February 13, 2009
I was understandably rankled when I read about the recent merger between Ticketmaster and Live Nation. Just when we were getting some competition going in the live ticket sales industry, we’re going back to the monopoly. In the article, the writer tried to put a positive spin on it by saying that perhaps now they’ll go to an auction-based ticket sales format so that artists can get paid the true value of their performance (much of which is now captured by Stubhub and ticket agencies on the secondary market).
The thought of an auction is a bit scary. Demand for hot show tickets in most cities is out of control, with individual tickets to most desirable shows going for 2 to 3 times their base sales price – typically hundreds of dollars each. It seems like you’d be able to see a lot fewer shows than you do in the current system.
But for the sake of comparison, let’s look at another public-venue entertainment industry: professional sports. One of the reasons professional athletes get paid as much as they do is because of the economic concept of “rivalry.” Simply put, rivalry identifies whether a good or service can be enjoyed at the same time by more than one person. For instance, only one person can eat my box of junior mints. Therefore that box is only worth the three dollars the movie theater overcharged me. However, the movie we sit down to watch can be enjoyed simultaneously by everyone in the theater. That is why one movie can be worth hundreds of millions of dollars (if it’s any good).
Professional sports teams and the athletes that play for them know this. They do as much as possible to get their on-field activities in front of as many people as they can. People pay top dollar to attend events, with ticket prices set close to market price, and then the leagues have massive TV contracts that bring the events to people all over the world. Merchandising and celebrity-athlete spokesperson contracts are for huge amounts of money, fueled by TV availability and awareness (the Dallas Cowboys, Chicago Cubs, and Notre Dame Fighting Irish all excel at grabbing national attention, which is why they are more valuable than other teams in their leagues).
So why aren’t rock concerts like that? Why can’t you watch them all live on TV (I know some of them are on pay-per-view, but that doesn’t count)? Well, I’ll point an accusatory finger (again) at the packaged media business. By putting musical content on to a tape, a CD, a DVD – by slapping DRM technology on digital downloads - media distributors are trying to introduce rivalry into a medium that is characteristically non-rivalrous. Follow me? Music is intangible, abstract – not at all like my junior mints. When people say that “music wants to be free,” they don’t mean without cost. They just mean that it, by its very nature, is supposed to be enjoyed by more than one person at the same time.
The economic reality of music and the musicians that produce it is that they are like professional athletes, and that economic reality is now causing a collapse in packaged media sales. Because you just can’t fight the nature of something.
What do record companies do? Is the music industry going shrink or even <gulp> collapse? No, not at all.
A big part of the solution is to follow the lead of professional sports. Raise tickets prices so your “athletes” get paid what they’re worth. Don’t fire everyone who works in your packaged media business. Move them over into a new type of distribution job for “ConcertTV” channels 1-20 that air live concerts of all types from all over the world on cable, 24/7. I’d pay $15 a month for those channels. With this increased personal exposure for artists, ramp up the merchandising and sponsorship dollars (there is so much that could be done here that isn’t being done). More distribution and marketing jobs there, too.
The side effects of this approach? Prices for albums lower further to a price that lets more people enjoy more of the good stuff (25 cents a song, anyone?) – music becomes more accessible and demand is further stimulated. Supply follows: Bands tour more, more venues are built, more musicians can actually make a living doing it on the low end – music becomes bigger and more diverse. Bands that can’t actually play their instruments, are supported only by good production and marketing, or write albums full of filler can’t put on a decent show and fail – music becomes more about talent and quality.
I for one think the above realities will come to pass regardless of what the record companies do, and I’m pretty excited about it. But I’d like to see the record companies continue to employ the good people they have, I’d like to see the transition happen faster and with less heartbreak. So here’s hoping that sometime soon, during a Sunday afternoon football game, a few record executives have epiphanies.
Photo Credit: Originally uploaded by Mark Sevigny