The dismal science of ticket prices

Expect to pay more for tickets for Dave Matthews concerts in the near future, predicted Alan Krueger, the world's first and foremost professor of Rockonomics, the study of the economics of ticket prices at a lecture Monday sponsored by the Wilson School.

Krueger, who holds a joint appointment in the economics department and the Wilson School, noted a trend of rising ticket prices in recent years at a lecture "Rockonomics: The Economics of Ticket Pricing."

Incorrectly priced tickets, new technology, more intricate and eccentric stage sets and pyrotechnics all contribute to elevating production costs, which in turn lead to higher ticket prices, explained Krueger, the Bendheim professor of economics.

He analyzed the reasons for the discrepancy between the actual and the market price of tickets, why some bands charged more than others, and the reasons behind the recent price growth trend.

The availability of free music over the Internet has led to a decline in record sales, which in turn has forced bands to raise ticket prices, he said.

If correct, this would help to account for the price growth from 1996 to 2001 of pop and rock concert tickets by 74 percent while with less heavily pirated music, such as jazz and blues, the ticket prices grew only by 24 percent for the same period of time, Krueger explained.

For music concerts, ticket prices, on average, increased by 62 percent while the cost of living rose by nearly 13 percent over the last six years.

Krueger explained that if the demand to hear the best is higher, then the rewards for the best should also rise — and higher band recognition has usually meant higher ticket prices.

The increased demand for name bands has come as the price of consumer audio equipment has fallen by a third over the last two decades, making people more knowledgeable about bands playing. Demanding the best, fans have driven up ticket prices for name bands more than for lesser known groups, he explained.

While the top one percent of the music industry generated 55 percent of all total revenue in 2001, from 26 percent in 1982, the top two to five percent made 29 percent of all total revenue in 2001, a decrease from 36 percent in 1982.

Krueger said he was surprised to find that characteristics such as the gender of the music band also affected the average salary of the group artists. Female bands outdid male bands, which in turn did better than mixed bands. The genres jazz and pop were at the highest end of ticket prices while reggae was at the lowest end. He also found that the age of the band made a difference, with young bands making slightly less than bands five to six times older.

The reason, Krueger suggested, was that the younger bands cared more about building their reputation. Older groups have already acquired faithful fans, who are part of the work force, and hence have more money to spend, and who are eager for leisure activities, he explained.

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He also applied his model to Super Bowl tickets. Although the National Football League could raise profits in the short run by increasing Super Bowl Sunday prices above $325 to reflect its market value of upwards to $25,000, it wants to reward fans for their loyalty, he explained. Those same fans are responsible for tie-ins and merchandise sale, which account for a quarter of the total revenue.

Krueger said he plans to expand his research to include data from yesterday's Rolling Stones concert at Madison Square Garden and from an October Bruce Springsteen concert in Philadelphia.