Copyright-Protected Assets in the National Accounts

In 2007, we estimate that US businesses and governments invested $278 billion in software and US artists produced $71 billion worth of long-lived entertainment originals. These copyrighted materials will yield useful services for years to come. Because of their long working life, the international guidelines for national accounts, System of National Accounts 2008, recommends that countries classify production of software and long-lived entertainment originals as an investment activity and then depreciate the copyrighted assets over time. At the current time, BEA capitalizes software in the national accounts, but does not capitalize entertainment originals. This paper presents data on nominal investment, prices and capital stocks of software and long-lived entertainment originals from 1929 to 2009. We then show how capitalizing software and entertainment influence GDP statistics. For reference, we also include estimates of short-lived entertainment from 1929 to 2009.

To preview, our empirical results are:

1. In 2007, software investment accounted for 2% of nominal GDP. In 1959, software investment was close to 0. Accordingly, average GDP growth increases when software is classified as a capital asset.
2. Entertainment investment accounts for approximately 0.4% of nominal GDP. This share has remained relatively steady from 1929 to 2009. Accordingly, average GDP growth rates do not increase much when entertainment originals are classified as a capital asset.
3. In 2007, the private capital stock of software was $486 billion and the capital stock of entertainment originals was $442 billion. Software has a lifespan of 3-5 years and entertainment has a lifespan of 15-50 years.