The Shift From The Industrial Information Economy to The Networked Information Economy

Information Economics

In an industrial information economy select groups of people control the distribution of information. All information in an industrial information economy is distributed through media outlets and costs companies and individuals exorbitant amounts of money (to obtain coverage). At the end of the 1990’s and beginning of the 2000’s, the widespread use of the internet jump started a transformation from a strictly industrial information economy into a networked information economy. In a networked information economy, many people are able to (as opposed to select groups) distribute information to many other people. The networked information economy allows for more individuals’ voices to be heard because capital constraints are reduced. The networked information economy democratizes the distribution of information. A networked information economy improves individuals’ abilities to “(1) do more for and by themselves, (2) do more with loose affiliations with others, and (3) do more in formal organizations that operate outside the market space.”[i] The networked information economy differs from the industrial information economy by enabling culture to be more transparent and flexible. The networked information economy facilitates this because larger, more diverse groups of individuals (than in an industrial one) are distributing information.

A strictly industrial information economy allowed major record labels to have great power in making or breaking an artist. Major labels (particularly in the 1990’s) controlled the distribution of information about particular releases and had the money to get mass media coverage. Their control of information distribution, through their ability to garner mass media support, allowed them to attract widespread public support (reflected in high sales) for their artists’ releases. After the shift (from the industrial information economy to the networked information economy) started to occur, major labels and mass media outlets began to lose their ability and influence in attracting mass public support for their releases. The reason why this happened is because potential consumers’ attention became more fragmented and many people stopped paying strict attention to mass media. The networked information economy allows for unsigned artists to attract the attention of potential fans directly (through sites like MySpace and YouTube). In a networked information economy, music fans and other non mainstream media personnel are also given the opportunity to discuss, promote, critique, and market these smaller, less known artists to other like minded individuals (through using blogs, newsgroups, and social networks). The networked information economy helped to create a opening for musicians, that didn’t rely solely on major labels and mass media, to become successful.

Information Production Strategies

The industrial information economy, as it pertains to the music industry, primarily relies on rights based exclusion information production strategies. The networked information economy is more open in lending itself to non-exclusion market information production strategies. Artists have historically been “romantic maximizers,” (authors and composers who sell to publishers) seeking to obtain monetary gains from the direct creation of content. In the new, networked information economy, (although being a romantic maximizer is still an option for artists) it is more likely for an artist to reap greater benefits from being “scholarly lawyers” (individuals who make money from the production of information but not from the exercising of their exclusive rights). In a networked information economy an artist (and labels) lack the strong distribution control that once allowed the romantic maximizer, Mickey, and RCA models to dominate the industry. In a networked information economy, if an artist solely relies on being a romantic maximizer, they will spend most of their time trying to protect their work from being distributed illegally and will not be able to achieve the maximum benefits offered by the networked information economy. However, if an artist shifts from being a romantic maximizer to being a scholarly lawyer, they will be able to focus less on direct sales of their music and more on the promotion of themselves and their music (thereby enlarging their fan base). Fans would be able to spread the artist’s music to other potential fans and thus increase the money he or she would make from touring, live performances and merchandising. If the artist’s musical information were able to travel freely (without cost restrictions) they would potentially be able to attract a wider fan base and achieve greater brand awareness.

Competing for the Future

According to Hamel and Prahalad, in order to compete for the future one must, “(1) change the fundamental rules of engagement in the industry, (2) redraw the boundaries between industries, and/or (3) create entirely new industries.”[ii] Hamel and Prahalad state that one must understand is that “the short term and the long term are tightly intertwined,” and that the “future is now.” If artists are focused solely on their present endeavors and not thinking about their future (business wise), they will ultimately fail. Another thing Hamel and Prahalad state is that one must learn to forget the past. Artists must recognize that the days of the superstar, quadruple platinum selling artists are over. Until an artist can recognize that the environment no longer allows for that, they will fail to meet their goals.

Artist Insights

The transition from a strictly industrial information economy to a networked information economy has made it easier for new and independent artists to reach potential fans. Websites like, MySpace, YouTube, twitter, and facebook have enabled them to network with their current and potential fan base and achieve popularity. In order for an artist to earn a living five years from now he or she must be able to reach their fan base directly, change their content distribution strategies, follow trends and foresee future ones.

In recent years, it has become easier for artists to create, distribute and promote their music without large initial investments. The use of home audio recording equipment, digital distribution and social networking sites has made this possible. No longer does an artist need to be signed to a record label to be successful. An artist needs to have an understanding of their target market and know how to reach them effectively, through their web presence. Knowing how to properly navigate the myriad of internet music sites will help an artist to reach and grow their fan base. An artist must constantly find creative ways of interacting with fans on the various web platforms they utilize, keep up with growing platforms, and understand how consumers actually use them. If an artist can do these things, they will be successful in continually gaining recognition from potential consumers.

In order for an artist to earn a living 5 years from now, he or she must change their content distribution strategy. Historically artists have pursued the “romantic maximizer” strategy for producing and exploiting their content. This strategy has become increasingly less effective in recent years. Music consumers are no longer interested in strictly obtaining musical content (as demonstrated by the continual decrease in sales of recorded music).

With the transition to a networked information economy, information and ideas have become more free flowing than ever before in history. This shift has also made it increasingly difficult for artists to track the exchange of their music from person to person. If an artist seeks to have a long-term career in the music industry, they must adapt their content distribution strategy. Their strategy can no longer rely on charging potential consumers for the distribution of their work and attempting to stop potentially infringing activities. Their strategy must switch to a “scholarly lawyer” strategy. If an artist allows their recorded music to change hands at no cost, they are more likely to stimulate the demand for their other music goods (because more people have the ability to access it). The increased exposure that this encouraged sharing would generate would directly link to an increase in purchases of other music goods that the artist has to offer. Adapting this strategy would increase attendance at their live performances and would increase the demand for their music to be featured in television shows and in movies.

An artist must be able to follow trends and foresee (or create) new ones, in order to be successful in the future. If an artist acts solely as a follower, they will be at the mercy of innovators and will eventually lose sales and fans to them. If an artist is a trendsetter, then they won’t run the risk of losing consumers because they will continually be changing and adapting to consumer needs and desires. An artist must understand their current and future consumer base in order to successfully adapt for the future. If an artist starting out now wants to be successful 5 years from now, they must take steps away from what most other artists in the industry are doing (like focusing on the direct sales of music) and focus on what most other artists aren’t doing. They must recognize the shift away from recorded music and capitalize on the goodwill and promotion that they could get by giving their music away for free.

[i]The Wealth of Networks. 1 Feb. 2009. Yochai Benkler. 1 Feb. 2009. < >.

[ii] Hamel, Gary & C.K. Prahalad. Competing for the Future. Boston: Harvard Business School Press, 1996.