Rockanomics

A while back I stumbled across an interesting and much discussed speech that one of the White House Economic Advisors gave at the Rock and Roll Hall of Fame. Here’s a link to an NPR piece which discusses it and also links to the text of the speech. I think the speech offers a good analysis of the music business and can also be applied to many other industries. I think it also points to a grim, probably unavoidable future for mankind.

The crux of the speech is this. If you were a singer in 1860, you had a limited audience you could service. If you lived in St. Louis, you were limited to people in St. Louis (unless you traveled to New York at which point you could not longer play for people in St. Louis.) Distance basically limited how big you could get; you had to actually be in front of people to sell your product – your voice.

The result was that you had a lot of people in a lot of towns making a living as singers. No one one got really big but they basically got by. Imagine a pie chart representing the potential audience of the world. In 1860 that pie chart would be divied up into tens of thousands of tiny slices owned by each singer in each town etc.

Then radio came along, as did records, tapes, cds etc. Suddenly you could sell your product – your voice – without actually being in front of people. You were much less limited by distance. Certain performers (Al Jolsen, Bing Crosby etc.) grew to be considered the best and grabbed a much bigger slice of the pie. The losers crawled into an alley and died.

Now we have Beyonce and Jay-Z owning a giant chunk of the pie while unappreciated talents such as myself toil in obscurity. (My dad made an interesting point about this – Michael Jackson is still selling tons of albums and he’s dead! With recordings, even death is no barrier to doing business.)

The speech gave evidence of something I think we suspect to be true – that “the best” in the world of music may be partly just “luckier” (and better marketed, branded etc.) Once the hype machine gets going, people figure it’s easier to just buy some album that’s been given the stamp of approval by the masses than take a chance on something unknown.

As we think about it, we can see that this process applies to more than just music. Let’s say you want a cola drink in 1860. I suppose you go down to the local drug store and buy a cola drink made with syrup from a semi-local cola manufacturer. Maybe it’s “Bob’s Cola.” No one can really dominate the cola market because the barrier of distance prevents any one manufacturer from getting into every city in the U.S. But trains start to get better and distribution networks develop and suddenly Coke is king (and Pepsi not far behind.) “Bob’s Cola”, which used to have a small slice of the cola pie, is now gone.

Basically, over the course of the past 150 years we’ve had an increase in networking and distribution and that has enabled market victors to increase their share over various markets. But this is just the beginning. The world is becoming even more networked at a dizzying rate. Will the victors increase their share of the pie more and more until they own the whole thing? Are we headed towards an increase in unequal distribution of wealth? Will hordes of cannibalistic zombies rise from the earth and seek human flesh? The answer to all these questions can only be “YES!”

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