This article represents a milestone between the original study of the music sector that I wrote for the Music Board of the Australia Council in 1985-86, and plans for a comprehensive update which are currently underway under the auspices of the Music Trust. The article reflects on "recent history" since efforts were intensified in 2005 after Richard Letts and I submitted a plan for developing a statistical framework for the sector to the Australia Council, and through it to the Australian Bureau of Statistics. In fact, the whole idea of this Music in Australia Knowledge Base developed out of that plan.
By retaining this article substantially as it was originally written in 2008 (with some amendments in October 2011 and a few added notes), it becomes a frame of reference and the updating work can be kept forward-looking with a minimum of references to the essential previous work which has made the update practicable in the first place.
So what follows below is essentially what was written in 2008. I have also retained another of the "original" articles, The Music Sector Defined, as background. HHG
There is an important difference between the music industry and the music sector. The former concentrates on a particular industry, recording; the latter aims at identifying the music content of a wide range of activities and industries along two activity streams: performance and support (see chart). The model evolved as a pivotal part of the Hoegh-Guldberg and Letts study commissioned to develop a statistical framework for the music sector.
The model is under constant scrutiny as it attempts to cover the full spectrum of the music sector and aims at eventually developing a comprehensive measure of gross value added through musical activities, and what we have called a “Music GDP”. Since musical activities overlap existing industry patterns, it would be of a similar nature to the satellite GDP accounts developed over the past several years for tourism.
Very few studies have emerged anywhere in the world to define the music sector in comprehensive detail. It was done, however, in a pioneering report for the Australia Council’s Music Board in the mid-1980s. The person responsible for defining the brief in 1985 was the then Music Board director, Richard Letts, who wrote a medium range plan that for the first time led the way towards a truly sectoral view of musical activities. The 1987 report noted (p 2): "The Music Board Plan is the result of a highly participative process, which should enhance its chances of general acceptance. The Board recognised, however, that it needed to be able to demonstrate the size and impact of the industry which it serves actually or potentially. It commissioned the present study to achieve this objective." A long-term intellectual partnership was born in that year, culminating in the author being appointed by Dick Letts and the MCA Board to develop the Music in Australia Knowledge Base.
One of the most important statements in the report reads (p 4): “The musician, singer, composer and music teacher is at the core of the industry”, helping to make it a true music sector rather than a music industry study. Notably, educators were recognised as part of the core, while the Hoegh-Guldberg and Letts report in 2005 regards them as crucial support for the core performers and creators of music — basically the same point of view.
The Music Board brief for the 1980s study specified that the music industry (or what we would now call the music sector) should cover not only the supply of goods but also live and mediated performances, broadcasting and television, music education and support organisations, among others. Even music therapy, then a relatively new discipline in Australia, was specified as an activity to be investigated.
The year-long research for the report resulted in an estimated economic value of $1.545 billion for the music sector in 1984-85, equivalent to 0.7% of GDP according to the statistics then current (it is still of that relative magnitude according to the latest annual national accounts). Actually, the correct concept for comparison is gross value added at basic prices (GVA), which excludes indirect taxes net of subsidies. The estimate was equivalent to 0.77% of GVA, which comprised 89% of GDP in 1984-85 with indirect taxes less subsidies making up the remaining 11%.
The Music Sector Defined page contains details of the estimation procedures, to which readers are referred. The first step was to update the 1984-85 estimate from the Music Board report. The main source was the most recent annual national accounts (2005-06), and associated supplementary tables available at no charge from the ABS website. The estimate is $3.26 billion at 2005-06 prices.
Assuming the estimated value of the music sector has remained at 0.77% of total GVA, the equivalent measure for 2005-06 is $6.82 billion, based on an aggregate GVA of $886 billion (the GDP was $966 billion for the year).
So the music sector would have increased by about 108% over 21 years, from $3.3 billion to 6.8 billion at 2005-06 prices, simply by holding its share of the total economy. But is it reasonable to assume that the share has remained constant? Further, did the original study manage to measure all possible parts of the music sector as the concept was defined in 2005 by Hoegh-Guldberg and Letts? Though the 1987 report tackles a surprisingly wide field of different music sector activities in an area that was actually quite unknown territory, this is unlikely. Even today there are serious difficulties associated with establishing the true economic value of important areas such as music education, research, publications and libraries, not to mention music in the community and the music content of industries other than recording.
Neither question posed in the preceding paragraph is easy to answer. Concerning the former, industry product statistics in the national accounts suggest that the share in total economic activity of the cultural and recreational services industry group has remained reasonably constant: between 1974-75 and 2005-06 the long-term trend was 3.28% per annum, marginally below total GVA (3.36%) and marginally higher than total GDP (3.21% pa). However, the industry group has fluctuated quite widely, and it is impossible to ascertain whether it has lost share of total GVA over the past two decades. At first glance, it seems to have lost share based on a point-to-point measurement of 2005-06 relative to 1984-85, but it appears to have been abnormally above the long-term trend level in that year, suggesting that this particular comparison is spurious.
More importantly, however, music has an impact on many different conventional industries and industry groups, not just the culture and recreation group where music in fact is likely to be less than dominant among many artistic and recreational activities. Bearing in mind that the ultimate measure of a music GDP (via a music GVA) is in the nature of a satellite national account, musical activities contribute to numerous other conventional industries — a fact that will be clear from a look at the music sector chart. Apart from the cultural and recreational services industry group, music is an important element of manufacturing, retail and wholesale trade (recordings and other manufactured and imported music-related goods), education, communications (such as broadcasting and television), and many other industries.
As far as the second question is concerned, did the original study in 1987 cover all possible activities in the music sector? It would be expecting too much of a study conducted more than twenty years ago to have achieved something for which there is now a recommended five-year statistical collection plan to find the answer. So we may expect the coverage of the 1987 study to be incomplete, despite it being the most comprehensive to date.
In view of the above, and other evidence of the growth of creative activities, the estimate of $6.8 billion for 2005-06 is probably conservative. Furthermore, music has the advantage that it is not only a major part of the creative arts, but it is also increasingly in a position to take advantage of modern communications and digital technology. The existing national creative industries strategy (2008) puts digital technology in the high seat but sees music as being particularly well-placed to take advantage of technological progress.
The ABS publication quoted in this note includes a table showing the standard list of industries whose GVA is quoted in the national accounts. Here are a few examples from the table (converted to 2005-06 dollars assuming a uniform 5% increase in the price index from 2004-05):
All these industries are considered sufficiently important in terms of domestic supply and role in international trade to warrant a separate place in the nation’s official accounts. The estimated contribution of the music sector to the national economy is larger than some, smaller than some of the quoted industries. It too has an important role in meeting domestic demand and increasingly in earning foreign currency – let alone its role as a cultural activity feeding Australia’s future social and economic potential.
Hans Hoegh-Guldberg, 2008.