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Live Music 101 # 2 – The political economy of live music: first thoughts – Simon Frith

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In the second of the ‘Live Music 101’ series of blog posts detailing the themes and ideas that developed over the course of the initial live music project, Simon Frith examines the political economy of live music, and defines two basic models of performance as a starting point with which to examine the economic transactions between artist, venue, audience, and promoter.

The starting point for the economics of live music is straightforward: live musical performance is either the cause or effect of an economic transaction between performer and listener.  Therefore there are two basic models:

a) musician performs and as a result of the performance listener gives performer money.  This simple model is exemplified by busking.  Note that the amount busker will receive from listener is non-standardised and unpredictable.

b) musician is contracted by listener to play for them.  Again this simple model is still an aspect of everyday practice; for example, the Music department at the University of Edinburgh gets a steady stream of emails from people looking for musicians to play at weddings, dinners, conferences, etc (and even to serenade someone in advance of a proposal of marriage!).   The fee is usually fixed in advance but can also be supplemented (or even entirely be made up of) tips, again non-standardised and unpredictable.

Note that even in this simplest of models there are regulatory issues.  On the one hand all public performances, including busking, may depend on licensed use of space (buskers are always at risk of being moved on); on the other hand, performing rights owners may need to license performance of their works even for seemingly ‘private’ performances if these result in money changing hands.

Both these models obviously contain the seeds of more elaborate economic models.  In the case of busking, the next step is for the performer/busker to employ (or be employed by) someone whose task is to attract an audience for them and to talk up the value of their performance – this is the traditional huckster role (not confined to musical performance, of course, but related to any sort of public performance or display; for example, freak shows, etc).  This, in turn, may mean framing or staging the performance in certain ways (the tent show) and this is one root of the development of promotion as a particular kind of activity and expertise, namely putting together an audience and shaping the experience it will get.

In the case of musicians-for-hire, as in the case of the University of Edinburgh Music department, hiring may not be direct but via an intermediary who is known to have access to musicians and knowledge of their capabilities.  Hence the agent: the person who provides appropriate performers for particular customers and occasions.

The economic transactions involved in live performance now become more complex.

a) a musical performance becomes an event, i.e. it takes place in a specific space at a specific time and therefore involves new sorts of cost:

  • Advertising/posters;
  • Ticketing/regulation of admission;
  • Preparation of the space.

The money from the audience has to cover such costs (as well as the costs of the performer).  While performers themselves can make the relevant arrangements, as investment gets bigger and more complex, it tends to be made by a promoter (by whom the musician is now hired).  And following the usual logic of a market economy (the pursuit of economies of scale and the reduction of costs of production), there is a tendency for promoters to create/take over performing spaces for themselves, to be venue owners (and then venue chain owners.  From this perspective the recent rash of venue takeovers by a small group of promotional companies (SJM, Metropolis, etc.), is seemingly to repeat similar venue chains (Moss, Rank and Mecca in the past).   This also expands the possible sources of income from performance – for example, food and drink, cloakrooms, parking, etc. (NB merchandise income – from programmes through to CDs – need not be dependent in venue ownership).

b) hiring musicians becomes a way of attracting an audience who are paying not for the music itself but for other services on offer.  Early models would be a band playing in a café (19th century origin of composers’ campaign for a performing right), a piano bar or string quartet in a resort hotel, etc.; nowadays an obvious aspect of how pubs seek to attract customers.  (There is a much looser relationship between musical investment and return here – as in the various deals pubs do with bands as to a share of evening proceeds. At the same time, much less investment in ‘the event’ is needed, in terms of advertisement, preparation of the space, ticketing, etc.).

There is much more to be said about all of this – and, in particular, we will need to explore the relationship (the overlap) between models a) and b) – but immediately I just want to note some broad issues for discussion.

First, the live music economy is primarily about the provision (hire) of services – it is based on a series of contracts rather than on an employer/employee wage structure; this goes for most of the people involved – not just the performers, but bouncers, sound crew, poster makers, etc.  This is thus an area full of dispute in which people who can manage contract negotiation and enforcement are significant (the initial reason why bands need managers and why the Musicians’ Union is so important).

Second, the live music economy is a risk business from various perspectives:

  • For the promoter, money has to be paid out in advance in order to put on a show for which there might be no audience (and there are not usually mechanisms for reducing such expenditure as evidence accumulates that ticket sales are slow).  Hence the development of mechanisms to try to ensure ticket sales in advance, starting with subscription concerts, reduced advance tickets, etc, etc.  But hence too the development of ‘partners’ to help meet the costs (and share the risks), for example sponsors, advertisers, record companies, state agencies, etc.
  • For the audience, money has to be paid before one has the experience for which one is paying (in economic terms, this is thus the same sort of good as a package holiday, i.e. it can’t be tried out in advance, like a record).  There is therefore a necessary degree of trust that the performance will be what it says (and in practice there seem to be very few cases of people demanding their money back, though audiences can have quite a strong sense of value for money – the length of a show, for example – and of being ‘cheated’; when an old group tours with none of its original members, for example).
  • The musician, meanwhile, has to trust the promoter to have met the terms of the contract (riders, etc) – and certainly at the lower end of the business, refusing to play when the terms haven’t been met may be an unrealistic strategy, just as trying to get the agreed fee when audience numbers haven’t been sufficient can be difficult (hence the policy of some acts to refuse to go on stage until they have the cash in hand, and of others to travel with enforcers – managers/road managers – such as Led Zeppelin’s Peter Grant).  By and large, one could say that while audiences do seem to have a basic trust in promoters, musicians have a basic mistrust.  I assume this has always been the case because, in the end, it is the musician who is being exploited.  (In the classical world the basic trust/mistrust relation is between performers and their agents).

Because live music promotion is risky, power relations have a particular shape:  when musicians are starting out (and therefore have no guaranteed audience), they tend to carry the financial risks themselves (their performing contracts are the most exploitative; they are unlikely to be able to ensure payment for a money-losing gig).  When performers are stars (and are thought therefore to guarantee ticket sales), performance carries no financial risks for them at all.  They can negotiate a contract with fees paid in advance; the risk becomes the promoter’s.  Note too, that an aspect of the risk here lies in the judgement of the financial terms involved – how much to pay the band; how much to charge the audience.  A promoter may underprice a gig (thus taking in less money than was available, given the demand); just as an act (or its agent/manager) can underprice itself.  I suspect that promoters suffer the constant stress of having a got a gig wrong, even when – because – it sells out.     If the value of live music is that it offers consumers a ‘unique’ experience, it is for that reason hard to standardise its pricing mechanisms.

There are aspects of the promotion business that can be understood in normal economic terms – economies of scale (venue size, venue chains, packages, festivals, tours, etc) and increasing productivity (through the centralised management of ticketing, for example) – but as economists have long pointed out (the Baumol effect), there are limits to such strategies given by the very nature of live music.  Hence the importance of other economic actors to the live business: record companies, broadcasters, and the state have all played a role in the economics of promotion in the last fifty years. (And at some points have determined what a performance is for – to promote an album, to entertain a radio audience – in terms that go beyond the immediate audience).

Simon Frith
26 May 2008

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