Krugman - Is Taylor Swift Underpaid?
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By Paul Krugman
Opinion Columnist
Like almost every other nation, Sweden has been experiencing high inflation recently. Consumer prices have risen 9.7 percent over the past year, reflecting multiple factors: large spending to support households during the pandemic, Covid-related disruptions of supply chains, Russia’s invasion of Ukraine and Beyoncé.
Seriously. Beyoncé kicked off her latest world tour in Sweden last month, and it has been widely argued that a huge influx of visitors attending her first two concerts caused a major, if temporary, surge in hotel and restaurant prices, big enough to have a noticeable effect on Swedish inflation overall.
I haven’t seen similar reports for the other huge concert tour now underway, but I wouldn’t be surprised if Taylor Swift concerts are producing hotel and restaurant booms in the cities in which she performs. Live music is big business.
But why is it such big business? And how has it changed over the long run?
Look, I know that there are more important issues out there. But let’s take a break here, mostly because I find thinking about the economics of music fun, but also because the concert business offers some interesting lessons about the sometimes perverse role technology can play in determining incomes.
In particular, as I’ll explain, the real puzzle here is why Taylor Swift doesn’t make even more money.
This isn’t the first time I’ve written about this subject. Inspired in part by the work of my late former colleague Alan Krueger, I have in fact weighed in on Taylor Swift in historical perspective before. But Swift’s latest tour is her biggest yet, and I also believe that I have some new insights into what may be going on here.
So, Taylor Swift makes a lot of money. Being a congenital cynic, I’d like to attribute her fame to marketing hype, but the sad truth is that she’s a highly talented songwriter and musician with remarkable stage presence; look at the video below, showing her solo performance at one of NPR’s Tiny Desk concerts. Even if you aren’t a fan, you have to admit that she’s the real deal.
Still, there are many talented artists. Why do a few earn so much? There’s a standard economic theory about that, laid out in a famous paper by the economist Sherwin Rosen, “The Economics of Superstars.” Rosen argued that modern technology meant that the potential reach of performers was much larger than it had been when live performance was the only way to entertain an audience, so that a musician (or, his example, a comedian) who was, or was perceived to be, even a bit better than his or her rivals could earn large sums by performing on mass media, selling records, and so on.
But on the surface, that’s not what’s happening with Taylor Swift and Beyoncé. They’re making huge sums not mainly from record or streaming royalties but from concerts — which is, by the way, normal. One of the lessons I learned from Alan Krueger is that musicians have always made their money mainly by touring; this was true even during the CD era, when record companies were making money hand over fist but passing very little on to the artists. It’s even more true now, in this age of streaming.
But there are live performances, and then there are live performances; ticket sales for each of Swift’s concerts are expected to be $11 million to $12 million. What technology explains that?
The answer, if you think about it, is that cutting-edge technology known as the microphone, which makes it possible for an artist to play live to tens of thousands of people. To be more precise, the enabling technology is microphones plus more advanced contemporary sound systems that make it possible for fans at stadium and arena concerts to actually hear the musicians (and for the musicians to hear themselves); these systems hadn’t yet been developed when the Beatles gave their famous Shea Stadium concert, which was largely inaudible over the screams.
But here’s the thing: Hugely lucrative tours by music superstars aren’t a new development. They go back at least to the ’50s — the 1850s, when Jenny Lind, the “Swedish nightingale,” toured America under the auspices of none other than P.T. Barnum. Lind did 95 concerts, with cumulative ticket sales of more than $700,000, or more than $7,000 per concert.
That may not sound like much, and Lind received considerably less than that — P.T. Barnum took a large cut. (Swift — who is also a very good businesswoman — is reportedly receiving more than the revenue from ticket sales, because the promoters expect to sell a lot of merchandise too.) But consumer prices in the early 1850s were about one-fortieth what they are now, so in real terms Lind’s ticket take wasn’t as trivial as it might seem. (Data here, unfortunately gated.)
And arguably, even that understates how well Lind did by modern standards. The amount people are willing to spend to attend a big cultural event presumably depends on how much they can afford, and America is, even adjusted for inflation, a vastly richer country now than it was 170 years ago. In dollar terms, per capita G.D.P. is currently about 600 times as high as it was circa 1850. If we adjust by per capita income, each of Lind’s concerts took in the equivalent of around $4.5 million today.
Swift’s concerts are taking in more than twice that. But why not more? After all, Lind performed in concert halls that had to be small enough so that people could hear an unamplified (if trained) human voice; Swift is filling stadiums that hold 50,000 or more people.
As I said, the real question, arguably, is why Swift isn’t making even more money.
One answer might be that the sheer size of the venues means that Taylor Swift tickets aren’t as scarce as Jenny Lind tickets were in the day, although offsetting this point is the fact that the U.S. population today is a lot bigger than it was in 1850.
Another, and I suspect better, answer is that live concerts play a more limited role now than they did 170 years ago. Back then they were the only way to hear music, or at least professionally performed music. Nowadays music, including videos of live performances, is universally available. Live concerts are still a special experience; as regular readers know, they’re one of my chief pleasures in life. But they serve a smaller niche of demand than they used to.
In any case, aside from her music, Taylor Swift is giving us food for thought — a reminder both that the effects of technological progress can be more complex than you think, and that the technologies that matter most may also not be the ones you think.
The newsletter will be taking a brief vacation. See you all again on July 4.
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