Live Concerts Can't Support The Existing Recording Industry… But Did Anyone Ever Say They Would?

from the one-piece-of-many... dept

Whenever we talk about the importance of freeing the infinite and charging for the scarce when it comes to music, we end up having people try to simplify that down to “make money on concerts.” That’s never been true, however. While we do think performances are one scarcity that is worth exploring, and which has proven to be quite lucrative for many performers — both large and small — we’ve never thought that live concerts alone would suffice as the business model. There are other, more important scarcities, such as access and attention, that can be much more lucrative. Still, it’s worth exploring how well live concerts alone could do in replacing recording industry revenue, and in a long (80 pages) and thorough paper by Mark Schulz (a law professor), exactly that exploration occurs (thanks to the anonymous reader who sent this in). It’s well worth reading, as there’s plenty of food for thought. Basically, he points out that free file sharing can help many artists in numerous ways, but he’s not convinced that touring alone can help. He goes through a pretty thorough explanation for why touring alone isn’t enough — including the fact that a disproportionate amount of the profits from live performances tends to go to a rather small number of artists, just as the number of musicians creating music is exploding.

While I think the paper is worth reading, and makes a ton of good points, there are a few problems with it. First, I don’t know many people who seriously think that touring alone would be the new business model. Most people think that it’s one component among a variety of new business models that are available. And, indeed, Schulz is good about mentioning some of the alternative additional business models out there. But, then he sort of ignores them in going back to discussing how touring alone isn’t enough. It’s sort of a nice strawman, but it’s besides the point, since almost no one really believes that touring alone is the model. Then, there’s the issue of extrapolating out from the existing “touring” market, most of which really looks at bigger tours, rather than at the market for local bands playing local shows. And, while he does include a discussion on making the live performance business “more productive,” I’m not sure he really takes into account some of what’s been happening — such as the efforts Jonathan Coulton puts into building up a critical mass in a certain area before parachuting in for a live performance. The ability to do such things only will grow over time, and not enough attention is paid to them. In fact, we’re already seeing live music bring in more money than recorded music in some markets.

So, while it’s a very good paper, and I agree with the overall strawman conclusion (touring alone isn’t enough to replace the entire recording industry revenue), I’m not sure that’s meaningful or really tells the full story. Touring does and will continue to work incredibly well for some bands, it will be a component of other bands’ business models, and it won’t be a part of others’. But there are plenty of different business models that can deal with that.

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Comments on “Live Concerts Can't Support The Existing Recording Industry… But Did Anyone Ever Say They Would?”

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TasMot says:

Don't forget to add in the synergy

Most of the entertainment industry expects to be paid before delivering the goods (a good time). How many times have you gone to a movie, only to walk out saying what a waste of time that was? By combining the “live show” with the sale of CDs at the exit point, a band could make a lot more money. Especially since it is easy enough to get plenty of CDs made very cheaply (without all the overhead of the big recording companies. The bands need to look for a way to build a strategy that implements the business model that incorporates “free”. Give away the free music, charge for the concert, and finally, charge for the CD on the way out that includes extras not available in the downloads. Now, if only I could entertain people, I could get into the business and make a fortune……

The infamous Joe says:

Re: Don't forget to add in the synergy

Unfortunately, once it’s given away for free, it’s very hard to turn around and sell it. The point is to try and get away from selling music at all, and instead use it to enlarge your fan base. (Which it does if your music is worth sharing!)

I think a better track is to use the music as a commercial to sell the band, and then the band can sell things that can’t be easily copied, like access to the creative process, hearing music and seeing lyrics before they’re polished up for mass-release– and getting to input on likes/dislikes– the very things that fans would love to do (and would pay to do) now. People who don’t care would still hear music, and possibly spread it, and someone they spread it to might want to pay for more intimate access.

As has been discussed before, a tiered system seems to be the best for this, with the amount of money donated equalling the more access that is given.

Now, if you’re really into selling CDs, have the band sign and date them for each show– they magically become scarce again (though you’re still not selling music, technically.) and you can sell them as people leave the show.

Weird Harold (user link) says:

Re: Re: Don't forget to add in the synergy

yes, it’s all good, but in the UK example, today, they would have to literally double ticket prices to make up for what is lost in record sales today if they stopped selling them.

Worse, the decline in record sales is fairly easy to attribute to increased file sharing as it is. So you would have to look at the 5 year ago sales number and try to recoup that.

So that insanely prices $300 Madonna ticket becomes a pointlessly expensive $600 ticket.

Wait, let’s come up with another way to make less money, quick!

Anonymous Coward says:

Re: Re: Re: Don't forget to add in the synergy

“yes, it’s all good, but in the UK example, today, they would have to literally double ticket prices to make up for what is lost in record sales today if they stopped selling them.”

