Thanks to the entertainment business and other intangible assets, the United States’ gross domestic product grew by $74 billion last year. That’s good news for a music industry that constantly defends the value of its intellectual property in Washington, D.C., and around the world.
The Bureau of Economic Analysis has revised GDP estimates to account for the money spent by private enterprise for creating “entertainment, literary and artistic originals.” Before, the money spent creating sound recordings and musical works was considered an expense. Now that money is seen as an investment in fixed assets like buildings and manufacturing plants.
The BEA also changed how it treats research and development. Until now, R&D expenses were considered a cost of doing business — now it’s included in the GDP. Taking into account R&D spending increased it by $397 billion.
“We recognize in the federal government how important these industries are,” Secretary of Commerce Penny Pritzker said during a visit to Nashville’s Loud Recording Studio. The financial impact extends to jobs created by those investments in creative works, from music instruments to recording studios, she added.
The changes were announced in March and stem from recommendations made by the United Nations in 2008. The United Kingdom has already changed how it values certain intangible assets. Last year, music’s value in the United Kingdom’s national accounts rose more than sevenfold from £176 million ($274 million) to £1.3 billion ($2.1 billion) after taking into account performance royalties to artists, revenue accrued by rights owners and income that artists earn from live performances.
These changes are a win for industries that create “soft assets” like music, books and movies. These assets, based on ideas rather than tangible materials, are now viewed similarly to investments in “hard assets” like airplanes and buildings. Music companies, embattled by digital piracy and constantly reminding policymakers of their value, now officially have a larger part in the GDP.
This change “is more than just a revised number,” RIAA chairman/CEO Cary Sherman says. It’s recognition that America’s economy of ideas is an important part of U.S. GDP and trade with other countries.
Music is “one of our best exports when you look at balance of trade,” National Music Publishers’ Assn. president/CEO David Israelite says. In fact, the United States is one of three countries — along with the United Kingdom and Sweden — that exports more music than it imports.
Music companies have always argued that they make an impact on the country’s economy. Now there is a number that helps describe their role in earnings and job creation. Now that Congress is beginning to consider changes to copyright law, having that number will augment the music industry’s narrative.
The BEA’s changes do not imply that all investment in music will have a net positive impact. Music will continue to be a risky industry. Some projects will be winners, and many will be losers. But, as the GDP revisions show, investment in music is important to the economy.