Wednesday, August 18, 2010

Music in a Declining Economy

I'm working on a series of blog posts on gift economies. It's a complex subject, so it's taking me awhile to pull it all together in a logical fashion.

In the meantime, I've been seeing a wave of articles on spending patterns during the recession. Not just about people buying less, but even giving away what they already have. I want to collect them here and do a short piece on how all of this might impact the future of music.

Recently the thinking has been that musicians should provide free digital music to create demand for salable merchandise and for shows and other types of experiences. But I haven't seen much attention paid to the fact that people either may not be able to afford what musicians are selling, or if they can, they may not want it.

First let's look at some economic figures (this is just a brief sample of what can be found):
  • Dubbed “median wage stagnation” by economists, the annual incomes of the bottom 90 per cent of US families have been essentially flat since 1973 – having risen by only 10 per cent in real terms over the past 37 years. That means most Americans have been treading water for more than a generation. Over the same period the incomes of the top 1 per cent have tripled. In 1973, chief executives were on average paid 26 times the median income. Now the multiple is above 300. "The crisis of middle-class America," Financial Times, 7/30/10.

  • Explained Sanford Bernstein analyst Craig Moffett: “When the bottom 40 percent has [only] $100 to spend every month after shelter, food and transportation, the idea that it’s OK to charge $80 for basic cable is very dangerous. "Analysts Bullish on the Eve of Upfront Week," MediaWeek, 5/16/10.
  • And when Americans are spending, the money is going to tech and telecom companies, which may not be putting money into musicians' pockets:
  • Right there up at the top is America’s love affair with mobile devices, where spending has soared almost 17% since the recession started. Also supporting my thesis of a communications boom – spending on wired, wireless, and cable services have risen by 5%. "Where Americans Are Spending More..." Mandel on Innovation and Growth, 8/9/10.

  • "Tech Gadgets Steal Sales From Appliances, Clothes."
  • And some people are going so far as to get rid of their possessions.
  • Many have begun trading in CD, DVD, and book collections for digital music, movies, and e-books. But this trend in digital technology is now influencing some to get rid of nearly all of their physical possessions - from photographs to furniture to homes altogether. "Cult of less: Living out of a hard drive," BBC News, 8/16/10.

  • Most people live their life trying to acquire more and more things. Living a minimalist lifestyle is completely the opposite. It’s about trying to live with less and less things. It’s about trying to get back to the bare minimum of possessions. In doing that, it frees up your life to pursue the things you most value. "Becoming minimalist: when having fewer possessions means living a better life," SmartPlanet, 8/12/10.

  • Is it possible to own nothing?

    Well, maybe not nothing. Nothing is a little extreme. But is it possible to own close to the nothing? I hope to have the answer to that question soon. Inspired by a a book or two, I’ve decided to try to see if I can rid my life of most of the clutter. The goal? Condense my life into 2 bags and 2 boxes. "Is it possible to own nothing?" Cult of Less Blog, 9/8/09.
  • If people either can't afford, or don't want, possessions, that knocks out t-shirt sales and limited edition books, albums, and art objects.

    On the other hand, the good thing about owning less is that it helps us prioritize what is really important to us. There have been quite a few studies lately about happiness; many indicate that experiences mean more to us than possessions.
    We find that only one component of consumption is positively related to happiness — leisure consumption. In contrast, consumption of durables, charity, personal care, food, health care, vehicles, and housing are not significantly associated with happiness. Second, we find that leisure consumption is associated with higher levels of happiness partially through its effect on social connectedness, as indexed by measures of loneliness and embeddedness in social networks. "Does consumption buy happiness? Evidence from the United States."
    This might be good news for music, which can be all about the experience. However, given that there is less money to spend, not all experiences are doing equally well. For example, we already know the high end concert market has been hit hard.
    Our Top 100 Tours for the first six months have a combined gross of $965.5 million, down $196.8 million, or 17 percent, from the same period one year ago. If you want to find a lower number you’ll have to go back to 2005 when the mid-year gross volume was $730.9 million. "2010 By The Numbers (So Far)," Pollstar, 7/9/10.
    And some data has been coming in to suggest the low end might be affected as well, but it's probably too soon to know about that yet.
    The live music industry exhibited a productivity gain in 2009 by generating more money through fewer events.

    ... as reported last year, the gap between the grass roots acts and superstars is widening, both in touring and at events where the big names are needed to attract fans. ... Down in the tail, the closure of pubs (49 a week, according to The Publican) puts more pressure on the low end of the market, which makes it increasingly difficult for emerging talent to find an audience. "Adding up the UK music industry for 2009," PRS for Music, 8/4/10.
    Working in favor of the low end of the live music market is that for consumers doing something small on a regular basis can be more fulfilling than blowing a lot of money on an occasional big experience.
    Scholars have discovered that one way consumers combat hedonic adaptation is to buy many small pleasures instead of one big one. Instead of a new Jaguar, Professor Lyubomirsky advises, buy a massage once a week, have lots of fresh flowers delivered and make phone calls to friends in Europe. Instead of a two-week long vacation, take a few three-day weekends. "Consumers Find Ways to Spend Less and Find Happiness," New York Times, 8/8/10.
    The three-day weekend vacations have worked well for some music festivals. Consumer costs can be kept down if the festival is in your own town and you sleep at home, or it's a festival with a campground.

    However, I have long maintained that the heart of live music is local, and this research seems to reinforce that:
    Being able to spend money on purchases designed to create positive experiences increased people's happiness. The best way to increase happiness, though, was to make a series of smaller purchases rather than one big one. Think of it this way. The people who went to a series concerts by a few local bands were happier overall than the people who spent the same amount of money but got great seats at a concert by a top band. "Money can buy happiness if you spent it right," Psychology Today, 5/21/10.
    I've touched upon just a small amount of research on consumer spending patterns, so this blog post isn't meant to cover the subject in great depth. But I wanted to add to the conversation by suggesting that some of the newly proposed music business models seem to assume that fans are sitting on cash that they will use to buy music-related stuff if only we are smart enough to offer it to them. People will always want music, but if and when they can obtain all the music they want for free, they may not feel the need to spend more for it.

    More on the economics of it all in my upcoming posts on gift economies.

    Suzanne Lainson
    @slainson on Twitter

    UPDATE 8/26/10
    "Musicians currently have half the gigs they did before the flood, and this work pays less than pre-Katrina," says Gabriela Hernandez, executive director of the non-profit relief agency Sweet Home New Orleans (SHNO), which released the report. "At the same time, the recession has eliminated a lot of the service industry day jobs they've previously relied on. So while the cost of living has skyrocketed in the city, musicians are seeing their opportunities to earn money dry up."

    SHNO published the report this morning, using its 4,500 clients to provide insights into the well-being of the city's famed music community. There's good news: Despite fears about the storm's impact on neighborhood-based institutions such as Mardi Gras Indians and the second-line community, those groups are back to pre-Katrina levels of activity. Musicians, on the other hand, have experienced a drop in the average number of gigs from 12 to six in a month, and earnings are down 43% to a ballpark income of $15,000 per year. "The state of working musicians in New Orleans: 'Half the gigs ... and the work pays less'," Los Angeles Times, 8/26/10.

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