Digital Consumer Networks and Producer--Consumer Collaboration: Innovation and Product Development in the Video Game Industry.

Author List: ARAKJI, REINA Y.; LANG, KARL R.;
Journal of Management Information Systems, 2007, Volume 24, Issue 2, Page 195-219.
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 some firms have opened a portion of their proprietary content for transformation by consumers and allowed the development of consumer-designed and consumer-implemented derivative products. By reappropriating these derivatives, video game firms are successfully outsourcing parts of their game design and development process to digital consumer networks. Applying economic analysis, we explore the potential benefits and risks associated with outsourcing to networks of consumers. We also derive the optimal combination of copyright enforcement and consumer compensation. Our results suggest that profit-maximizing producers of video games have incentive to partially open game content to their users and to remunerate the most innovative ones, under the condition that the derivatives constitute complements to, and not substitutes for, the original product. We discuss the implications on firm strategy for innovation.
Keywords: digitalentertainment;innovation;outsourcing;producer-consumer collaboration;user-generated content;videogames
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#5 0.164 consumer consumers model optimal welfare price market pricing equilibrium surplus different higher results strategy quality cost lower competition firm paper
#201 0.131 piracy goods digital property intellectual rights protection presence legal consumption music consumers enforcement publisher pirate producers policies copyright provision profits
#89 0.120 product products quality used characteristics examines role provide goods customization provides offer core sell key potential stronger insights design initial
#19 0.078 content providers sharing incentive delivery provider net incentives internet service neutrality broadband allow capacity congestion revenue cost efficient enhanced provides
#210 0.075 innovation innovations innovative organizing technological vision disruptive crowdsourcing path implemented explain base opportunities study diversity taking actors practice shape creation
#100 0.069 affective concepts role questions game gaming production games logic play shaping frames future network natural processes evidence addresses reference theorizing
#249 0.066 network networks social analysis ties structure p2p exchange externalities individual impact peer-to-peer structural growth centrality participants sharing economic ownership embeddedness
#273 0.052 source open software oss development developers projects developer proprietary community success openness impact paper project associated activity phenomenon peripheral variety
#47 0.051 outsourcing vendor client sourcing vendors clients relationship firms production mechanisms duration mode outsourced vendor's effort activities in-house managing technology domestic