Digital Consumer Networks and Producer-Consumer Collaboration: Innovation and Product Development in the Digital Entertainment Industry

This paper examines new forms of collaboration between producers and consumers that are emerging in the digital entertainment space. Taking the case of the video-game industry, we show how firms have successfully engaged in outsourcing parts of their game design and development process to digital consumer networks. Applying economic analysis, we explore the potential benefits to both producers and consumers. We also discuss implications with respect to copyright enforcement on firm strategy for innovation. We finally indicate potential research areas in producer-consumer collaboration for innovation in general and in the music and moving image industries in particular, the value of digital consumer networks, as well as the effect of outsourcing to consumers on social surplus and the boundary of the firm