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Can 1,000 fans replace the music business?

Kevin Kelly's recipe for broken dreams

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Does better music mean more fans?

Kelly points out that an increase in fans is in direct proportion to the increase in the creativity of the group. Let's deal with the theory and then some practical realities. To begin, when Kelly states that "if you increase your group size by 33 per cent, you need add only 33 per cent more fans".

But this proposition fails to accommodate the established literature on what's called Baumol's cost disease. This theory examines the phenomenon of areas of the economy that have experienced no increase of labour productivity in response to rising salaries.

For instance, if the music industry pays its musicians 19th century style salaries, the musicians may decide to quit and get a job at an automobile factory where salaries are commensurate to high labour productivity. Hence, musicians' salaries are increased not due to labour productivity increases in the music industry, but rather due to productivity and wage increases in other industries. It’s a hotly disputed theory, but it's well worth considering, as the music industry struggles with reduced demand and increased supply, and other media sectors – which often employ the same external intermediaries - grow.

There are interesting implications for the role of government which follow from the economics of Baumol's cost disease, in that a little intervention from the state could go a long way for the independent artist, given their new internal cost structure. This is something that Kelly gets right.

Let me conclude with a personal and practical example that highlights Kelly’s naïve and simplistic approach to this issue.

Music isn't a formula - nor is the business

For the best part of a decade, I’ve been working in a personal capacity with the legendary Brazilian composer Eumir Deodato, and we're now well on our way to confirming him to perform at the prestigious North Sea Jazz festival in Rotterdam this summer. In order for us to secure the date, we offered a hybrid solution of a five-piece band from New York and then a horn section which would travel up from Italy, as this allowed us to keep within the initial budget. It would be cool to see a nice linear cost structure, but we are already looking at a 'cost malaise' of hiring two tour managers as opposed to one, for example, and two separate sets of flight packages.

Of course, Deodato could have opted for a more economically viable 'Trio' performance, which would have satisfied his existing fans, but given the recent interest in his work via Lupe Fiasco's Paris-Tokyo single, he wants to go that extra mile (and costs) and deliver a show that will win over new fans too.

And you might say "but Deodato is a special case", but then isn't that the point? All creators are a special case in that their works (and the way they are created and performed) are unique. The point is that it just isn't smart to assume a simple mathematical rule of thumb formula can be applied to a creative business like music.

Will Page is the Chief Economist at the MCPS-PRS Alliance, a non-profit collection society representing writers, composers and music publishers in the UK. He writes in a personal capacity. Examples of his work are available at The Alliance's research page.

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