps today we see another turning point, not a decline, in the industry.

Streaming and the importance of sunk cost

Looking closer at the data, it’s clear that digital music, which caused the decline at first, has given the industry a lifeline. Digital music came in various forms: paid downloads (like iTunes), subscription service (Apple Music, premium Spotify), or on-demand streaming (YouTube, free Spotify). In 2015, the combination of all digital music overtook revenue from physical sale (which has been helped by a curious come back of vinyl records). In addition, revenue also comes from live performances and royalties from movie or game soundtracks (which helps Led Zeppelin or AC/DC enjoy a brief popularity among teenagers).

Of digital music, paid download was popular until a couple years ago. But streaming has increased, and now makes up more than half of digital music revenue in the US. Technology explains part of this – thanks to better internet connection and compression technology, streaming is much better today.

Pricing is another. Subscription price means I only need to care about my fixed cost (or, sunk cost), not the marginal one.  This is a new way of enjoying music. Back then, when I want to own Skid Row’s first album, I paid Rp5000 (guess what year was that) for 10 songs, of which I liked only 4 or 5. Then I need to think, should I pay another Rp5000 for Debbie Gibson’s Electric Youth, in which I only enjoy 2 songs. What if I don’t like the albums after all? What if I get bored after a month? Subscription service made my life easier.  I only need to think of paying once a month to have a huge range of options of music I want to listen to, or don’t want to.

Like gym membership years back, looks like subscription-based pricing will be our new norms for many things. It means our decision will be driven more by sunk costs rather than marginal costs. (Free streaming service is basically the same, unless someone pays our bill in the form of ads).

Complicated royalty scheme

For artists, things look a bit more complicated. In the old days, for every $18 wepurchased on a CD, around $10 went to labels (for their marketing, production, distribution, and profits), $5 for retailers (most of them are now out of business), $3 for the artist, and $1 for the songwriter. Yes, if you’re an artist-writer, then you got $4. You got the revenue when I the CD, and not need to bother when will I actually listen to your song and for how many times.

It’s similar under paid download scheme. If I download Adele’s single from iTunes for $1.29, I paid Apple 30 cents, and Sony 90 cents. Sony will then pay 8 cents in songwriting royalty to Adele and her co-author. Adele will get another payment from Sony an artist, depends on whatever mentioned in the contract, which ranges around 12-20 percent of sales.

Streaming service is much less straight forward. Every time I listen to a song, artist will get something. But it depends on certain algorithm like artist rate, region, streaming time (prime or non-prime time). For one stream, an average song generates $0.005 to $0.008, which will be split between the artist, songwriter, and the label/management. An indie band revealed, after their songs were streamed for 1 million times, their payment was less than $5000. Just calculate how many streams it takes for Beyonce who earned $1.9 million from streaming in 2016.

Live performance makes artists still alive

One thing is still a puzzle for me. According to an industry report, digital music accounted for 50% revenue in 2016, while performance rights (including live shows) accounted for 14%. But for top artists, streaming is only a small fraction of their earnings stream. Top earners got 90% or more from performing live. Even physical sales still generated more than streaming.

So who earned from streaming?

My hypothesis: digital music helps many non-major, independent musicians to sell their pieces. Top artists still dominate all revenue sources, for sure. But the digital space is so huge with fewer middlemen, so smaller artists can be part of the game. There was only small space in Aquarius Mahakam and Duta Suara for non-label artists, think about the old days. In a way, this may be a good thing.  

Live shows have also been the way for old artists to stay in the game. Last year’s topearner may be Beyonce. But guess who others on the list? Guns N’ Roses and Bruce Springsteen. They may not catch up with newer artists in terms of streaming and record sales, but their revenue from live performances lifted them to the second and third place. Similarly in 2015, The Rolling Stones, Billy Joel and Grateful Dead were side-by-side with One Direction and Taylor Swift in the top earner list, thanks to their live concerts.

So what’s next?

We are still in the middle of disruption process, so hard to draw the conclusion for now. Streaming, like smartphone is today, but may not be tomorrow’s game.

Music may be surviving in terms of sales and revenue. But is the quality improving? Some are complaining that today’s pop music has less variation (meaning they all sound alike), indicating lower creativity. Yeah, maybe no one wants to be Genesis anymore, producing 30-minute tracks.

The role oflabels, and today’s marketing channels are other questions for next articles (maybe). And of course, understanding the Indonesian context. For now, it’s too much already for an economist of jaman old trying to understand jaman now.

Tuesday, April 25, 2017

Negative externality of racist campaign

Illustration: two candidates, A and B, were campaigning for an office. They needed to get votes from 16 percent of population -- the swing voters coming from the first-round election. Candidate A's strategy was to play racism and bigotry card against the B. Candidate B decided to face it one-on-one by playing pluralism card. Both are rational. You can even assume that neither of them are actually racist nor bigot by heart.

Candidate A won the election as apparently voters bought the racism and bigotry card he played. Some commentators also believed that candidate B's strategy for directly confronting the racism card is the reason he lost the election. Nonetheless in a relatively competitive election, this is the equilibrium of the number of voters for each candidate and the quantity of racist and bigot campaign. The voters have spoken. But is this a socially optimal outcome?

If you believe that racism and bigotry are not `bad', then it is optimal. And you can skip the rest of this posting.

If you believe that racism and bigotry are `bad' -- something like pollution--,  then it is not socially optimal. We have a case of negative externality: candidate A, the producer of racist campaign, while maximising his private benefit against cost in a competitive political market, massively failed to take into account the social cost of doing it. As a result, he over-produced racist campaign.

To fix the problem, the social cost of racist campaign needs to be `internalized' to the private cost-benefit calculus of the candidate. One way is by asking government to step in by imposing tax or anti-racism regulation. But here, in this case, it might not be applicable: the candidates ran for the very government position, while at the same time people in the government are part of the game

So we need to take a different approach: when market fails, use more market. We can try to link the current political market to other markets - say, the next presidential election market or even just a market for `(urban cosmopolitan) educated social club membership' -  where our candidate is also aspiring to be. The idea is to make the candidate pay the full price for playing racism card by explicitly internalize the social cost he incurred into his private cost structure in these other linked-markets.

This might work or not work, but what I fail to comprehend is some pundits' post-election suggestion to help (subsidize?) the producer of racist campaign to get away with the allegation of being racist under disguise of repairing the election damage. First, it would even more externalize the social cost from the private cost-benefit structure of the candidate. Second, it would create a moral hazard among other aspiring politicians to play the same dirty tricks. In the end, we will see more of `bad' in the air, not less.