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Perspective, pings and other things relevant to our world

Federal Government Recalculates GDP To Include Investment In Creative Works

July 31, 2013

Today the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA) implemented changes to its gross domestic product (GDP) calculation, including counting – for the first time ever – the money that is invested in recorded music and other creative works. 

Retroactively and going forward, GDP now recognizes a variety of “artistic originals” such as sound recordings, movies and other creations as long lasting investments that contribute billions of dollars to the U.S. economy over time.  Specifically, according to today’s report (page 10), GDP was calculated to be $74 billion higher than previously estimated for 2012 due to the inclusion of investment in “entertainment, literary, and artistic originals”.

This news is more than just a revised number – it’s what it means and what it says about investment in creativity and its value to the American economy.  For too long, the underlying economic contribution of the American creative industries has been given short shrift.  That was overdue for a change, and we’re pleased that the Department of Commerce has recognized the need to more accurately reflect the value of investment in creativity.  America’s creative works are one of our strongest exports, and this change recognizes the investments that music companies make to develop America’s artistic heritage, which has long lasting economic and cultural value.

Cary Sherman, Chairman and CEO, Recording Industry Association of America (RIAA)

Counting Digital Singles and Digital Albums for G&P: A Common Sense Update

July 01, 2013

By now, many of us in the music business, as well as Jay Z fans, know that Samsung has purchased one million “Magna Carta Holy Grail” digital albums to be given away to the phone maker’s customers.  It is a novel and creative marketing move and it has rightly stimulated a healthy conversation about the sale’s meaning and implications for the modern music business.

For us, the move prompted a re-examination of our historic Gold & Platinum (G&P) Program award rules.  As we dug through the records of audits, re-reviewed rules and consulted with our auditing firm of more than thirty years, Gelfand, Rennert & Feldman, we discovered one rule disparity that no longer makes sense.

One of our program’s requirements is that an album can become eligible for certification 30 days after release date. (There are other rules, of course – such as requiring that the price of the album meet certain requirements.)  The 30-day rule exists to take into account potential returns of physical product – CDs, cassettes, vinyl, etc. that could be shipped to brick and mortar retailers and returned, in which case our auditors do not count the sales.

When we first created the Digital Single Award in 2004, we elected not to impose any 30-day rule because there are very few digital returns.  According to our auditing firm, digital returns on average account for less than two percent of sales included in reports provided by the labels for certification – most digital retailer Terms of Use/Service allow users to return products only under limited circumstances.

Also at the time in 2004, sales of digital albums were virtually non-existent and accounted for a small fraction of overall digital sales.  Fast forward a decade and that’s obviously no longer the case.

We think it’s time for the RIAA – and Gelfand, Rennert & Feldman – to align our digital song and album certification requirements.  That’s why today we are officially updating this rule in our G&P Program requirements.  Going forward, sales of albums in digital format will become eligible on the release date, while sales of albums in physical format will still become eligible for certification 30 days after the release date.

Not only do we believe it’s sensible and logical to align digital album rules with those we have maintained for digital singles since the program’s inception, we also consider today’s move in line with our larger efforts to modernize the G&P Program to reflect the new music marketplace.   In May we announced the integration of on-demand streams to the program to more broadly recognize online demand for songs.

The reality is that how fans consume music is changing, the music business is changing as labels and artists partner with a breathtaking array of new technology services, and the industry’s premier award recognizing artists’ commercial achievement should similarly keep pace.  In short, we’re continuing to move the 55-year-old program forward and it’s a good day when music sales diversification and innovative strategies meet the RIAA’s time-tested, gold standard requisites for certification.

Liz Kennedy
Director, Communications and Gold & Platinum Program, RIAA