Crypto-fying The Creator Economy
A move towards disintermediation can substantially change many aspects for every industry, notably the intermediaries connecting artists with their audiences. The Web3 future holds a more equitable distribution of digital power and the transfer of control from tech behemoths to the community.
In the world we live in today, The entertainment industry is ruled by middlemen. Here are some examples.
Substack at its peak became a synonym for ‘mutiny’.
Substack at its core is about letting stories and not news reach your doorsteps. The novelty was in the idea of journalists by-passing their age-old monolithic media organisations employers and reaching their readers directly. Instead of, say, The New York Times bringing legitimacy to a story, now the journalist can build their brands via Substack as a platform. The USP is that they can focus on telling stories that were not watered down in these woke times.
Substack creates a direct relationship between writers and their audience, and writers own their audience. The subscription model creates an incentive for writers to provide readers with as much value as possible. Substack makes money by taking a 10% cut of subscription revenue. Contrast this to an ad model where the incentive is to gobble up as much of the users’ attention as possible. The company also takes out payment processing fees, which go to Stripe.
Today it seems almost banal to find an acquaintance or business, whether in media or otherwise venturing out on Youtube. It is also unimaginable for most of us to consume just ‘read-only content.’ While audio-visual content seems like the obvious move, the not-so-obvious part here is that Youtube enabled a generation to take their cameras out to tell stories they think matter.
Creators on Youtube earn through the Youtube Partner Program, enabling creators to monetise their videos via Google Adsense. To qualify, content creators must have at least 1,000 subscribers and 4,000 hours of accumulated watch time over the prior 12-month period.
YouTube monetises videos via pre-roll, display, and other advertising formats. Advertisers pay based on clicks and impressions. YouTube gives the content creator 55% of this revenue and takes 45% for itself. While this seems relatively straightforward, creators from different genres earn pretty differently.
Youtube has also introduced a slew of features, including Channel Memberships, Youtube Premium(subscription-based ad-free access for viewers), enabling merchandise listing and ‘Super-Chat’ during live streams where fans can interact with creators paying so that their message gets shown on top among the flurry of comments.
Patreon is a membership platform that allows creative people to build a recurring income stream for their work. It’s used by artists, musicians, podcasters, YouTubers, bloggers, and all kinds of people looking to get financial support from their fan base.
Creators can offer access to exclusive content — such as videos, articles, live streams, or podcasts — in exchange for a monthly membership fee. The platform also allows you to communicate with fans directly and provide insight into your vision. Patreon emerged when platforms were solving for discovery but not monetisation, and even if they were, a sizeable portion went to the platform.
'A man is known by his shoes and playlist.’
The 21st-century edit to this quote seems to become a universally acceptable compatibility test slowly. If one looks carefully enough, a playlist is not only a peek into the listeners’ tastes and thoughts, but a careful assortment of artists from pockets of the music world served peculiarly. Today, finding solace in lesser-known artists and promoting them by compelling your friends to give in and stream or slowly conditioning them by putting them on loop is cheap thrills for some and pride for others.
Spotify made it possible for artists to upload their music on the platform and get recognised as a musician. The platform’s algorithm not only supports discovery but the number of streams an artist has is also a badge of honour and a widely discussed mark.
Spotify divides up the 2/3rd of the royalty pool(revenue earned through advertisers and premium subscription) based on each rights holder’s stream-share on Spotify. This money is not divvied up based on a fixed amount per stream because Premium subscribers do not pay per stream; they pay a subscription fee for access.
1. Surpassing the intermediary status: The platforms started as an attempt to enable creators to highlight their thoughts/works to the world across genres as long as they were not a threat to the sanctity and decorum of the platform. However, they slowly started extending their definition of these potential threats as and when they liked. Unilateral and often opaque monetisation policies have resulted in widespread creator mistrust.
2. Unequal slicing of cake: The story of David and Goliath is best denoted by the almost decade long struggle between creators and platforms. While it is undeniable that a lot of heavy-lifting goes into building the tech and distribution, the creators are the cornerstone of these UGC platforms. On almost all occasions, creators have expressed their disagreement in the most un-subtle way they could about a sizable portion of their income being gobbled up by the platforms.
S-curve: A platform attracts users by providing value initially, intending to extract value later on
3. New referee in the bylines: There is a Panchatantra fable about two cats fighting over the loot and a monkey taking away all of it. The situation is somewhat similar here in the sense that as the discontentment of underpaid creators with the sizeable audience became public, brands found an opportunity to not only place themselves strategically amidst the creators helping them with much-needed runway but over time started dictating rules of the game to an extent where they began influencing content.
4. Too much supply: The creator economy is marked by incentivising oversupply, where one’s offering can be substituted with a steady stream of new alternatives every day. The onus is not on the algorithm to keep the audience engaged but on the creators to keep getting them back. In the process, the algorithm eventually creates a zero-sum game where content is commoditised, and some creators surpass their expectations of building a loyal audience only at the cost of others. Also, the audience driving this frenzy is immutable, i.e., only a tiny percentage of them would take the pain to shift platforms if their beloved creators chose to jump ships.
