Wednesday, May 25, 2011

Buy Indie Support Locals the consumerization of our economy

The premise of “buy indie support locals” is not just a catchy phrase. By buying independently produced entertainment product you are supporting the majority of the entertainment industry -- those artists, musicians, filmmakers and others who account for 90 percent of the product we produce -- yet only 10 percent of the sales. This “indie” business is of vital concern -- not just to our collective bottom line. It is the most important way we influence the world.

Looking back 20 years ago, U.S. exports of entertainment related goods were 40 percent of our exports, and for many years it was our number one export. Take the case of music: our exports of these entertainment products totaled $36 billion in 1996, more than any other U.S. industry, according to Commerce  Department data.

Today, according to that same data, our entertainment product exports are a small percentage of what they used to be. How could we allow them to decline so much? It used to be that 80 percent of the world’s entertainment was conceived here, recorded here, manufactured here, and then exported. Importantly, all the profits from this activity stayed here in the U.S. This is the way it was until 1997. That year, the consolidation of the major labels and the near extinction of domestic independent entertainment distribution began.

Every time a U.S. consumer buys entertainment product from a multinational corporation, product from artists on labels like Bertelsmann AG, Sony, Universal or WEA, the U.S. loses both the domestic income and the ability to export finished product, accounting for billions in lost opportunities.  Between 1996 and 2004 multinational corporations, saw their foreign profits nearly double -- while domestic profit margins declined by more then three percent.  

Yet, the entertainment business is still profitable according to the National Association of Recording Merchandisers. The worldwide entertainment market grew by 2.3 percent in 2009. Yet, according to Census data we exported less than $3 million dollars worth of music product in that same year, down about a half a million from the year before. In less then a decade we when from billions in entertainment product exports to millions, without a blink of an eye.

Micheal E. Porter eloquently  pointed out in “The Competitive Advantage of Nations,” that  'a nation's  prosperity is created and not inherited, states must recognize that a nation's competitiveness depends on the capacity of its industries to innovate and upgrade.’   We have failed to heed these words and worse is that we are entertaining our economy to death.

We hear President Obama claim that we will win the future. I ask, does he or any 2012 candidate or government official have a clue as to the economic impact of entertainment product exports on the domestic economy -- let alone on the content or lack of it, that we export to the rest of the world? I am pretty sure the bean counters at the major labels do.

Major label entertainers may conceive their music here and even produce it here. However, it is very clear that the majors, as multinational corporations, love to shift intangibles created in the U.S. to foreign subsidies with less of a tax burden. These “intangibles” are further shielded by the elimination of the check-the-box rule, which now allows multinationals to avoid rules which trigger payment of interest or royalty payments to IP holders.  We are losing billions of dollars on our intellectual property and we can stop it with a check box.

We call on the Administration, Congress, state and local officials to understand that Buy Indie Support Locals means billions of dollars to our local economy. During this next election cycle politicians need to think hard about the choice of music and artists that perform for your campaigns. It better be locally produced, manufactured and supported in the U.S.A.  If our agencies, politicians, and trade groups claim to represent the interest of American citizens, they must take Buy Indie Support Locals as gospel.