How fast does music depreciate? Try three times as fast as movies. This isn’t quantified by me just making a random statement. This is actually what the US government is saying.
Now, before we get to the “huff-and-puff” part that the internet likes to flame over, let’s talk about the positive. Starting on July 31st, the U.S. Bureau of Economic Analysis will be restating and recalculating how they come up with the US gross domestic product (GDP). For the first time, they will actually take into account artistic creation (defined mostly as movies, TV, books & music) as part of the economic engine of the United States. They are estimating that it all adds up to about 0.5% of the US GDP, which is $70 Billion dollars. For the government to recognize creatives in this fashion is a huge deal, and will probably result in benefits that we don’t even realize yet.
But what really caught my eye in the deck from the May briefing and theBusinessweek article is the annual depreciation value. What the Bureau found is that music depreciates the fastest at an annual rate of 26.7% while movies depreciate the slowest at an annual rate of 9.3%. This figure is derived from factoring in the different depreciation values across the spectrum of content. As described in a footnote about TV:
“Long-lived television programs include situation comedies and drama programs. Other types of television programs, including news programs, sporting events, game shows, soap operas, and reality programming, have much shorter service lives and will not be capitalized.”
In music terms, the Mumford And Sons record might depreciate in value very slowly, but the new Paris Hilton record might depreciate very quickly. But even if the government doesn’t have it exactly right, I tend to believe they have enough information to be fairly close. Perhaps the reality is that some complaints about low digital royalties has more to do with people losing interest in many older titles faster than they ever have before.
Bob Lefsetz is likely correct that the lack of quality across music is also causing great deterioration in music’s value. With so much music being released, it’s more likely that more music will be forgotten in a year’s time. Can you name more than 5 songs released in July 2012? (Not you, Sean Ross). Even if you could, there were an estimated 10,000 releases that month. If 50 of them held value, that would still leave 9,950 that don’t. The high volume of releases coupled with the lack of perceived quality can clearly be a major contributor to music being more disposable than ever before.
You can’t blame it on royalty rates either. Because if anything, the royalty rates for services like Pandora go up every year (albeit slightly). I’ve seen first hand at my own company that the more we market a great record, the more that record’s value INCREASES with each year. Make better music, market it longer than a week, and show your audience you care. Maybe…just maybe…we can retain the value of more music for longer. And now, if we do that, we’re officially helping our GDP grow.
