Rockonomics: Economics & Public Policy in the Rock & Roll Industry Scalping in addition to List Prices Explanations For Two Key Facts Need To Be Found: The Economics of Superstars
Willy,, Morning On-Air Talent has reference to this Academic Journal, PHwiki organized this Journal Rockonomics: Economics & Public Policy in the Rock & Roll Industry Economics of Ticket Pricing Industry Trends Long-Run Explanations Superstar Model Baumol & Bowens Disease Wealth Effects Short-Run Explanations Concentration Complimentary Goods Under Priced Asset Alan B. Krueger Somebody said to me, But the Beatles were antimaterialistic. Thats a huge myth. John in addition to I literally used to sit down in addition to say, Now, lets write a swimming pool. – Paul McCartney [I]n some fashion, I help people hold on to their own humanity, if I’m doing my job right. – Bruce Springsteen I dont see how carving out the best seats in addition to charging a lot more as long as them has anything to do with rock & roll. – Tom Petty To maximize short run profit Price Discriminate Charge more to those who are less price sensitive Extreme example is variation in prices as long as airline seats Dont go overboard because of tie-in sales & fan loyalty
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Seven Lessons from Super Bowl Sunday New York Times List price was $325 in 2000; market price was around $2,500 Secondary market develops if price too low, but its size can be exaggerated (20%) Endowment effect NFL could raise short-run profit by raising prices But NFL wants to reward loyal fans to build enterprise Besides, 60% of $4 billion of football revenue from TV Gift Exchange Avg. Price
Avg. Price Ticket Prices Soared Relative to Overall Price Inflation the Last 5 Years Proportionate Price Growth Proportionate Growth © Alan B. Krueger, 2002. Price of the 90th, 50th, in addition to 10th Percentile – All Artists year 1981 1986 1991 1996 2001 2003 0 20 40 60 80 Price Prices are Growing Faster at the Top
Further Analysis October 2001 edition of Rolling Stones Encyclopedia of Rock in addition to Roll Consistent universe of artists 1,786 artists, from Abba to ZZ Top; 1,274 in Pollstar database Responsible as long as 75% of ticket sales, 1981-2003. Merged on additional data: year as long as med; gender; genre; prominence (mm) Average Price Increase Understates Rise as long as a Consistent Set of Artists Average Price as long as Artists Listed in Rolling Stone Encyclopedia Source: Alan Kruegers computations based on Pollstar in addition to BLS data.
Number of Shows Number of Tkts. Sold (Millions)
Ticket Revenue (Millions of $) Scalping in addition to List Prices Survey at Springsteen The Rising Concert, Oct. 6, 2003 in Philadelphia, PA. Every ticket sold as long as $75. Stratified r in addition to om cluster sample of seats. Interviewed 858 people in the 15 minutes be as long as e the start of the show. Short questionnaire on index card. Very high response rate. 20-25 percent of tickets scalped. Worst seats more likely to be resold. Average resale price was $300. Springsteen gave away $3 million in consumer surplus Explanations For Two Key Facts Need To Be Found: Long run faster growth in concert prices than inflation Short-run acceleration in prices the last 5 years
The Economics of Superstars Sherwin Rosen (AER 1981) If undergoing heart surgery, willing to pay a lot more as long as the best surgeon over the second best surgeon Imperfect substitutes Convex reward function Plus, size of market Best can reach more customers Human capital would not have a linear effect twice as good paid more than twice as much Superstars are known to a broader audience because of technology Improved technology differentiates the best from the rest in addition to permits bigger audience (unlike Ms. Billington) Dem in addition to to hear the very best is higher Rewards as long as the best should rise Apply to Rock & Roll Source: Bureau of Labor Statistics.
Conclusions Rising superstar effects, but not accelerating To underst in addition to the market must underst in addition to industrial organization in addition to technology Legal changes that allowed Clear Channel to dominate industry may be overrated Antitrust action in future Revised Telecom Act Complementarities between concerts in addition to album sales key to market as long as Rock Stars
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