Princeton economist Alan Krueger has studied the U.S. touring market going back to 1981, and he has some interesting observations. BBC News has a nice article on Krueger and the current state of ticket prices (which came to Coolfer via Camille Acey).

In the past, Krueger says, live concerts were about throwing a party, not selling a product. Money was made from music sales, so artists had more incentive to underprice concerts. Over time sales of recorded music has dropped and illegal downloads have taken off, he says, and the connection between recorded music and live concerts is gone. Artists and managers are compelled to make more money from concerts. Since 1996 ticket prices have outpaced inflation -- 8.9% though 2003 versus 2.3% inflation.

This news article at Princeton's website has some interesting items not included in the BBC article. For one, Krueger found that female bands command the highest prices in the concert industry, and that jazz and pop tickets cost more than reggae or folk.

Krueger's reasons for the increase in price:

(1) Production costs have increased,
(2) Music industry consolidation, though Krueger downplays this one,
(3) A slowing of album sales, and
(4) Ticket prices were too low to begin with.

Today the top five percent of artists generate 84% of concert revenues. This says to Coolfer that the bands that draw the most people are getting those 98% of Americans who go to two or fewer concerts a year. A concert is a big night out for them, and the price tag for a big night out can be high.

But what about the bands that play for those 2% of Americans who are avid concert goers? While the Internet has caused ticket prices for premium concerts to rise, it's also enabled a flourishing market of lesser known acts and small clubs. And prices at those small venues are very affordable. The sequence of events is no longer: buy music, buy ticket, see band. Now it's often: visit band's MySpace page, buy ticket, buy t-shirt or CD at merch table.