Rockonomics | Alan B. Krueger

Summary of: Rockonomics: A Backstage Tour of What the Music Industry Can Teach Us about Economics and Life
By: Alan B. Krueger

Introduction

Welcome to a thrilling journey through the intriguing world of ‘Rockonomics’, where economics and the music industry collide. Renowned economist Alan Krueger takes center stage to unravel the complex financial fabric of the music industry and explain how it mirrors the United States economy. As you dive into the summary, you will encounter eye-popping statistics on income disparities, the rise of streaming platforms, the challenges of royalty payments, and how the economics behind live performances force artists to hit the road. ‘Rockonomics’ will open your eyes to the realities of the industry and the potent connection between music and economics, making you think twice the next time your favorite tunes fill your ears.

Krueger’s Rockstar Economics

Economist Alan Krueger’s book on the financial aspects of the music industry receives high praise from legendary producer Quincy Jones, Nobel Prize winner Richard Thaler, and other notable individuals. Jacob Slichter, drummer of Semisonic, commends Krueger’s deep understanding of the intricacies of the industry. Several people in and out of the music world laud the book’s ability to simplify complex financial concepts and make them accessible for readers of all backgrounds. Krueger’s book offers fascinating insights into the financial world of rock music, making it a great read for anyone interested in music or finance.

The Economics of Music

The music industry is a microcosm of the US economy, reflecting core economic principles. The top 1% of artists make 60% of the revenues, while the time we spend listening to music is up, but spending is down by 80% since 1999. These figures illuminate the realities of price segmentation, supply-and-demand dynamics, incentives, and cost control. Music generates only 0.1% of US GDP, but 80% of the population listens to music daily at an average cost of $0.10. Krueger expertly dissects the music industry as a unique lens through which to examine US economic forces.

Streaming Platforms Reviving the Music Industry

Streaming platforms, including Spotify, Apple, and YouTube, generated $2 billion in revenue for the music industry and streamed one trillion songs in 2017. About 66% of recorded music income comes from music rented via streaming, and platforms pay out 65% to 70% of their revenue in royalties. By the mid-2030s, it’s predicted that one billion users will use these platforms. This new, disruptive technology is causing artists’ revenue from recorded music to rebound, indicating how new delivery systems can revive entire industries. However, there is a concern about the unequal distribution of revenues where 50% of recorded and streaming music sales go to the top 0.1% of musicians.

The Harsh Realities of the Music Industry

More than 213,000 people in the US work in music, representing 0.13% of the labor force – a figure that hasn’t changed since 1970. The typical artist earns around $20,000 in a year. The job market has become a winner-takes-all affair, like the music industry itself, where only a few top performers thrive while others struggle. The high supply of performers drives down earnings for everyone, except the elite. Krueger uses supply and demand to explain why the majority of music artists make meager earnings.

The Economic Divide in America

Krueger’s analysis of the US economy is startling – the top 10% of earners have gained 100% of income increases since 1980. The “superstar market” fuels this inequality, seen in both the music industry and the wider economy. Krueger proposes that if all individuals had equal talent, only a select few could demand higher wages. An eye-opening reminder of the increasingly unequal distribution of wealth in America.

The Music Industry’s Money Game

Krueger reveals that musicians earn more money from live performances than making records. The top 1% of performers make more than the bottom 99%. The author shares a comment from David Bowie that touring will be the only unique situation for music. Krueger highlights that four main promotion companies control two-thirds of US live performance revenue. He also states that the average cost of a live performance ticket has increased by 190% between 1996 and 2018, far exceeding overall price levels. The music industry is a money game, and the elite are coming out on top.

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