Graduation Year

2019

Date of Submission

12-2019

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Janet Smith

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Terms of Use for work posted in Scholarship@Claremont.

Abstract

"Music itself is going to become like running water or electricity. You'd [artists] better be prepared for doing a lot of touring because that's really the only unique situation that's going to be left." – David Bowie

From 2014-2019, ticket prices for live music increased by 21.1% while inflation only went up by 9.3%. This large jump in concert ticket prices is similar to the 1997-2003 price spike observed by Alan Krueger in his 2005 paper “The Economics of Real Superstars”. In this paper, Krueger introduces the Bowie Theory – the idea that a decorrelation between live performance and recorded music revenue would cause artists to stop undercutting concert ticket prices in an effort to boost recorded music revenue and price them at independent market clearing levels. From 2014 to 2018, streaming went from being just 27.3% to 72.8% of the recorded music market by revenue. This paper examines the possibility that the shift to streaming decorrelated the relationship between live performance and recorded music, and that this decorrelation caused concerts to be priced independent of recorded music revenues, explaining the spike in concert ticket prices. I will also explore other possible explanations for this price spike examined in Krueger’s 2005 study, particularly the superstar effect. I conclude that while I was unable to show a statistically significant relationship to support the Bowie effect, this was likely due to the lack of quantity and quality of the data. Furthermore, there is evidence to show that the relationship between the components of the music industry are changing, and deserve further investigation.

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