“[C]ost disease studies usually select opera, theater, and the symphony orchestra. Cost disease proponents display an unjustified bias towards ‘high culture.’ We also should consider today’s cultural winners, such as rock and roll, country music, and heavy metal.” (Cowen, 1996)
“In 1983 it took General Motors about 135 man hours to produce a car. Twenty-five years later, that number had fallen to 32.29 hours per vehicle, marking fifteen consecutive years of improvement in productivity. By contrast, it took the band Lynyrd Skynyrd 1.07 man hours to produce a performance of the song Freebird in 1977. Today, a band duplicating the performance would still take 1.07 man hours.” (Schultz, 2009)
Harvard trained economist, Tyler Cowen, takes exception to the cost disease especially as it applies in a biased manner towards ‘high culture.’ The quote above is from his piece, “Why I Do Not Believe in the Cost Disease: Comment on Baumol,” originally published the Journal of Cultural Economics (20: 207-214, 1996) and in my post, Arts revenue and the fallacy of the “savior demographic” (younger audiences), I took a look at how the Sports Industry which has an even smaller percentage of ticket revenue to total revenue than the classical music industry can actually be considered “profitable.”
The quote from Law professor, Mark Schultz so closely mirrors the title of one of my past blog posts (“It still takes the same number of musicians to play “Hey Jude” now as it did for the Beatles“) that I couldn’t resist using it!
With this post, I’ll briefly look at another industry more closely related to classical music and how it is just as prone to the Cost Disease while also being considered a “productive industry” –namely, the Pop Music Industry.
Larry DeBoer (1985) discusses the shift to Rock and Roll from the popular Big Bands of the 30s and 40s.
It was one factor accounting for the shift in the dominant form of US popular music from big band swing in the 1930s and 1940s to rock ‘n’ roll in the 1950s. Baumol’s disease made the smaller band a necessity, although cultural forces determined the music’s content. The recording industry responded to these cost pressures by concentrating on rock ‘n’ roll music.
A similar shift from Bands (usually comprised of four instrumentalists and/or singers to individual singers as Superstars (e.g. Michael Jackson, Madonna, Lionel Richie, Billy Joel, Whitney Houston) by the 80s and which is still primarily the model by which the industry tends to operate (e.g. Justin Beiber, Lady Gaga, Britney Spears). By the mid 90s we see a pronounced increase in ticket prices which is partially described as due to the Baumol effect:
In some respects, popular music concerts are a slow productivity growth sector: it takes just as long and about as many people to perform a concert today as it did 20 years ago. As Baumol and Bowen (1966) point out, prices should rise faster than overall inflation in low-productivity growth sectors because of cost increases. Baumol and Bowen’s disease may well account for the mildly faster price growth in live entertainment events than overall price inflation in the pre-1996 period. (Connolly & Krueger, 2005: 21)
It probably doesn’t need to be said that the onset of file sharing has helped create this sharp increase as that type of activity lowered the revenue that could be gotten from record sales.
During the period of single Superstars there’s also a skewing of revenue towards fewer and fewer top earners which makes sense since individual superstars number far fewer earners than four piece bands.
In 1982, the top 1% of artists took in 26% of concert revenue; in 2003 that figure was 56%. By contrast, the top 1% of income tax filers in the U.S. garnered “just”14.6% of adjusted gross income in 1998 (see Piketty and Saez, 2003). The top 5% of revenue generators took in 62% of concert revenue in 1982 and 84% in 2003. Surely, this is a market where superstars receive the lion’s share of the income. (Connolly & Krueger, 2005: 19-20)
Connolly and Krueger also found that this ticket price inflation far surpassed the rate of inflation and actually outpaced ticket inflation for other forms of entertainment such as Sports and Movies. So maybe it shouldn’t be surprising, as I said in a previous post, “that U2 didn’t turn a profit during their 2009 360° tour [and] that Lady Gaga can bankrupt herself to the tune of $3 million during her 2011 Monster Ball tour.”
None of this is particularly surprising, and I’ve posted about how little money is actually made by most musicians in the Pop Music Industry. The Superstar effect mimics the Blockbuster effect in movies–studios can lose tons of money off a movie as long as they recoup the costs via a big blockbuster. The recording industry operated this way for decades and is only becoming highlighted by the Emily White NPR debacle.
In the end, it seems like those who are really making the money are the Sports owners or media corporations as well as the Superstars but what is really the question is how sustainable is it–and is it a particularly good idea to mimic the business practices or lead an industry to using business practices which may not help the bottom line of individual musicians or a music industry (e.g. Classical Music) as a whole?
That seems to be what the Chicken Little Think Tank wants but not surprisingly, there’s very little talk about the feasibility of these types of initiatives in lieu discussions about so-called “relevance” or adapting to popular culture or generally being hip-to-the-times which, as I mentioned in my previous post regarding Richard Florida’s ideas aren’t particularly profitable or sustainable either.
Connolly, M., and A. Krueger (2005) “Rockonomics: The Economics of Popular Music,” Working Papers 878, Princeton University, Department of Economics, Industrial Relations Section. ark:/88435/dsp01xs55mc05g
Cowen, T. (1996) “Why I Do Not Believe in the Cost Disease: Comment on Baumol” Journal of Cultural Economics. 20(3): 207-214. doi: 10.1007/s10824-005-7214-1
Cowen, T., and R. Grier (1996) “Do Artists Suffer from a Cost Disease?” Rationality and Society. 8(1): 5-24. doi: 10.1177/104346396008001001
DeBoer, L. (1985) “Is rock ‘n’ roll a symptom of baumol’s disease?” Journal of Cultural Economics. 9(2): 48-59. doi: 10.1007/BF00187744
Porter, E. (2010) “How Superstars’ Pay Stifles Everyone Else” New York Times. December 26: BU1. <<http://www.nytimes.com/2010/12/26/business/26excerpt.html>>
Schultz, M.F. (2009) “Live Performance, Copyright, and the Future of the Music Business” University of Richmond Law Review. 43(2). <<http://lawreview.richmond.edu/ive-performance-copyright-and-the-future-of-the-music-business/>>
Critiques of the Cost Disease by bloggers:
- Baumol’s Cost Disease
- Cost Disease and Classical Music
- He went through wild ecstatics when I showed him my lymphatics
- Is there a cost-disease?, or Mozart by computer