California’s Role in U.S. Information Industry Soaring, Census Data Show

The government’s first detailed measure of the so-called information industry shows that California has an even bigger share of these fast-growing businesses and their workers than previously thought.

In a report released Monday, the Census Bureau said California’s information industry--including software publishing, music recording and motion pictures--generated sales of about $109 billion in 1997. That was 17% of the nation’s total receipts for these firms, well above California’s 12% share of the U.S. population that year.

The census report underscored the significant role that the information industry--companies that produce, distribute and process information, cultural product and data--has come to play in the nation’s fast-growing and productive economy in recent years.

The report showed, for example, that the information industry employed 450,511 workers in California in 1997. While that represented just 3.5% of all payroll employees in the state, total sales of those companies accounted for 10.5% of California’s economic output that year.

“That speaks volumes to how important California is to the nation’s information technology industry, and how important information technology is to California’s economic output,” said Mark Zandi, chief economist at Regional Financial Associates in West Chester, Pa.

One of the most striking findings in Monday’s report was the size of California’s software industry. The report identified 2,389 software publishers in California, with 77,277 workers and total sales of $18.6 billion.

That was one-third of all software workers in the country that year--far more than the 20% that economists had previously estimated. California firms also accounted for 30% of the nation’s total sales reported by software makers.

“A lot of people look to Seattle because they think of Microsoft, but [Washington state] is a small player compared to California,” said Ross DeVol, economist at the Milken Institute in Santa Monica.

Within California, the census report showed that the Bay Area dominated the industry. The four-county area of Los Angeles, Orange, Riverside and San Bernardino accounted for one-fifth of the state’s total software employees, and one-sixth of total industry sales.

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Los Angeles, however, was easily the dominant force in motion pictures, and, by employee and firm counts, the leading player in the music-recording industry as well.

The census report found that California, predominantly Los Angeles, had 6,546 workers employed at 617 firms in the recording industry in 1997, compared with somewhat fewer workers at 535 such businesses in New York. Sales of recording firms in California, totaling $4.7 billion, lagged New York’s $5 billion in receipts two years ago, but that may no longer be true.

In recent years, the world’s five biggest record conglomerates have dramatically ramped up their presence in Southern California. Seagram’s Universal Music Group, which became the world’s largest record company last year following its purchase of PolyGram, will open its new headquarters in Santa Monica within months. Last year, British music giant EMI Group moved its headquarters to the historic Capitol Records tower in Hollywood from Manhattan.

Ted Gibson, chief economist at the state Finance Department, said the Census Bureau’s numbers on motion pictures were higher than he had thought. The bureau reported 6,157 firms in the motion picture and video industries, with total sales exceeding $26 billion. The census, however, counted only about 92,000 jobs in motion pictures and video, far fewer than the state has estimated--a discrepancy that Gibson said may be due to data collection differences.

In broadcasting and telecommunications, California garnered shares of sales and employees commensurate with its population. Those two industries, including cable and satellite telecommunications, employed about 163,482 in 1997.

The last category in the census’ information industry was called information services and data processing services, including some Internet-based firms. California had 1,801 firms in this group, with $4.4 billion in sales and 34,041 workers in 1997--all consistent with its nationwide population share.

With some exceptions, the industries and companies classified as “information” by the census pay above-average wages and have been growing at faster rates than most other industries.

The software industry in California, for example, paid an average salary of $78,400 in early 1997, and the industry has been growing in recent years at 15%. That rapid growth by definition means the 2 1/2-year-old census report significantly understates today’s levels.

Monday’s report was part of the Bureau’s economic census, conducted every five years. The latest one, however, incorporates new industry categories aimed at better capturing the nation’s changing economy. The report will be used by other government agencies to better track the more productive information-based nature of the U.S. economy.

The information industry grouping does not include firms that manufacture computers and other high-technology equipment. Nor does it include firms in electronic commerce, which are classified as retailers.

In a previous report, the census Bureau identified more than 1,400 firms in California engaged in electronic commerce and mail-order retail sales that combined generate $5.5 billion in sales. Previous reports also indicate that California has an outsized share of firms and employees in computer manufacturing and other leading high-tech industries.

Using a broad definition of information technologies, Regional Financial Associates calculated that California has more than 2 million employees in this industry--twice the number of Texas, its closest rival.

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Times staff writer Chuck Philips contributed to this report.