This is under the false assumption that you need to maintain -all- of the overhead that currently exists. If you fundamentally change your business model, you can cut the cost of overhead. Ticket prices may still go up, but not as much as they would’ve had you maintained all of your (now) pointless overhead.

B says:

Re: Re: Re: Don't forget to add in the synergy

Did you really just throw out the same straw man argument called out in the article? Really?

“Worse, the decline in record sales is fairly easy to attribute to increased file sharing as it is”

So the industry people keep saying, but the increase in file sharing isn’t the only reason for declining CD sales. I’d point at the quality of music… but there are other much less personalized reasons.

For instance… DVD prices have steadily declined over the years, to the point where some DVDs are cheaper than CDs… and not just strait-to-dvd movie dredge. Real movies like Robin Hood: Men in Tights! Anyways, if that media is cheaper than CDs and people perceive it as having a higher value, wouldn’t that contribute?

Or maybe it’s the rise in video games as an entertainment medium. People have a certain amount of money to allocate toward “media spending” and video games have certainly taken their fair chunk out of that market. The industry’s having a bit of a down year so far (as is everyone), but video game sales have skyrocketed over the past few years.

I would love to see a pie chart pair comparing 1999 and 2009 total “media” sales, with CDs, movies and video games as contributors, as well as the total dollar amount spent.

ehrichweiss says:

Re: Re: Re: Don't forget to add in the synergy

Care to back that up with some numbers that relate to the artists themselves?

The typical artist makes around $0.05 per CD. A ***well known*** artist will make closer to $0.50 – $1.00 per CD.

It takes 1,000,000 album sales to make it to platinum status. So, if you happen to be Madonna and 1 million people happen to download the album and not buy it afterward, how many tickets would you have to sell to make up for it? If you make $25/ticket it takes 40,000 people to attend your shows to make up for that. Madonna gets more people that in ONE show and, as you pointed out, about 12 times more $$$ per ticket.

Sooo… if 1,000,000 people download her album and none of them liked it, she doesn’t lose anything since if they had bought it the most they’d do is resell the crappy cd and she doesn’t get $$$ for used CD sales(but I bet you’re all for that aren’t ya Harold), so that route is null and void.

If even 1 percent liked the CD and they decided to attend a show for $25 you get 10,000 * $25=$250,000 – meaning she made more off of 10,000 people attending a show(a cheap show) than 250,000 people buying her CD.

So the question is:
I wonder which she’d prefer: 1,000,000 album sales or 40,000+ people attending a single show.

Do I really have to continue with the math? You seem to have such a hard time with that and your logic that I’d suggest you take some rudimentary high school classes. It’ll surely help.

Now, tell us again Harold. Have you found any not-well-known musicians bragging about the incredible amount of money they make from record sales over touring?

lulz says:

I wonder if it will work..

A local band, Surviving Thalia, will be having a concert in Louisville very soon. They are charging $12 at the door, and the cool part is everyone that goes gets their new CD.

This is the kind of thing that more bands should do. I wanted to go already, but now i’ll definitely be going. I’ll be supporting a local band; if they didn’t offer the promotion, I would end up copying it from a friend.

hegemon13 says:

Scarcity Idea

I have always thought that one cool scarcity for a band to sell would be recordings of each of their concerts. Before you say recordings aren’t scarcities, understand that it is the HOW of selling these that makes them scarce.

When I was in high school band, choir, marching band, etc, we went to a bunch of contests. Invariably, an option at those contests was to buy a video (and sometimes a CD) of the contest. Parents lined up like crazy to buy them, despite the fact that they had recorded it on their own camcorders.

So, apply this to concerts. What if, at the merchandise stands, a person could pre-order a CD or DVD of the concert they are attending? What better way to relive the experience? The catch (to avoid production losses on certain shows) would be that the band would have to reach a certain number of orders in order for it to be produced. If that number is not reached, your credit card is never billed, and you are sent a letter or email informing you that the product won’t be available. This would be a way for fans to purchase the creation of a good (which is scarce because it is not yet produced), and the band could produce it only when they knew ahead of time that it would be profitable to do so.

Anonymous Coward says:

Some of the things you list that can’t be easily copied … can be easily copied.

Advance tracks and demos? Torrent ’em.
Unpolished lyrics? Post ’em.
Concert footage? Torrent it.

Part of this whole push towards new business models is based around the “if it can be copied, it will be copied.” However, that will probably hold for all tiers of access. So, a new business model which includes something digital which can be copied … is not a solution. It’s the same problem, dressed up.

You’re down to not too many items. Autographed bits, particular memorabilia, a visit with the band, etc. You have various hostage models for producing new content.

