I noticed in yesterday's paper that the music industry has taken its political demands to a new level of deluded self-importance: it is asking the government to introduce an 'A&R tax credit', to mimick the R&D tax credits that companies are eligible for in the UK. The argument runs that the time and money spent by EMI on trying to 'find the next Coldplay' is of such strategic and economic importance to the UK economy, that they should receive tax relief on it. This is even sillier than the demand for a 'value recognition right' issued earlier in the summer (for anyone who missed it, this was roughly analogous to Nescafe demanding a share of the revenue from mug production, on the basis that mug manufacturers were unfairly benefitting from people's emjoyment of coffee), not to mention the old term extension chestnut.
One would hope that the government would take the view that 'I want never gets' - I don't remember a massive lobbying campaign leading to the R&D tax credit - but perhaps EMI and co are trying a lobbying version of Goebbels's Big Lie theory, seeking out policy suggestions that are so silly that people start to wonder if there might actually be something in them. For the record, there are at least three reasons why this demand is based on a false analogy:
- R&D is a process of invention, whereas A&R is a process of discovery: the process of invention produces various accidental benefits (or economic externalities) along the way, and does not proceed in a linear fashion. It involves developing collective intellectual capabilities in a cumulative fashion, to be drawn on over very long time horizons, potentially decades. Given the potential for these benefits to leak out to competitors, and the time horizons involved, there is a potential market failure in R&D, and companies are likely to invest in it to a suboptimal degree. None of this is true when it comes to 'finding the next Coldplay'.
- A&R could potentially disappear within a decade: leaving aside the question of whether open source dstributed research methods are 'better' than centralised, closed ones, one thing which is undeniable is that music listeners take some degree of enjoyment in the process of finding new music. They are also likely to have a pretty expert understanding of their own tastes. Equally, bands have a strong desire to 'be found', and don't necessarily rely on A&R men to do this - live music and the internet perform a rival function. Bands are not North Sea Oil; they don't sit there waiting for some intrepid EMI exec to come and dig them up at huge cost, but actively tout themselves at the listening public. Should people get bored of having the 'next Coldplay' found for them, this inter-relationship between consumer and musician could cut out the middle men of A&R altogether.
By contrast, air passengers are neither qualified nor eagre to start designing the planes they fly in, and nor are patients likely to become responsible for the medicines they depend on. Give or take the odd rumour about mountain bikes being designed by cyclists, expert, centralised R&D is therefore far less dispensable to society.
- They've totally missed the point about tax credits: a tax credit exists in order to incentivise an activity that is currently happening to an insufficient extent, such as paid work on the part of parents, or R&D on the part of companies. Hilariously, the music people have misunderstood this: "In its response to the Government's Creative Economy Programme, the BPI - the record industry's trade body - argues that the music sector spends a bigger proportion of its annual turnover on R&D than the aerospace, motoring and defence sectors put together." Woops!
I'm not an economic historian, but I imagine that if one looked back over the past hundred years of industrial policy, any industry whose political requests become this divorced from reality is in the autumn of its life...