Book review: Rockonomics

When Alan Krueger passed away in 2019, the economics profession lost one of its top labour economists. Krueger was known for his famous research with David Card on the minimum wage, as well as work on the economics of education and on inequality. However, he was also an active researcher on the economics of popular music (see this earlier post), and much of his work is collected in the book Rockonomics (published in 2019). Krueger explains his interest in this topic on page 2 of the book, where he writes that:

...music is all about telling stories.

Economics is also about telling stories...

I like the representation of economics as telling stories, and that is how I explain the art of answering exam questions to students - it is like telling a story. Krueger's book tells an interesting story as well, of the economics of the music industry. It is full of insightful explanations, such as this point on why there has been increasing collaboration in music over time:

"Despacito," the most streamed song in 2017, is a good example: it is by Luis Fonsi and Daddy Yankee and features Justin Bieber. If you listen carefully to songs that feature other singers, you will notice that the star normally appears early in the song, within the first thirty seconds. This is logical because streaming services only pay royalties for music that is streamed for at least thirty seconds. In other words, economic incentives of streaming are directly affecting the way songs are written, composed, and performed.

Or this on price discrimination in ticket prices:

Charging a higher price for a seat that is closer to the stage, just like an airline charging a higher price for a first-class seat, is a natural way to price-discriminate and extract the greatest revenue from concert attendees. When the prices vary across good and bad seats, fans self-sort into price tiers (or, equivalently, sections of the venue) based on their willingness to pay.

Krueger and I will have to agree to disagree on whether higher prices for first-class airline tickets are price discrimination (because first-class seats are more expensive, the difference in price is not purely explained by differences in consumers' willingness to pay). Krueger also explains some things about the music industry that have come in for criticism, such as:

The infamous Ticketmaster service fee, which seems out of proportion to the service actually provided, is a way to channel revenue back to venues or promoters, and indirectly to artists, for tickets that are underpriced... Part of Ticketmaster's business model is to act as a heat shield to protect artists from the reputational fallout from charging a higher price.

Clearly, there is more to the economics of the music industry than meets the eye. The effect of music streaming comes in for particular attention. Krueger clearly explains the economics here (see the quote above as an example), along with debunking three misconceptions about the economics of streaming: (1) that streaming is not a zero-sum game, where one additional stream for Artist A reduces income for Artist B; (2) that the amount an artist earns per stream is not a meaningful measure of the contribution of the streaming service to artists' incomes, because it is based on a share of the total streaming service's revenue; and (3) that there is not a simple way of converting the number of streams into 'album equivalents' to measure the overall popularity of artists.

Finally, it is not often that a book will convince me to change my behaviour. However, Krueger convincingly points out that artists earn more from streaming services when consumers are paid subscribers rather than using the ad-supported version. That convinced me to switch my Spotify premium subscription (which I allowed to lapse earlier this year) back on.

Overall, this is a really interesting book, both for those with an interest in the music industry, and for those with an interest in economics. For readers in the intersection between those two groups, this book is a must-read.