Getting Creators Paid is the Next Big Thing in Media

It’s Time to Democratize the “Economy” in “Creator Economy”

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Image by Mohamed Hassan from Pixabay

There are a lot of forces buffeting traditional media businesses (newspapers, magazines, radio, music labels, TV networks and film and TV studios). Most of these forces stem from digitization. It reduced the cost to distribute information goods to almost zero, greatly lowered barriers to entry and ushered in a flood of new entrants willing to operate at lower margins. But that’s not news. It’s been happening for 20 years.

In a recent essay I argued that a more subtle factor pressuring traditional media businesses, and one that many seasoned media executives have trouble grasping, is that the consumer definition of content quality is changing. This happens in a lot of disrupted businesses. New entrants not only compete on the traditional dimensions of quality, but also introduce new ones. Usually the incumbents dismiss these new attributes as irrelevant. But if consumers find them important, it changes how they define “quality.” The traditional markers of content quality, like big name directors, showrunners or producers; big name actors, writers and musicians; and the catch-all bucket of “high-production value” — all of which have high barriers to entry — are now competing with attributes like authenticity, virality, relatability, accessibility, relevance to one’s community or niche interests and more –which have much lower barriers to entry. That’s not to say that people no longer swap recommendations for hit TV shows, go see the biggest movies (when one could do that) or add the latest Top 40 hit to their playlists. They just do these things less than they used to.

As described in that essay, due to this evolving definition of quality, the shape of media consumption is changing. Big hits still matter, but there are fewer of them; the mediocre “middle” is going away; and the “tail” of user-generated (UGC) and low-cost professionally produced content is getting ever bigger. It does not bode well for the future profitability of traditional media businesses.

The mirror image of the shift in value away from traditional media businesses is the shift in value towards the tail, or what is often referred to as the “creator economy.”

The obvious follow up question is whether this dislocation presents any opportunities. It does. The mirror image of the shift in value away from traditional media businesses is the shift in value towards the tail, or what is often referred to as the “creator economy.” The main problem with the creator economy historically is that the aggregators make all the money, not the creators. But as more platforms and tools providers compete to attract talent, that’s untenable. In this essay I lay out why there is no end in sight to the growth of the creator economy and why enabling millions of creators to make a living wage — the democratization of the “economy” part of “creator economy” — is one of the biggest opportunities in media today.

Tl;dr:

• By conservative estimates, more than 10% of U.S. working adults are already engaged in the creator economy.
• It is not a fad, it is a structural shift, and it has numerous tailwinds behind it. These include the prevalence of the creator economy among younger demos; the normalization of independent work, which has been accelerated by the pandemic; growing consumer demand for “authentic” content; and, most important, an explosion of new enabling tools, platforms and monetization models.
• Historically, the creator economy has been undermonetized by ad-supported platforms because “free” is not the market clearing price and, relatedly, there is growing evidence of consumer willingness to pay.
• The solution is price discrimination (or “versioning”) models that enable creators to extract consumer surplus by offering multiple tiers of content and perks for different prices.
• Near term, expect rising competition among platforms and tools providers to get creators paid and help them run their businesses more effectively.
• Longer term, micropayments seem like a logical way to extract even more consumer surplus, but it is unclear if they will ever achieve scale. Another trend to watch is the evolution of new financing models in the creator economy, including debt financing and the “equitization” of celebrity (aka social money).
• In a struggling media industry, it’s one of the biggest opportunities for the companies that can figure it out.

What is the Creator Economy?

There is no consensus definition of “creator economy.” Li Jin, a former partner at a16z, has written extensively about what she refers to as “the passion economy.” She draws the distinction between the gig economy, which seeks to commoditize labor, and the passion economy, which emphasizes and monetizes individuality. I think a more precise definition is that the creator economy is the ecosystem of content creation activities in which independent creators generate content on a self-directed basis that is monetizable by the creator. Under this definition, this excludes the content creation of mainstream celebrities who obtained fame offline (i.e., it excludes The Rock but includes DanTDM or Ninja); it also excludes the large class of gig workers (independent contractors and freelancers for organizations such as Uber, Upwork, Fiverr, Juni, Scripted, Taskrabbit, Torch, etc.) who supply labor for work that is directed by someone else (whether or not they are passionate about what they do); and it also excludes all the content that can’t be monetized by creators themselves (such as the billions of Facebook posts, low-engagement YouTube and TikTok videos, tweets and other social activity that is monetized by the platforms, but not the creators).

