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The economics behind album releases during a pandemic

Valdy Wiratama
Valdy Wiratama

Active learner with a penchant for cultural observation

Jakarta  /  Tue, April 28, 2020  /  03:58 pm
The economics behind album releases during a pandemic

'Future Nostalgia' by Dua Lipa (Warner Records/File)

On March 23, American pop-rock band HAIM announced that it was postponing the release of its third studio album, Women in Music Pt. III. The band cited the COVID-19 pandemic as the reason for the delay. Lady Gaga made a similar announcement the following day, moving the release of her sixth studio album to an undetermined date.

The postponements raise a few eyebrows, especially at a time when comfort is crucially needed. In his column for NME, music journalist Mark Beaumont opined that musicians had the upper hand in offering a time-guzzling distraction that could help elevate one’s spirit. They should play the role of a comforter, a friend and a back-line emergency service in times of personal crisis. Postponing the release of new music would be a betrayal to their role as an entertainer first.

Beaumont’s argument is solid but pretty narrow in scale. While it is true that musicians should be entertainers first, they are still human beings whose activities are subject to economic incentives.

Returns on album sales used to be the primary economic incentive for musicians, but times have changed as they barely contribute to income. In his 2019 book Rockonomics, the late professor Alan B. Krueger found that recorded music only amounted to 15 percent of a musician’s income. Most of their income today comes from touring, with an average proportion of 80 percent. These numbers resulted from the shift to digital releases via streaming services, as they have greatly cut royalties from album sales. Concerts are now viewed as a strategical profit center, while digital recordings are becoming less of an incentive.

Even if musicians are still driven by album sales, their decision to postpone will likely follow a strategy implemented by Taylor Swift. The Grammy-winning singer-songwriter withheld her sixth studio album Reputation from streaming services during the first week of its release in 2017. Her economic logic implicitly involved segmenting markets to price-discriminate. Fans with higher willingness to pay were assumed to be impatient and would purchase her album when it was not available on a more convenient platform. As a result, the album sold more than 1.2 million copies in its first week, edging out Ed Sheeran’s Divide for the strongest album sales that year.

The promising outcome of Swift's strategy might resonate with some musicians and drive their economic motives to postpone an album release. Efforts to slow down the COVID-19 pandemic have forced casual consumers to stay at home and be more calculated with their spending. Nonessential businesses are shutting down, with nearly 250 record stores closing their doors in the United States alone. Some are offering online sales as an alternative, but with essential items as the highest priority, shipping time might be reduced for nonessential goods. This could discourage consumers from purchasing physical records.

In this period of economic slowdown, musicians are faced with a dilemma of having to choose between economic incentives or moral incentives. If they choose the former, they will have to face the risk of public backlash. Fans might view them as solely “in it for the money”. However, if they choose the latter, they will have to sacrifice a promising sales revenue for the greater good of distributing comfort.

Several musicians have opted to trade off economic incentives for moral incentives. Dua Lipa released her second studio album, Future Nostalgia, on March 27. In an interview with the BBC, she explained that it was better to proceed with the release than to worry about the “perfect” strategy. “I wanted to give people some happiness during this time, where they don't have to think about what's going on and just shut off and dance.”

The Strokes shared a similar attitude when it comes to releasing their sixth studio album. In an interview with the Los Angeles Times, frontman Julian Casablancas mentioned that the pandemic did not seem like a fitting excuse to postpone. He acknowledged that the band would lose the opportunity to promote, but it was a trade-off the band members were willing to risk. The decision to release clearly paid off as The New Abnormal is on track to become the number 1 album in the United Kingdom.

For musicians who are more risk-averse, trading off incentives might be too much to handle. They can avoid such stress by releasing 30-40 percent of their album’s catalogue as an alternative. Rolling them out gradually as singles will help prolong the anticipation for the eventual release. This would lead to better album sales, especially after the ease of lockdowns for fans to shop in-store. Ticket sales may also increase as albums are commonly treated as a loss leader to promote concerts and tours.

HAIM is following the alternative approach and its latest single, "The Steps", released on March 30, has been streamed 3.6 million times on Spotify. This number is equivalent to a gross revenue of US$6,000 to $9,000 in royalties.

Ultimately, the decision to release an album comes down to how musicians view incentives. They are individuals with distinct preferences, and the lack of actions driven by moral incentives does not make them less human. Taylor Swift, for example, prefers that music is seen as valuable art first. “Music is art, and art is important and rare. Important, rare things are valuable. Valuable things should be paid for,” Swift opined in an op-ed piece for the Wall Street Journal.

As long as musicians position themselves as defenders of art, each decision they make should be valid. After all, every activity is subject to economic principles of choice. (wng)


Valdy Wiratama is a cultural economics enthusiast who worked in research and business development. When he’s not writing, he likes to catch up on the latest global news, analyze films and read stories about personhood.

Disclaimer: The opinions expressed in this article are those of the author and do not reflect the official stance of The Jakarta Post.