Pop Culture Depreciation

Moneybox
A blog about business and economics.
April 22 2013 11:21 AM

Pop Culture Depreciation  

The Bureau of Economic Analysis is working on an update of the methods used to calculate GDP, and part of that involves treating the production of movies, TV shows, books, and music as "investment" in a kind of capital good. To incorporate that idea into analysis, the BEA needs to also calculate a depreciation schedule for these cultural works, which reveals some interesting differences across media.

The most ephemeral cultural works turn out to be musical records, which depreciate at a staggering annual rate of 26.7 percent—meaning they earn a huge share of their lifetime income in their first year of release, and only a tiny number of works have a meaningful level of back-catalog sales. Television shows come next, depreciating at a 16.8 percent rate. Then you have books at 12.1 percent. Movies turn out to be far more durable than TV, music, or books, depreciating only at a fairly low 3.8 percent rate. The reason for that, presumably, is that movie studios are quite sophisticated about selling the same product repeatedly. First in theaters, then in DVD and pay TV stations, then to cable networks, and with simultaneous rollouts happening abroad. My guess is that when the BEA looks back in five or 10 years, they're going to find that they've miscalibrated this number because the movie industry is facing substantial business-model transformation on precisely this point. The rise of on-demand entertainment options and the falling quantity of films produced in any given year is putting pressure on traditional market segmentation practices, and this number may not hold up.

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So how about plays? Well, unfortunately for theater lovers, "theatrical play scripts" are placed into a miscellaneous category along with stock photography and greeting-card design. That aggregate has a 10.9 percent annual depreciation rate, but I'd imagine that the market for theatrical scripts and the market for greeting-card designs don't actually have much in common.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.