Examples of platforms (marketplaces connecting creators and consumers) enabling the creator economy include YouTube (video), Instagram (photos and video), Caffeine.tv (live streaming), Twitch (mostly gaming streaming), itch.io (independent game development), Medium (journalism), Wattpad (fiction), Tumblr (blogs) and SoundCloud (music), along with almost any niche category you can imagine, like Shapeways (3D printing designs), Ravelry (knitting patterns), Spoon (spoken word), Tingles (ASMR) and Insight Timer (meditation). Although the distinction between platforms and tools can be gray (some tool providers also aggregate content, although I only classify a business as a platform if it is primarily oriented as a marketplace), enabling tools include Wordpress, Patreon, Ko-fi Labs, Kajabi, Substack, Knowable, Teachable, Podia, Streamlabs, among many others. (See Figure 1 for a non-exhaustive illustration of companies focused squarely on monetizing the creator economy).

Figure 1. Creator Platforms and Tools

Source: Author analysis.

Not surprising for something without a consensus definition, it’s hard to ascertain how big it is. As defined above, the creator economy is a subset of the tail of UGC and low-cost professionally produced content. And while we don’t even know how big that is, it’s pretty big. Here’s an excerpt from the essay I mentioned above:

It’s tough to get at exactly how much time is spent in the tail, but we can triangulate on the conclusion that it’s a lot and it’s growing faster than overall media consumption. Last quarter Facebook’s Daily Active Users (DAUs) hit almost 200 million in North America, or roughly 75% of everyone over 13 years old. Emarketer estimates that those people spend 38 minutes on Facebook per day. About half of US adults access YouTube daily too, according to the Pew Research Center. Layer in Instagram, TikTok, Snap, Pinterest, Reddit and so on, and it should easily reach two hours daily, on average, for every American adult. Corroborating the two-hour estimate: Mobile phone usage is closing in on four hours daily for the average adult in the U.S. (also according to Emarketer) — and when you pull out gaming, messaging and ecommerce, much of what is left is long-tail media consumption. Two hours might even be low. Either way, that’s significant relative to the roughly 12 hours that consumers spend with media each day (according to Activate).

According to one report, in 2017, 17 million people in the U.S. earned ~$7 billion from the creator economy on nine platforms: Amazon Publishing, eBay, Etsy, Instagram, Shapeways, Tumblr, Twitch, WordPress, and YouTube. I’d exclude the roughly 2 million sellers on Etsy at that time, because the dynamics of selling physical and information goods is entirely different, as I’ll discuss below. Nevertheless, this estimate is likely substantially understating the size of the creator economy. It is dated and leaves out many of the creators using the platforms and tools in Figure 1. But it suggests that more than 10% of the roughly 150 million working adults in the U.S. are already engaged in it.

Historically It’s Been Very Hard for Creators to Get Paid

YouTube, Instagram and, increasingly, TikTok creators (or influencers) have become household names (sometimes for their content and often for their controversies): PewDiePie, the Paul brothers, Charli D’Amelio, Huda Kattan, James Charles, Zach King and on and on. According to Forbes, the top earning YouTuber in 2019, eight-year old Ryan Kaji, made $26 million from his unboxing videos. The Dude Perfect guys made $20 million, Jeffree Star made $17 million. That is just from ad splits or sponsorships. Some stars have expanded into merchandise; Huda Kattan’s beauty line is supposedly worth $1.2 billion. The poorly kept secret, however, is that the distribution of success on these platforms, like the Internet itself, is a power law with a very long tail.

