The Economics of Real Superstars: The Market for Rock Concerts in the Material World

Abstract

Beginning in 1997, the price of concert tickets took off, and ticket sales and the number of concerts performed by top artists declined. From 1996 to 2003, for example, the average concert price increased by 82 percent while the CPI increased by just 17 percent. This paper summarizes and seeks to understand trends in the concert industry from 1981 to 2003. Explanations that are examined include: 1) the possible crowding out of the secondary ticket market; 2) rising superstar effects; 3) Baumol and Bowen’s disease; 4) increased concentration of concert promoters; and 5) the erosion of complementarities between concerts and album sales because of file sharing and CD copying. The paper tentatively concludes that the decline in complementarities between concerts and album sales is the main cause of the recent surge in concert prices and decline in ticket sales.