TC Global Insights

Future of Industry

Creator Economy: The What, The Why, The How

Justin Bieber, Carly Rae Jepson, Shawn Mendes and The Weekend have one thing in common besides a successful music career: they are social media discoveries. And they are examples of the role content creation has played in the last decade or so, helped of course, by platforms like Instagram, TikTok and YouTube, Vine, Periscope, Dubsmash, to name a few.

As of May 2021, over 50 million people consider themselves creators, worldwide, amateur or professional. With that kind of population, it is no wonder that the creation economy has evolved into an ecosystem of its own. What does it entail? How does it get monetised? What trends can we expect?

We explore it here…

Understanding the creator economy

It begins with customers who are involved in the process of creation to generate some kind of monetary value: that means your influencers, vloggers, bloggers and other independent artists who are dependent almost entirely on social media for the spotlight. But that is not all. Add in the software requirements and the financial tools, you have covered the core of the creation economy.

It is a humongous sector. Sponsored influencers alone are worth close to $8 billion, but the distribution is fairly uneven.

Monetising content

In 2019, to honour 50 years of moon landing, LEGO group conducted a poll to inspire the next generation towards space exploration. Ironically, the survey revealed the 29% of the kids wanted to be YouTubers, followed by the 11% who wanted to be astronauts.

Social media and content creation are no longer hobbies or, as the older generations would call it, ‘a waste of time’. But why and when did it become an acceptable career plan or, at the very least, a side hustle?

When? Sometime since the late 2000s.

Why? Because people have been willing to pay for content. Relatable content, made by familiar faces, aimed at a specific demographic gets huge fan followings compared to generic productions made by large media houses. Many brands are now capitalising on this, to increase their reach.

Revenue for a content creator can come from any/ some of the following sources:

  • Share of advertising revenue
  • Paid subscriptions from the consumers of the content

(This can happen one of two ways: either project based––through  Kickstarter or GoFundMe or creator-based––Patreon being one of the most used financial applications for content creators. They take a small percentage as fees and almost 90% goes to the artist in Patreon. Of late, the tipping trend has also spread to content creation wherein the consumers can tip an artist/ creator at their own convenience.)

  • Sponsored content
  • Digital sales
  • Merchandising, making their own brand
  • Events

Chronicling the growth of creation economy

We now live with Internet 2.0, wherein creative and artistic skills are being marketed. We don’t turn to the internet just for information anymore; we collaborate, contribute and make our presence felt. In a way, the rise of the creative economy democratises mass media, evening out the field for more players to join.

In an article that maps out the development of the creator economy, Yuanling Yuan and Josh Constine study the evolution of this market in three phases:

  • It began with the foundational media platforms. From a creator standpoint, opportunities were opening up. From the other end, huge investments were made in distribution algorithms and editing tools.
  • The second phase was focussed on monetising influencer reach. If you are an influencer, you know it is not just about the number of followers. From an economic standpoint, he/she/they has the power to affect purchasing decisions. In this stage, the content creator either splits the advertisement revenue with the company or produces sponsored content or finds ways to monetise. There was a huge gap in this chain and soon resulted in agencies for influencer marketing, that brought manufacturers/ service providers and content makers together, Viral Nation, Upfluence, CloutBoost, HypeAuditor being some of them.
  • Where we are today, is the third phase where creators have built enough of a fan base that they can become full businesses themselves. This opens up multiple revenue streams beyond advertising and sponsored content, to include merchandise, books, fan interactions and such.

Why does it work?

The most appealing facet of creation economy is that it is fuelled by passion. Increasing awareness of mental health and heightened emphasis on job satisfaction are pushing more people to pursue avenues that make them happy.

For instance, Tucker Budzyn has 3 million followers on Instagram alone. He also has a sizeable presence on Twitter, Facebook and Youtube. He has his own website that sells his merchandise. His entire content is built out his experiences with his mum and friends, presented to the world in adorable ways. In the process, sometimes, he suggests brands that he likes. For those of you living under the metaphorical rock, Tucker Budzyn is a golden retriever. His pages are run by his hu-mom ‘Linda’ who, with a little bit of technical expertise and a lot of patience, is successfully navigating the creator ecosystem.

In addition to passion, it works because there is a sense of connection between the creators and the consumers. The consumer gets to claim ownership over an experience or a purchase, due to the relatability of the content. It also works because technology is being made extremely simple at the user end. It democratises media spaces and distributes control, rather than it being concentrated in the hands of a powerful few. Psychologically, the attention works.

It is not all likes and hearts

It is certainly not easy to “make it”, especially considering how fickle public perception can be. Earning as a creator can be simple, but challenging. Li Jin, in an article published in the Harvard Business Review writes: “On Patreon, only 2% of creators made the federal minimum wage of $1,160 per month in 2017. On Spotify, artists need 3.5 million streams per year to achieve the annual earnings for a full-time minimum-wage worker of $15,080, a fact that drives most musicians to supplement their earnings with touring and merchandise.”

  • This ecosystem is fairly new and the common person is acclimated to free content online. Progress can be slow; it is challenging to build an audience base, especially at the beginning.
  • The behaviour of your followers also counts to a large extent. YouTube, for instance, pays you for the number of people who watch the advertisement on your video with out clicking “Skip Ads”.
  • Copyright can also be a major issue, especially if you are using popular artists as your background music/ inspiration.
  • Over dependency on a platform can also result in troubles for the creator, when the platform changes features, user policy or algorithms. Which is why you notice a lot of content creators either make their presence felt on multiple platforms or eventually move to their own websites.

The future of creation

The rise of fin-tech companies that provide services almost exclusively to influencers (#Paid or Mavrck, for instance) shows increased interest in creation economy. Right now, platforms that provide exposure and opportunities to monetise are discrete from one another. It is logical to predict that these two would begin to merge soon, providing end-to-end solutions.

Another trend expected is the rise of the creator middle-class that will balance out the insanely popular with those who are struggling for exposure. It is this middle class that will sustain the growth of this sector. All we can say is that this sector will grow and evolve for the considerable future. And it is going to be exciting.

Date added
22.06.2021

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Future of Industry

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