There are an estimated 31 million channels on YouTube. According to one study, only 3% of YouTube channels earn above the poverty level, about $17,000 annually. Even this estimate may be high. In its yearend 2019 earnings report, Alphabet disclosed that YouTube paid out $8.5 billion in content acquisition costs in 2019. Presumably that includes not just advertising splits but also affiliate fees for YouTube TV, music rights and its small original programming budget. Affiliate fees and music rights could easily chew up $1 billion of this (with an average of about 1.5 million YouTube TV subscribers in 2019 and monthly affiliate fees around $50 per subscriber, that alone is $900 million). Even if the entire remainder was paid out as advertising splits to the top 3% of creators (~900,000 out of ~30 million channels), that only equates to $8,000 each, on average.

Reportedly only 3% of YouTube channels generate more than the poverty line annually.

Either way, very few people can make a living on YouTube. (Here’s one article explaining the challenges of a mid-tier creator who is prominent on several Buzzfeed YouTube channels and attended the Buzzfeed Golden Globes party not as a guest, but as server.) The reason is that they need massive scale to really get paid. One million views sounds like a lot, but depending on whether the YouTuber allows ad-skipping, the length of the video (and therefore the number of ads YouTube permits), the geographical distribution of viewers and the appeal of the content/vertical to advertisers, 1 million views only generates about $2,000 in revenue to the creator (with a range of about $700-$5,000, a net CPM of $0.70 -$5). With abundant supply and demand and complete price transparency, it’s hard to argue that the market for UGC video ad inventory is inefficient, but yield sure is low. Since YouTube takes a 45% revenue split, that net CPM range equates to a gross CPM of about $1-$9. In other words, each view generates between $0.001-$0.009 in gross ad revenue. Again, creators are only getting about half of that. As regards other ad-supported platforms, like Instagram and TikTok, most don’t share revenue, so only the influencers with a sufficient following to attract brand sponsorships or sell merchandise can get paid at all.

There are Numerous Secular Tailwinds Behind the Creator Economy

Despite the historical challenges getting paid, there are a host of reasons to believe it’s on a multi-decade growth trajectory.

The Drive to Create Isn’t Going Away

Not to get all woo-woo on this, but the underlying driver of the creator economy, the need to create, is not going away. Some theorize that the abstract symbolic thinking evident in the earliest cave paintings were a precondition to the development of language. If accurate, the implication is that creative work is an evolutionarily hard-wired need that predates language itself. In any case, there is little dispute that people yearn to express themselves. The vast majority of the untold millions of people who create digital content today do so solely for their passion for their product, whether they get paid or not. As the hurdles to creation fall — as broadband penetration grows globally, hardware prices decline, tools proliferate that make it easier to create and publish content of all kinds –and digital-natives grow to constitute an ever-larger proportion of the population, the number of creators will expand indefinitely.

Increasing Awareness of the “Creator Economy” is a Positive Feedback Loop

As anyone who has teenage or preteen children (or cousins, nieces, nephews, students, etc., in their orbit) knows, online celebrities monopolize a tremendous amount of kids’ mindshare. How much money the biggest stars make is front and center. It is considered a barometer of success and in many cases the most popular YouTubers’ content revolves around it. It’s a big part of why so many kids aspire to be professional creators; a recent Harris poll asked 3,000 children what they want to be when they grow up. The top answer, provided by almost 30% of kids, was to be — you guessed it — a professional YouTuber. As described above, YouTube stars are proverbial needles in the haystack. Most creators will be unable to earn a living, let alone achieve stardom. But stories are much more persuasive than statistics, and increasing awareness of the creator economy is likely to attract ever more creators to try.

The Normalization of Independent Work

Even before the COVID-19 pandemic it was clear that the traditional definition of going to “work” has changed for many people in recent years. Back when such a thing was possible, a visit to a packed WeWork or any number of unofficial co-working spaces illustrated viscerally how many people are engaged in non-traditional knowledge work. According to McKinsey, an estimated 20–30% of all working age people in the U.S. and Europe currently engage in “independent work.” Many of these are gig workers or freelancers, not creators as I defined them above. Still, the legitimization and normalization of working this way will likely increase the ranks of people who attempt to make a living or at least meaningful supplementary income as creators. The pandemic has brought greater acceptance of working from home and challenged common perceptions about the security of a traditional job. It likely accelerates the trend.

