Are you in the camp of people who think celebrities (singers, actors, athletes) are overpaid? If so, I understand where you are coming from. But Paul Krugman, economics columnist for the New York Times, isn't so sure. He provides some facts that caused me to change my mind. Try changing your mind now and then. I highly recommend the feeling it gives you. Now Paul Krugman has me asking, is Taylor Swift perhaps underpaid?
Let's start with some assumptions about the music industry that I've long had. I thought that musicians got the bulk of their income from record sales (later tapes, CDs, MP3s, and today streaming royalties). I believed that big musicians performed at live concerts less for the ticket sales than to boost CD sales. I also believed that the economic equation in the music business was different for superstars than for the average musician. Superstars could expect to sell a ton of records (tapes, CDs, streamed songs) to fans at home. Because the population is large and growing, superstars can leverage that to keep getting richer and richer. But the majority of musicians can't count on that. These musicians don't have concerts; they have gigs. If they get paid, it's cab fare. If they sell any CDs, it's a good night. And the venue owners use revenues from beer and liquor sales to make up for what they pay the musicians. If there are any ticket sales, the music venues keep that. At least, that's what I thought. Why did I believe these things? Are any of them true? Dunno.
This is the statement Paul Krugman makes in his latest newsletter that
caused me to change my mind about some of it at least:
This implies that for big stars like Swift, the economics of concerts are flipped from what I had assumed. She is big enough for concert organizers to meet her demand for all of the ticket revenue and more, because they know there will be enough merchandise sales for everyone else to make some money. If true, that's what I learned today.
Krugman goes on to assess whether Swift is overpaid or underpaid. He points out that, "Hugely lucrative tours by music superstars aren’t a new development. They go back at least to the ’50s — the 1850s, when Jenny Lind, the “Swedish nightingale,” toured America." So maybe music superstars have always been overpaid. Krugman uses some measures (population growth, GDP growth) to argue that, even though Lind was highly paid in the 1850s, Swift is even better paid today. But is she enough, compared to Jenny Lind? That Swift's concerts make more money than Lind's did is perhaps due to technology. Modern sound systems allow Swift to perform in arenas and stadiums for audiences of tens of thousands. Jenny Lind had only her unamplified voice, limiting the size of her audiences. Using a lot of those measures (the growth of population and disposible income, the reach of her voice, the size of her live audiences, etc.), Krugman suggests that Swift might even be underpaid. On the other hand, there are competing entertainment options available to modern audiences that Jenny Lind didn't have to compete with. In the 1850s, it was live performances or nothing. So, all told, is Taylor Swift overpaid or underpaid? I still can't say I learned the answer to that.
"Swift's voice echoes wide,
Population, incomes soar,
Is she underpaid?"
—h/t ChatGPT
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