Millions of people have downloaded music from Napster, Morpheus and KaZaA — and bought fewer records as a result. Music sales are plummeting, putting downward pressure on artists' royalties.
In this environment, concerts take on a different meaning for artists and their managers. In pre-Napster days, concert prices were kept below their market rate to help sell albums, a complementary good. Now concert prices are set with an eye toward maximizing concert revenue.
Bands have always had cadres of fans, whose loyalty conferred monopoly power. Yet they were reluctant to exploit this power by charging higher prices because they wanted to sell more albums. When revenue from albums began to dry up, it was natural for bands to raise concert prices.
There is some empirical support for this hypothesis. Jazz and blues fans are probably less likely to download music from the Web than are fans of rock and pop. Since 1996, prices increased by only 20 percent for jazz and blues concerts, but by 74 percent for rock and pop.
"Music itself is going to become like running water or electricity," the singer David Bowie said recently. "You'd better be prepared for doing a lot of touring because that's really the only unique situation that's going to be left."
This makes sense: as perfect copies are easier and easier to make, the only thing left unduplicable is the artist in the flesh.
I find it fascinating that jazz and blues ticket prices have risen less than pop and rock, and conjecture that this is for two reasons beyond Krueger's downloading assumption: first, jazz and blues recordings have always much more closely approximated live performance. In other words, jazz and blues recordings sound like "live" recordings (which they often are, even if it's just "live" in the studio) therefore the live show is less novel than a pop or rock show. Second, jazz and blues records have rarely sold like pop and rock, therefore jazz and blues performers have always made a higher percentage of their living from performance.
http://blogcritics.org/archives/2002/10/17/130709.php#20021017130709