Leading Creator Economy Insights

Will The Creator Economy Increase Centralization

Startups love buzzwords. Decentralization is one of the most inflated words of our time. Right now many startups are working hard to decentralize the Creator Economy. But is decentralization even realistic? Let's analyze what changed and where we're headed.

Will The Creator Economy Increase Centralization
Photo by Rebecca Orlov | Epic Playdate / Unsplash

Written by: Daniel Koss

Startups love buzzwords. Decentralization is one of the most inflated words of our time. Right now many startups are working hard to decentralize the Creator Economy. But is decentralization even realistic? Let's analyze what changed and where we're headed.


Decentralization Factors

  1. Smartphone Distribution

With an estimated 6.64bn. smartphones around the world, more people than ever have constant access to hardware that can record audio, image or video content than ever before.

Anyone can now record content.

2. Creation Software

Instagram is free and enables anyone, without any image editing skills, to edit pictures.

TikTok is free and enables anyone, without any video editing skills, to edit videos.

There are many other great examples, but I think you get the point. There's a ton of fast, simple and free editing software out there. That wasn't the case only 10 years ago.

Anyone can now edit content.

3. No more gatekeepers

Posting on Facebook, Instagram, TikTok, YouTube, Spotify, Snapchat, etc. is fast, simple and free.

There's no casting agent that could tell you "you have a radio face" or "I'll help you get the job if you sleep with me" or "I'll connect you if you pay (bribe) me" or "I just don't like you so f*ck off". You also don't have to sign a multi-year contract with any platform. You don't hand over exclusivity. Short version: While there will always be some form of corruption in any system, platforms today don't own your ass. If you think the Creators are in a bad spot today, you have no idea how powerful gatekeepers were (in some cases still are) in the traditional media world. They just decided according to their interests and the Creators had to accept their fate.

Anyone can now distribute content.

Learning: The Creator Economy is now accessible!


That all sounds great! So will the future be a highly decentralized Creator Economy?

Centralization Factors

  1. Zero-sum competition
    Attention sadly is a zero-sum game. We all have 24 hours in our day. If you spend your time sleeping, you can't go to the gym at the same time.

    Social Media is no exception to this obvious reality. The time you spend watching one Creator will not be spent watching another Creator. If Creators see it that way or not, they are effectively competing with each other for the audience's attention.

    Just like the platforms, Creators make more ad revenue, when people spend more time consuming and interacting with their content.

    This fact points to the obvious reality that the limiting factor for the Creator Economy is the total attention of all audiences. The ad revenue from time spent watching Creators will always have to be divided between the Creators that created the consumed content.
  2. Not all views are created equal

    Views have different commercial values for platforms, advertisers and Creators. If the viewer is highly engaged, consumes the content for 1 hour and is very wealthy, the view is very valuable. If the view comes from somebody broke, not engaged and misclicked on the content piece and will click away after 2 seconds, the view is basically worthless to all parties getting paid.

    Because some Creators attract more valuable audiences and are better at engaging them, they are effectively creating more commercial value for the platform on which they are posting. The platforms are competent at recognizing which Creators get the highest value out of the time end consumers spend on the platform.

    As a result, the platforms optimize their algorithms to distribute the highest commercial value content over any sup-optimal content. This creates extremely strong winner-takes-all effects for very few Creators who are "algorithm darlings".

    Even if these few Creators get canceled for voicing out the wrong political opinion, become inactive or just fall off, they will always get replaced with new Creators who will then take the top spots and occupy the recommended pages.
  3. Fewer bigger winners, more unpaid losers

    As the economy became more globalized and international markets became one, few companies emerged as huge winners in most industries. Amazon "The Everything Store" today covers such a wide span of services and product offerings that it probably disrupted and killed millions of small businesses across the globe.

    But Amazon today also employs over 1.1M people in the US alone!

    If you define the Creator Economy as "individuals replacing institutions" then you'll see the problem coming. We've already seen individual Streamers sell billions of inventory in hours!

    The power of massive distribution allows Creators to completely disrupt huge institutions with thousands of employees. These Creators can make millions and I guarantee we'll also see many Creator billionaires over the next two decades.

    These Creators will often have tiny teams compared to the institutions they disrupt. Instead of thousands of employees, they have 0 - 100 employees.

    A strong argument can be made that the Creator Economy will create a few huge winners that have to share their profits with fewer people than ever before while most Creators won't make any relevant money and be hobbyists forever.
  4. Increasing quality barriers

    MrBeast spends $48M / year on video production.

    Joe Rogan can get guests like Elon Musk on his podcast because he is so connected and has so much reach.

    The Yes Theory guys regularly create scenarios where they feel highly uncomfortable, creating world-class content for their audience.

    These examples illustrate how damn high the bar for amazing content really is. Yes, as we've seen in the first part, anyone can now create content. But the same content that went viral 10 years ago, is no longer good or special enough to stand out!

    The bar for today is so high, that realistically only very few people that go to extreme lengths to push the bar, will stand out and make it to the top.


The Facts Today

  • The recent Twitch Leak revealed over 50% of revenue generated for Creators goes to the top 1% of Streamers

Summary

The Creator Economy today is highly centralized. The idea that the Creator Economy automatically decentralizes everything, because it puts individuals first, is just not true. Access does not equal success.

Time will tell if the participants will push for meaningful changes that actually make the Creator Economy more decentralized.

Personal Opinion

Personally, I find it morally and ethically ok if some individuals make significantly more money than others.

BUT, there are 3 things I consider essential

  1. Revenue should be directly connected to merit and value generation
  2. The Math matters! Whether the top Creators make 10x or 1,000x more than the mid-size Creators is not a detail. One creates a thriving ecosystem, while the other will collapse.
  3. The Creator Economy is going to be so big, that it's not just a question of personal opinion or "fairness". We must build a Creator Economy that is decentralized enough to offer enough people real full-time jobs, or we will see Social unrest and violence sooner or later. The Creator Economy will start to disrupt more and more traditional (offline) businesses over time. It's a ticking time bomb until enough people lose their job.

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Jamie Larson
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