MUSIC DEPRECIATES THREE TIMES AS FAST AS MOVIES

Screen Shot 2013-07-23 at 9.06.57 PMHow 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.
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But what really caught my eye in the deck from the May briefing and the Businessweek 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.

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4 Responses to “MUSIC DEPRECIATES THREE TIMES AS FAST AS MOVIES”

  1. Paul S July 24, 2013 at 6:29 pm # Reply

    Two words: “It’s Complicated” (which, now that I think of it, is the name of a movie that is depreciating more slowly than any song that might have the same title…)

    Jay, you have identified in your previous post – as Lefsetz has likewise inferred in the post you link above – the basic economic principal at the heart of all of this sturm and drang about the “value of music.”

    Economists call the principal I am referring as “the law of supply and demand.”

    More precisely, I think the formula at work here may be: “If the supply is infinite, then the price is zero.” Especially so if the demand is finite and the demand is relatively inelastic.

    I don’t think that formula has been conclusively proven or disproven yet, because there really has not been an adequate test case. However, he explosion of musical content in the digital realm may be that test case writ large.

    So, yeah, the more “content” that is pushed into the market place, the faster its value is going to depreciate. I can’t really comment on the relative value of “filmed” content -v- recorded music (see ‘It’s Complicated, above), except to say that – given the relative order of difficulty in producing film/video -v- music – the surprising thing here is that music doesn’t depreciate even faster than the reported 1/3rd ratio.

    As your experience suggest, the “value” is not so much in the content as in the perceived “relationships” the content engenders. It’s hard to put macro-economic metrics on something that intangible.

    • Jay Frank July 24, 2013 at 9:01 pm # Reply

      Fully agree on the supply/demand equation devaluing music. The interesting thing there, though, is if the devaluation occurs on the front end. So if music is worth near zero, how is it still depreciating at a faster rate? I’m not an economist so I don’t know the answer, but it’s all interesting stuff.

  2. Derek July 25, 2013 at 2:26 pm # Reply

    Music should ebb and flow it is art, not a commodity and the valuation is respectable to the material in question. Further, what does Bob Leftsetz know about quality music. He’s not a musician and his pompous overstated, know it all attitude is the demise of fools. In my opinion, more is better in art since it is discretionary. Music is different altogether than movies because one person can produce and create it with less investment. Also, I didn’t see paintings mentioned…aren’t they artistic creations?
    However, the valuation of music in the aforementioned is a legalistic concept, one of competition to further create propaganda. Beauty is in the eye of the beholder. If you speaking on what’s popular in music, well then you are talking about marketing and demographics and commodities (which the major labels are good at producing-paint by numbers, image driven songs that contain musical notes), not art, valuation and freedom of expression (which musicians are good at producing). Further they should throw out the whole summary since the miscellaneous % is higher than the smallest category. Now back to making art.

    :) Derek

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