The Decline of the “Middle” is Drawing More Talent into the Tail

As mentioned above, in a recent essay I described why the “middle” of content quality — the space in between the “head” of big hits and the “tail” of UGC — is going away. That process is displacing thousands of professionals who formerly made a living working for traditional media companies. They are increasingly turning to the creator economy.

Rising Distrust of Centralized Institutions and Demand for “Authenticity”

According to the Pew Research Center, Americans’ trust in the federal government has been declining steadily for the last 60 years. Pew also catalogs rising distrust in higher education and science. These are indicative of a general and sustained decline in the trust of all centralized institutions, including brands. By contrast, consumers view UGC as much more authentic than brand advertising. There is very little consumer tolerance for Khloe Kardashian hawking dubious weight-loss shakes — but, in general, as consumers place a higher value on “authenticity,” coupled with the belief that creator content is more authentic, it is reasonable for both usage and dollars to migrate that way.

Automation May Dislocate Traditional Labor

There is much hand-wringing about the effect of automation on work longer term. This may seem like a distant concern, but it’s sufficiently near term that the concept of universal basic income (UBI) has moved into the mainstream. That’s not to say that the growth of the creator economy will sop up all the labor displaced by automation, but significant dislocation in the labor market would likely propel even more people to try to make a living by pursuing their passions.

New Monetization Models

Perhaps the biggest tailwind is the evolution of new monetization models that can enable a lot more creators, meaning tens of millions in the U.S. alone, to make a living wage. These include subscriptions, one-time purchases, donations and merchandise sales. To understand why these models are so promising requires a little background.

The Creator Economy Has Been Undermonetized

The reason that the creator economy monetizes at such a low rate is that the largest creator economy platforms — YouTube, Instagram and TikTok — are free to users and underwritten by advertising. This raises a couple of questions: how did we decide free is the right model?; and, relatedly, would a sufficiently large subset of people be willing to pay more than zero?

Free is Not a Profit-Maximizing Price

In practice, most businesses set price through an iterative process of testing customer willingness to pay and competitive response. Two-sided markets for digital information goods don’t set price this way. In the absence of proprietary technology, the chief barrier to entry in these businesses is the strength of the network effects, which is generally driven by the size of the network itself. The first one to scale usually wins. Typically, these businesses have a “subsidy side,” the side they attract for free, and a “monetization side” that pays for access to the subsidy side. YouTube, TikTok, Pinterest, Reddit, Tumblr, Google Search, Facebook and countless other platforms for information goods are free because they needed to rapidly scale users, not necessarily because that’s what consumers are willing to pay.

All these services are free because their top priority was scaling.

Then why not raise price after achieving scale? To state the obvious, it’s hard to come back from free. The psychological hurdle for consumers to go from paying nothing to paying something is enormous, not to mention the friction of entering in credit card information, etc. Around free, willingness to pay acts like light acts near a black hole — it all gets sucked up.

A potential push back to this point is that while “free” is clearly not the price you would charge if trying to maximize the value of the “subsidy side” as an independent market, when accounting for the advertising revenue paid by the “monetization” side, perhaps free is the price that maximizes aggregate revenue. After all, TV and radio are two-sided markets and they’re both free, right? Yes, over-the-air TV and terrestrial radio are both free. However, they evolved this way for two reasons: 1) they use a public good (spectrum), and therefore need to provide public utility in return; and 2) because both are broadcast technologies, it would’ve been much more difficult operationally to charge for access. Plus, as we have seen with the hundreds of billions of dollars in value created by pay TV and satellite radio, free was not the profit maximizing price.

