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Rockonomics: A Backstage Tour of What the Music Industry Can Teach Us about Economics and Life by Alan B. Krueger*
Published in June of 2019.
We need a name for higher ed economics that is half as good as rockonomics. Some ideas: academiconomics, universityonomics, collegeonomics.
I think that collegeonomics is the best. What do you think?
Next, we need to convince someone to write a book that is as energetic, joyous, and wildly edifying about collegeonomics as Rockonomics is about the economics of the music industry.
Rockonomics can be read two ways. It is either the best book ever written about the business of the music business, or the clearest explanation we have about the impact of technological change as a driver of our increasingly stratified superstar economy.
Higher ed nerds can read Rockonomics a third way. For us, the evolution of the music business, as revealed in Rockonomics, provides clues to understanding the future of higher education.
How are universities like record labels?
How are academics like rock stars?
Two figures from Rockonomics can help us answer these questions.
Figure 2.2 (page 30) shows the astounding drop of record industry revenues from a peak of almost $15 billion in 2000 to about half that figure by 2013.
The source of the bottom falling out of the record industry was not that artists stopped making great music, or that listeners stopped consuming songs.
The reason that revenues in the music industry fell off a cliff was that the record companies failed to adapt to changing technology. As music was digitized, and file sharing sites like Napster came into existence, the only response that the record industry mustered to protect their revenues from CDs was to sue their customers.
The big labels could have created an iTunes equivalent (for downloads), or a streaming alternative (for Spotify, etc.), but were unwilling to do so.
The digital technology of MP3 files drove the unbundling of recorded music. Consumers became unwilling to pay $15 for a CD that contained only a couple of good songs. Without legal alternatives to purchase single tracks, Napster thrived. Song sharing was not killed by the death of Napster (other illegal file sharing sites popped up), but by the development of Apple’s iTunes. (And next by the switch to streaming).
If universities are like record companies, then what is our equivalent to CDs?
Is streaming to compact discs as online learning is to residential education?
Likely, the answer is no.
Revenues at many colleges and universities are likely to drop precipitously over the next few years. But the reasons will have more to do with demographics than technology.
Although there will be technologically driven postsecondary pain. Today, many schools depend on master’s degrees to make up for budget shortfalls caused by slacking demand for undergraduate spots. (And the attendant tuition discounting that schools employ to fill their seats).
What will happen to all these master’s degree tuition institutions when lower cost online alternative credentials - ones often offered by brand name schools - begin to be valued by employers?
Colleges and universities might want to look to record companies to understand what happens when incumbents fail to evolve their core businesses. We are not, after all, in the campus business. Or even in the degree business. We are in the education business. What is the educational equivalent to streaming?
The second figure from Rockonomics that may be illuminating for higher ed is one that shows the growing winner-take-most nature of the music business. (Figure 4.1 - page 85).
From 1982, the percentage of total ticket revenue that has accrued to the top 1 percent of all performers has grown from around 25 percent to about 60 percent. Today, the top 5 percent of artists take in more than eight out of every ten concert dollars.
As touring accounts for 80 percent of all the income that musicians make (with recorded music adding 15% and publishing fees 5%), the fact that almost all the revenues of playing live music go to the top 5 percent is even more striking.
Are we in for a future where only 5 percent of schools suck up the majority of all higher ed revenues? Or maybe a few schools hold the majority of postsecondary wealth? (Or is that our present?).
Another way to ask that question is to wonder if the tenured professor is the Justin Bieber of higher ed?
How might digital technologies accelerate the higher ed superstar economy?
Are MOOCs the equivalent of music delivered by streaming, with the real payoff to professors and schools coming from those willing to pay to have more intimate learning experiences?
Do small online programs, and physical campus-based classes, serve the same function as concerts and music festivals?
Will colleges and universities start to pay more attention to the high-priced online and campus-based experience, just as today’s concerts are spectacles of pyrotechnics and backup dancers?
Any reader of Rockonomics would be unwise to read the book wearing only higher ed goggles. Rockonomics is full of fascinating data and stories about the economics of music.
As Krueger points out, music is today among the best bargains. We spend less on music than we spend on potato chips. (Although I’d argue that digital books are even a better deal).
Our concern about the structural inequalities of the music industry should not blind us to the availability of quality, low-cost music. In my life, music has moved from a scarce to an abundant good. We can now find and listen to as much of the world’s music as we wish, all for less per month than we once spent on a single CD.
It would not be the worst thing in the world if digital technologies accelerated the transition of education from scarcity to abundance.
What other books on the music industry can you recommend?
Can you recommend any books that take a deep dive into the economics of a single industry, with lessons for our own?
What are you reading?
*Tragically, Alan Krueger died in March of 2019.