Crypto Bringing Truce
Web3 blends the lines between creators, consumers, suppliers, and investors and lets projects pay people to use them, whether directly or via tokens that might grow in value over time. That diminishes the value of aggregation by creating a shared set of incentives between supply and demand.xx
1. Returns beyond entertainment: Web3 is all about empowering the stakeholders in ways only possible in theory. Crypto-fying the passion economy changes the status of creators to entrepreneurs and fans to supporters. This is done by establishing a bi-lateral economic relationship between the two parties, which was limited to support through comments and likes. Fans can predict and work for their favourite artists to make it big and help them in their journey and get hefty returns if it happens. This concept is being put to the test by several projects, where supporters can earn through:
a. Share of royalties: Blockchain-based music platforms enable artists to launch NFTs minted such that they promise to pay the buyer a percentage of the royalty earned by the piece of music.
b. Secondary Markets of NFTs: Digital artists are seeing massive traction for their NFTs not only because people have suddenly developed a taste for art but because they see future value accruing in these pieces of code mixed with colours and pictures. Once an NFT project is deemed blue-chip by the community of NFT lovers, the value skyrockets, and so does the demand, and new buyers are ready to pay that extra premium to grab this piece in the secondary markets, which are also facilitated by the same marketplaces that enabled the prior purchase.
c. Creator Token: The most straightforward analogy could be from the listed markets where one buys stocks of a company going public, gets voting rights, and becomes a crew member of the vessel. Creators can launch their token, which lets their community invest in them and hold them for as long as they want to till they think it’s time for some sweet returns; if the creator is doing well and the token’s price has risen in value. They also get to interact with them in ways they would have imagined earlier and also, to some extent, support and enable the creator in a way that helps them to keep producing craft which got the community to love them in the first place and still make enough money and not give in to the injunctions of brands.
2. The community does all heavy-lifting: Once the possibility of returns is put in place, it automatically synchronises the community of consumers and early believers to propagate the craft through word of mouth and facilitate by putting their time and effort. Individuals might choose to become moderators of discord servers, provide designing and editing services, arrange for logistical support, and even go to the extent of planning future pieces of content through the aggregation of surveys and reviews. The artist gets this support in return for just the promise to create quality content and the effort to match that intent which would have otherwise cost them a village to pay for these services. In Web3, the individual is now influential within the organisation it holds tokens of, giving s/he the ability to drive decision making that will bring better health and effectiveness to the community.
3. Content ownership and rights: Web3 introduces ownership as a process. As IP is put out on the web, IP is minted on the chain to show provenance and give creator control to its distribution and usage rights. This is done on the individual level vs the platform level.
4. Freedom: Circling back to the how and why the passion economy started was the freedom to do what they like and showcase the same in a way they think would do justice. The essence of freedom is lost in translation because while there is a want to deliver, there is also a need to survive, and the latter will always supersede. When platforms start dictating the terms, it calls for the creator to be cautious of not repeating the same mistakes and not experimenting, as any wrong move can cost them their reach. Web3 solves that problem as the reigns of distributions are no longer in the platform’s hands but the craftsperson themselves.
As more people have started tinkering with Web3, we’re witnessing the emergence of newer platforms where the value proposition is aligned to benefit the creators and the consumers. Some of them are:
Audius Project is community-owned music streaming and sharing platform that lets artists own and monetise their work and gives fans access to artists and premium features by holding the $AUDIO token. Plus, all $AUDIO holders govern the project’s future. Because it focuses on remixing, it bills itself as an alternative to Soundcloud. It’s possible to imagine a platform like Audius competing with Spotify down the line by attracting musicians who want to own their music and connect more directly with fans. Given the complexity of music rights, it will take the system a long time to sort itself out, particularly for back catalogues. Still, nearer-term, platforms like Audius might start stealing artists away from the traditional record label model.
Mirror is a publishing platform that gives writers crypto tools. Mirror lets writers own their domain (using ENS) and content (using Arweave), crowdfund posts, mint posts as NFTs, auction them off, and split the proceeds. The project is trying to create a modular ecosystem of tools that enables writers to do things they can’t do on Substack or Medium. What makes projects like Mirror more interesting is that it unlocks the potential to challenge players like The New York Times and Washington Post is that individuals work on stories that were only at the disposal of these media outlets given their resources and funds. This is possible through tools like DAOs, where resources can be pooled in and individuals willing to help the community.
Obscura was created to enable and set free the creative possibilities for photographers. Many photographic stories are left untold for lack of funding. This platform aims to facilitate photographers to pursue their projects through the sales of NFTs. A curation team selects photographers on a rolling basis, and then funds are collected through mint passes - which can be brought on OpenSea by people who support the vision and want to get the stories out. The photographers then use these funds to showcase their work within four weeks. The same NFTs then can be redeemed through the mint passes issued earlier.
Rally is launching a cryptocurrency dubbed Creator Coin to help influencers, content creators, and streamers run their virtual economies. With Creator Coin, Rally will enable influencers to create their flavour of cryptocurrency that they can use to reward fans and build engagement. These can be folks like esports athletes, cosplayers, influencers, YouTubers, live-streamers, modders, and so many other creators across genres. For example, a streamer could make a Creator Coin and give it away to fans who spend a specific time watching their live streams. The fans could use that custom-branded cryptocurrency to buy virtual items in a game or purchase items from another streamer.
Most platforms built on blockchain haven’t solved the discovery layer. The reason is even though it might seem a lot is happening, it is still very early. Both sides of the market need to be onboarded not only on the platform but also with the idea of how their relationship with each other will evolve.
The Graph solves the discovery layer for Web3 indexing and ranking all of the internet’s data. The Graph relies on a decentralised network of Indexers and Curators who are financially incentivised to uncover and index relevant subgraphs and provide correct data to Consumers. Consumers pay directly for that data. The Graph also lets any decentralised app build on top of its APIs to deliver data to end-users. It’s a more open and financially-aligned alternative to Google’s ad-based model.
It will be interesting to see if the general public accepts this distributed business structure, which they are hardly familiar with. If they do, it will be a stark change from how things are currently run.
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