There is Growing Evidence of Willingness to Pay for Digital Content

So, the price of zero was not set by testing market demand. Are there people willing to pay more? Sure seems like it. In contrast to the “information wants to be free” ethos that prevailed 10–15 years ago, over the last five years there has been growing evidence of consumers’ willingness to pay for professionally-produced digital content. Most traditional national news publications have successfully put up paywalls, notably The New York Times (for which subscription revenue is now double ad revenue), The Washington Post, The FT, The Wall Street Journal; digital native publishers like The Athletic, The Information and Business Insider are proving out the feasibility of subscription models; Spotify has convinced roughly half of its monthly active users to subscribe; and the proliferation of SVOD products is also conditioning consumers to pay for content. That’s for professionally produced content. What about user-generated online video or live streaming or independent music? The difference between professionally produced and “independently” produced content is increasingly a specious distinction for consumers. It’s safe to say that there are plenty of people willing to pay more than zero to watch PewDiePie or T-series or Mr. Beast. It’s also probably safe to say there are people who would pay a lot more for content that is relevant to their niche interests. But on ad-supported platforms, the die hard fanatic and casual viewer both pay nothing.

These’s Too Much Consumer Surplus

In economic parlance, these models leave too much consumer surplus on the table. What’s consumer surplus? In a market with a downward-sloping demand curve, by definition there are people who would pay more than the market-clearing price. (There might be no demand for a $20 latte, a little demand at $15, a little more at $12 and a little more at $9, even though the market clearing price is $5.) The difference between the revenue that would be generated if everyone paid what they were willing and the revenue at the market price is consumer surplus. All else equal, the lower the price, the more consumer surplus; the more elastic the demand, the more consumer surplus (Figure 2). Ad-supported models generate a lot of consumer surplus because they have the lowest price possible and there is growing evidence of consumer willingness to pay for content, implying demand is elastic.

Figure 2. The Lower the Price, the More the Consumer Surplus; the More Demand Elasticity, the More the Consumer Surplus

The Solution, for Platforms and Creators, is Price Discrimination Models

The obvious solution to this problem is to charge more (and provide more) to those willing to pay more. Kevin Kelly theorized about this more than a decade ago, with 1,000 True Fans and Jin, the former a16z partner mentioned above, recently argued certain kinds of creators could get by with 100 True Fans.

To be clear, most people, perhaps even the vast majority of people, will not be able to make a living as digital creators. Barriers to entry are essentially zero to create content and success will inevitably be distributed according to a power law. There will always be a lot of people who will not attract enough fans to make ends meet. So it will always be possible to write articles like this or this that bemoan the inability of creators to make a living wage. But that misses the point. The point is that as monetization models evolve that extract more consumer surplus, millions more people will be able to make meaningful income.

Most people will not be able to make a living as digital creators, but that is beside the point. The point is that many more will.

Pricing models that charge more for different tiers of a product or service are known as second-degree price discrimination models (or what economists Carl Shapiro and Hal Varian call “versioning”). In the case of the creator economy, this means different versions of the creator’s product — such as early access, exclusive access, personalized shout outs in content, the ability to influence content development, member-only chat sessions, emojis, etc. — for different prices, often including a free tier.

Although this approach is becoming increasingly common in the creator economy, these kinds of models are as old as the hills and, once you’re aware of them, they’re pretty much everywhere you look. Price discrimination is at the heart of content windowing (such as charging different amounts for a movie first in theatrical, then pay per view, then DVD and so on); differential prices for seats and perks at live events and on planes; most SaaS businesses; free-to-play mobile games; every “freemium” or paywall model (many publishers, Spotify, Pandora, etc.); and every other business you can think of that charges different prices for different versions of its goods or services.

A select number of the platforms and tools providers in Figure 1 expressly enable creators to offer versioning models, such as:

• Patreon enables creators to offer different access and perks for different monthly subscription tiers.
• Twitch enables its streamers to offer different subscription tiers, which may include a wide range of perks, such as subscriber-only gaming days, Discord chat sessions and “emotes” (essentially emoticons) that only subscribers can see. Viewers can also buy “Bits” that they can donate to streamers on an ad-hoc basis.
• Last year YouTube introduced the ability for creators with more than 30,000 subscribers to offer subscription tiers with different perks, which may include early access to content or merchandise, personalized shout outs or the ability to influence content.
• Bandcamp and Mixcloud enable fans to directly support artists and Soundcloud recently added a donation button that links to third-party payment processors.
• Udemy, Podia, Outschool, Teachable, Thinkific and Kajabi all enable creators to produce and sell their own online courses.
• Patreon-owned Memberful, Supercast and Supporting Cast all offer the ability to sell paid podcasts.
• Steam, itch.io and Gamejolt enable independent developers to sell their games.
• Uscreen allows video creators to sell videos, giving the creators wide latitude to set the monetization model (subscription, one-time sales, freemium, etc.).
• Substack enables writers to create paid subscription newsletters and recently added the ability to support paid podcasts.