Let’s not pretend that the high-tier digital stuff won’t be copied.

LostSailor says:

Before you burn the house down.

Gee, doesn’t this make the point that since there will be numerous business models to fit different circumstances in the new era of “free” music, it makes sense to experiment widely, see what works and is sustainable, and then give all the music away for free. Rather than give it all away for free and then come up with a business model that allows musicians to create and make money.

Earlier you pointed, again, to Jill Sobule as a model that “works.” Well, yes, she was able to produce an album with good production values paid for by donations. But she’s still selling the album (one of the tiers of donation was a free download). And Mike discounts the fact that however beneficial her constant interaction with fans is, it also severely impacts her time to actually create music.

The sentiment around here seems to be AJ’s: just “torch it” and hope something good rises from the ashes? One could point to the current woes of Wall Street bankers to see how well that approach works out. Just a thought.

icomeanon says:

okay, the recording industry is going to downsize. the fact is that most people can make fairly professional recordings with the lower-end recording equipment, and artists can make 100% professional recordings with the high end stuff and some sound work on the recording room.

no one NEEDS the recording industry except for distribution and promotion. however, distribution is now being done online, and all it takes is an artist account on one of the main distributors (amazon, itunes).

that leaves promotion, and with the change in communication the internet is providing, having a loyal fanbase and setting up your own recording station will do you just fine, and will likely become the norm.

Biggie Wiggles says:

What's wrong with...

What’s wrong with artists making advertising deals? They could put a company’s logo on their drums and wear t-shirts or other apparel that prominently displays sold ads. Sure it might seem like an artist is “selling out” but if money is what is important to them, why not?

Of course this sort of advertising would encompass not only their live performances but they could include their sponsor’s logo on their album cover and on their website.

I think live performances + advertising + endorsements/commercials could generate more than enough money for a band.

Additionally, although it is just a personal dream of mine, why not start a whole new spectator driven sport that involves bands or artists in a “battle of the bands” sort of activity. It wouldn’t be like American Idol where everyone votes, but rather the spectators that are actually present. Band members could also do activities (like beer drinking contests against the other band) so fans get competitive and follow “their band.”

Weird Harold (user link) says:

Re: What's wrong with...

“I think live performances + advertising + endorsements/commercials could generate more than enough money for a band.”

Good, except that we are all planning to get rid of copyright and musicians / authors rights and all those other things, so they money disappears.

As for a battle of bands or American Idol, please remind me again how many American Idol winners currently have record deals? How many could actually sell albums? (I think the answer is 1, maybe 1.5). When you give the public the ultimate right to decide, they tend to select crap. It’s amazing how it works out (and explains why COPS is still on TV).

Biggie Wiggles says:

Re: Re: What's wrong with...

Live performances + advertising + endorsements/commercials wouldn’t be affected by any of this…

Even if copyright somehow didn’t exist, people would still flock to live concerts. They would then witness what the band was wearing. The band could then endorse a product during the show and on TV.

Hmm…how this has anything to do with copyright or author rights, I don’t know.

And American Idol has been a huge success financially (for towns involved in try-outs, advertising revenue, etc.) Additionally, the people would already be talented, so you wouldn’t rely on the masses to select who should exist in the industry. You would rely on the people at the concert (who probably know music or have definite points of view) to select which band was better on that particular night. It would be like a football game. Your team vs their team…and your team plays different teams depending on the week/month/whatever.

You’re an idiot Weird Harold

Weird Harold (user link) says:

Re: Re: Re: What's wrong with...

AI is successful at many things, except finding musical talent that people are interested in.

It is what makes it all funny. Great TV show. Great selection process. Great tryouts. Lousy end product.

It may be the ultimate new business model for music, because it sure ain’t about selling records!

Nick says:

One thing that does seem to get glossed over is that supporting the whole recording industry usually isn’t the point of many of the new models. Instead, they’re about allowing the artists to get a bigger share of the profits, while the “record labels” become service providers that the artists hire, rather than the absolute gatekeepers to the public that they have been for the last few decades.

Can you imagine if advertising agencies tried to behave with their corporate clients like the big record labels do with their artists?

Mogilny says:

What's the point?

I hate the recording labels, but i find this discussion pointless.

Recording labels are an integral part of mainstream music, like it or not. Without recording labels, many artists would not have the success they enjoyed. Is the recording industry broken? yes. Will they change their ways? no. As long as entrepreneurship exists, then new ideas will replace these dinosaurs. Bitching won’t make them budge.

Mark Schultz says:

The Author Responds

Thanks for noting the article.

I do agree that many business models are possible. Indeed, I’ve written about some of them in prior work, including the jamband model. I think the future holds a great diversity of business models.