What’s Next?

The logical trajectory of these dynamics is a few things:

Near Term: Rising Competition to Get Creators Paid

Creators will gravitate to where they can make the most. Take Medium vs. Substack as an example. Medium charges consumers $5 monthly (or $50 annually) for access to all its content, which it then shares with writers based on engagement (or “claps”). Substack, by contrast, provides the tools for writers to create paid newsletters and podcasts. The writers set the price, which is generally at least $5 monthly (for which Substack takes a 10% fee). Obviously the most successful writers, those who can sustain a paid subscription, will be better off using Substack. They may still use Medium as “top of the funnel” to build a following and drive people to their paid newsletters, but as they become more successful they’ll move more of their content behind a Substack paywall.

As the competition for talent picks up, expect more platforms and tools to focus on getting creators paid. YouTube is arguably the most powerful “creator economy” platform, but even it is potentially vulnerable to a focused competitor, particularly one that is creator-friendly — see Twitch. In the past YouTube has been widely criticized by creators for the size of its ad splits and its tendency to “demonetize” videos (make them ineligible to receive ad revenue) for purportedly arbitrary reasons. Lately, however, it seems more focused on finding more ways to get more creators paid (and, of course, itself in the process). As described above, it recently added the ability for certain creators to offer tiers of paid subscriptions and it also recently introduced a “merchandise shelf” on which creators can feature and sell merchandise. TikTok just disclosed that it created a $200 million fund to pay creators and a Bits-like tipping mechanism seems a reasonable next step. Expect the trend to continue.

Medium Term: I’d Rather be a Platform than a Tool*

*Sung to the tune of Simon & Garfunkel’s El Condor Pasa (If I Could).

As mentioned above and shown in Figure 1, creator economy companies can be broadly classified as either platforms (or marketplaces) that connect creators and consumers; or tools. Tools includes production/post-production tools, hosting, analytics and various administrative functions, like managing mailing lists or payment processing. Given this scope of activity, it’s hard to make too many generalizations, but I’ll try one: you’d rather be a platform than a tool (take or leave pun as you wish). Just as there will be increasing competitive pressure on platforms to help creators make more money, there will also be increasing pressure to help creators run their businesses more effectively and efficiently by offering workflow, analytics and administrative tools. If successful, that will increase creator switching costs, attract talent and indirectly improve creator monetization (and their own revenue splits). Because the creators usually have no choice but to deal with the platforms (such as when posting content, monitoring feedback, managing profiles, etc.), the platforms are better positioned to become one-stop shops; and because the platforms already aggregate consumers, they likely have much more powerful data sets and cross marketing opportunities.

The risk for tools providers is that the platforms will suddenly decide their business is a feature set, not a business.

Take YouTube and Patreon, for example. Patreon’s primary appeal to creators is the ability to offer multiple membership tiers. But it is not a platform. Creators need to drive fans to their Patreon pages from other consumer-facing sites, like YouTube, Instagram or Soundcloud. As mentioned above, YouTube now offers some creators a very similar ability to sell membership tiers, but with several key advantages: video creators can now deal with one provider (i.e., they don’t have to upload videos to multiple sites) and there’s less consumer friction to subscribe because there’s no need to click through to another site and a lot of people already have a Google wallet. Patreon still has advantages — it charges a much lower commission than YouTube (5–12%, compared to 30%) and it integrates with multiple 3rd party tools, like MailChimp and Discord. But YouTube could theoretically match those benefits and make it very difficult for Patreon to attract new video creators.

One could make the same analogy for Medium and Substack. As described, Substack is currently the better option for successful writers. However, Medium could choose to replicate Substack’s business model by offering writers the ability to sell paid newsletters. Because it already attracts readers and has detailed datasets on their preferences, it could potentially market those newsletters more effectively.