I was motivated to write the paper through irritation at some who claim copyright is not needed because touring will “take care of it all.”

The paper has tended to provoke two responses: (1) “You’re an idiot. Nobody believes this. You’re attacking a straw man.” (2) “You’re an idiot. Of course this is the future of the music business.”

Common thread in the responses: I’m an idiot. At least I was able to bring people together on something, a rare thing these days. I’m sure that posting in blog comments section will tend to provoke yet more agreement with that sentiment.

Because of the straw man point, I was careful to document that people really do assert this point. Examples included Paul Krugman in a column shortly before he won his Nobel Prize last year. I don’t think it’s a serious argument, but it’s a favorite way for many people to wave their hands when asked “what’s the alternative?”

As I discuss in the paper, different business models tend to enable different types of music production. For example, the jamband model gets you jambands, and the celebrity brand model gets you pretty divas. I hope that future business models allow for a very diverse music scene.

I wont have time to debate the paper here, as I’m off to the Leadership Digital Music Summit in Nashville, where Mike Masnick will also be speaking.

Mark Schultz
Southern Illinois University

Dave says:

Re: The Author Responds

You’re not an idiot. Some of the commenters here are but that’s no reflection on you.

Your paper is a reasonable attempt to review a business model and show it’s strengths and weaknesses.

Commenters here are the kind that like to attack that which they either do not understand or disagree with.

Take it all with a grain of salt and keep going.

David (profile) says:

Let it fail

Something that doesn’t often get mentioned. It seems that some people think that musicians have a right to make money. Maybe they don’t. Maybe making music is no longer a money-maker. Maybe people will lament it when bands stop touring and making albums and releasing music, but perhaps that will happen. If you can’t afford to keep doing it for free, then you quit and become a plumber or something. So maybe the fall-out of P2P, Napster, Limewire, etc will be less music. People don’t want to pay, will stop buying CDs, so that’s it. Making music is no longer a good business model. Maybe the people who can afford to give it out for free and hope for the best will still do it, but those that wanted to have a #1 top-seller are SOL now.

So what? That’s the way it is now. You can’t make money making buggy whips anymore. Maybe you can’t make money making music anymore. Too bad. It’s had a good run, and now it’s over.

Why should we assume that since people used to make money at making music, they still can, and we need to protect that?

Dave says:

Re: Let it fail

Interestingly, there used to be the “regional hit” Bands that would be extremely popular only with a certain area. usually driving distance from their home town.

Maybe the music industry will go back to that and while the mega-stars will disappear, there will still be a large number of very successful artists that have dedicated fans.

The world doesn’t need another Britney Spears (if it ever needed one) but it does need music that represents the people that spawn it. That will always exist. They may never make $100 million a year but then again why should they?

Let the megastar die off. And have it take the megacorp music label with it. I don’t think the world of culture will suffer for it.

LostSailor says:

Re: Let it fail

You can’t make money making buggy whips anymore. Maybe you can’t make money making music anymore.

Actually, you can make pretty decent money making buggy whips since it’s a very specialized market. And while the music industry may not be selling as many discs as they used to, it’s still a multi-billion dollar industry, which, last time I checked, is considered pretty good money.

Jason (user link) says:

Re: Let it fail

Damn good point.

Truly creative people will continue to create whether they’re making money or not. Hasn’t that always been true?

Something else that doesn’t often get mentioned: For many musicians, getting paid for a gig or a recording is one thing, but corporate endorsements, commercials, and limited-edition glossy box sets are something else entirely. In the past, musicians could survive while holding on to their dignity. Are the only options now to give up or sell out?

Suzanne Lainson (profile) says:

Not making money

I think the no-one-makes-money-with-music is the most realistic right now. Sure, there will be bands (mostly already famous) who will continue to make money. But for a band just starting out, trying to make a go of it in this economy, it’s going to be hard.

Let’s say you have a four-piece band. If they make $120,000 a year, that will pay them each $20,000. That leaves $40,000 to pay for tour expenses, promotion, management. Or maybe they each make $25,000 with $20,000 to cover all band expenses.

To do that, they need to gross $10,000 a month. That’s $2500 each week. That’s $500 a show five times a week, or $1250 a show twice a week. Etc.

Start looking at what most bands are able to clear per show. Nothing to start.

To build up that career, they pretty much have to be touring all the time (or playing regionally), living out of the van, not having rent or mortgages to pay. In other words, not making $20,000 annually per person.

Now if, on the other hand, all band members have day jobs that actually pay their bills; they don’t worry about making any money at this; they play for their friends; and they make the music they want to make, it’s a satisfying experience. They aren’t famous rock stars, but they are making music.

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