Soundcloud is another platform that’s figured out the benefits of being a one-stop shop for creators. It offers artist analytics; manages monetization on all major streaming platforms (Spotify, Apple, etc.); partners with Twitch to make it easier for creators to live stream performances; and, as mentioned, recently added a donation button.

This isn’t to say that tool providers are doomed. If they can do it better or cheaper than the platforms themselves, they can attract creators and/or become acquisition targets. And they may also seek to become one-stop shops themselves. For instance, Landr offers musicians the ability to create, collaborate, master and distribute music to almost all of the major streaming services, all from one place. But not every platform provides APIs enabling third party sites to post content. And APIs can always be changed. Tool providers are always potentially vulnerable to changes in the platforms’ strategies.

Longer Term?: Micropayment Models Make Sense, as They Have for 30 Years

A logical step between paid monthly (or even annual) subscriptions and free — and a potential path to extract more consumer surplus — is micropayments: the ability for consumers to pay a modest amount or provide a tip for a specific article, video, stream, song, etc. Ideally, a micropayment model would also eliminate the friction of entering in credit card or other data on each site by using some sort of universal wallet. But it’s a toss-up whether it really works at scale. It’s been an intriguing idea for 30 years and hasn’t happened yet, for a variety of reasons: fees can be onerous relative to small transactions; content owners and aggregators have been reluctant to adopt a universal currency for fear of shifting bargaining power and valuable data to the payments processor; and it is not clear that consumers would adopt it. Regarding the last point, the vast majority of paid information goods and communications services (newspapers, pay TV, streaming music and video, magazines, wireless, broadband) are sold as bundles because consumers don’t like the psychic cost of incurring a marginal charge to consume content. Cases where services have transitioned from per unit pricing to bundled pricing have seen usage surge, underscoring the point (such as the shift of wireless toward bundles and eventually unlimited minutes or AOL’s move to unlimited minutes). Twitch and WeChat have seen success with tipping, but it remains to be seen whether micropayments can work in a broader array of use cases.

Even Longer Term?: Social Money is Compelling, If Very Early

Like all burgeoning economies, the question eventually turns to financing. Without a steady paycheck, creators often have trouble accessing small business loans or mortgages. One obvious solution is companies that provide debt financing backed by a creator’s earnings. An even more formative idea is the concept of social money, or the equitization of celebrity. The idea is that celebrities would issue equity, perhaps actually tied to a revenue stream, perhaps not, that fans could trade. One such example is Dream Fan Shares, founded by Spencer Dinwiddie, who tokenized a portion of his Brooklyn Nets contract. Another example is Roll, which enables creators to issue up to 10 million creator-specific tokens, that they then distribute to fans in exchange for likes, shares and other related social activity. The creators/celebrities establish a value for the tokens by offering various perks or services to fans in exchange for them. (The question here is whether this works when the token is not collateralized by an asset or revenue stream.) These kinds of ideas don’t necessarily need to be implemented on a blockchain. HumanIPO enables people to sell shares in themselves backed by their time. Shareholders can trade shares or redeem them.

How much is an hour of Charli D’Amelio’s time worth today compared to three years ago?

The most compelling element of social money is that it enables the next step in the evolution of the relationship between creators and fans: the alignment of financial interests. Fans could benefit by investing in their favorite creators — especially those they think they’ve discovered early in their career trajectory — and “ownership” could become yet another way to signal fandom. Creators would benefit not only by getting access to capital, but also because their fans would be incented to be even more ardent evangelizers. It’s early and a lot has to be worked out (not the least of which is whether the idea of buying a share of a “person” is just too distasteful for many people). But it makes a lot of sense.

Creators Gonna Create*

*Apologies to Taylor Swift.

The creator economy is not a fad or even a trend. More like a structural shift. People need to create, the tools to create and publish are constantly improving, awareness of the creator economy is continually growing and the economic models are finally maturing to the point where millions, and perhaps tens of millions, of people in the U.S. alone can make a living wage. In a struggling media industry, it’s one of the biggest opportunities for those companies that can figure it out.