Creating the future
Creating the future
A Cambrian explosion in entrepreneurship
Hi, it's Ben from the Tony Blair Institute. Digital technology in the 21st century has led to a much more disaggregated model of media. Easily accessible technology has given individuals the ability to innovate and reach audiences simultaneously, with traditional media organisations playing much less of a gatekeeper role. This new creative sector has the potential to generate economic growth while also meeting demand for a newly democratised media scene.
However, as Benjamin Tseng (Product & Strategy lead at Stir and TPP emeritus fellow 😉) and I set out, challenges remain for policy makers. A small number of creators have converted popularity into very substantial income; many others find monetising their output more difficult, including for reasons of business skills or apparently weak bargaining power. Helping more creators overcome these challenges requires a re-examination of how they are treated as economic actors.
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By Benedict Macon-Cooney and Benjamin Tseng
The increasing digitisation of the world has led to dramatic changes in our daily lives and the ways we make a living. Technology has fundamentally altered not only how we communicate and collaborate, but the markets and industries we interact with. New tools, platforms, and community-oriented business models have produced unique and entirely new opportunities for people around the world today. This affects us all as consumers, but an increasing number of us are now creators as well.
A number of critical technological, economic, and cultural shifts have created a new wave of entrepreneurship commonly referred to as the “Creator Economy.” Smartphone technology has equipped virtually every house with high quality camera and sound recording equipment, easily edited into professional-looking material. High speed internet has allowed immediate dissemination (and collaboration between creators). The rise of massive, highly-engaging platforms for user-generated content has brought together huge addressable audiences, at the same time as the fragmentation of media, paired with growing consumer distrust of traditional brands. All of this has enabled individuals (and sometimes collectives) – the “Creators” in the “Creator Economy” – to very rapidly build up massive loyal followings.
Some estimates point to there being over 50 million Creators around the world, about 2 million of which are believed to be “full time.” This new economy has enabled make-up artists and dancers, Excel specialists and comics, toy reviewers and trainspotters to earn income from platforms such as Etsy, YouTube, TikTok, Twitch, OnlyFans, Patreon, Instagram, Substack and Teachable. It has also resulted in creators frequently competing with legacy institutions for attention while simultaneously being paid by those institutions to lend an air of authenticity to legacy brands. It’s also created a rich ecosystem around the Creators themselves – service providers ranging from business managers and accountants to creative support vendors like video editors and thumbnail creators. With the largest creators believed to be earning 10s of millions of dollars per annum, the economic impact for some is significant already. And as this rapidly booming, relatively new source of economic activity, continues to grow it will further reshape the job market and the businesses that cater to it.
Since the industrial revolution, entrepreneurship has occasionally burst forward at very rapid rates. Even within the recent history of digital technology, the foundry / fabless model for integrated circuit manufacturing led to a boom in semiconductor innovation in the late 90s/early 2000s, and the cloud hosting / rise of smartphone app stores has led to today’s massive boom in new software companies. But the innovation of the creator economy has brought forward a Cambrian explosion of new content forms, led by new creators, with entirely new market models.
Nothing is static, and the platforms that host content are positioning themselves to retain strategic positions. Meta (fka Facebook) CEO Mark Zuckerberg has announced a program to appeal to creators by offering $1bn through 2022 to Creators for posting content on the company’s platforms. Similarly Snapchat, TikTok, YouTube, and many other platforms are also offering compensation to creators in a scramble to secure Creator support. In September, even LinkedIn, the professional-focused social network, got in on the act with a $25m fund allocated to investing in this area. Some platforms such as Clubhouse even offer accelerator programs to Creators to help empower them towards making better career and life decisions.
The explosion in interest and energy in Web3 is opening up even more avenues for the Creator Economy. Web3 potentially offers a truly permissionless framework in which to develop new business models and offerings. Non-Fungible Tokens (NFTs) are one example of a technology which makes it easy for creators to directly monetise their creations – in most cases artwork. They are now being utilised across a variety of applications by Creators and other companies, for instance, as a key playable element of a large game (like Axie Infinity) or being used as status badges and loyalty rewards (both financial and otherwise) to improve fan engagement.
However, while much of the recent developments around the Creator Economy have been very positive, as a group, Creators and the burgeoning ecosystem around them face significant challenges. Because creator business models are new and can have highly variable income streams, many of these new businesses are cut off from capital markets, making it difficult to scale these businesses. For the same reason, creator businesses find it hard to access policies intended to support small businesses. In the US, for example, many Creators found it highly difficult to qualify for policies in 2020 designed to help small businesses deal with COVID-19.
The smaller size of these businesses also dramatically increases the burden of legal and regulatory compliance. Many Creators start out in a mostly amateur capacity and are expected to be completely fluent in the inner workings of corporate law, accounting, and tax law. This has likely contributed to the potentially unhealthy inequality in the Creator Economy, where a small fraction of Creators retain a large share of industry profits, and others with potential to scale are unable to get past the initial startup challenge.
These problems open up new questions for policy around how to encourage the growth of these new entrepreneurial endeavours. The reality is traditional policies for private enterprise / innovation are typically too heavy, designed mainly for big projects and firms with traditional payrolls and brick and mortar presences.
As a result, policy needs to adjust to adapt to this emerging class of industry. These need to happen in both broad terms by continuing to further democratise access to the internet and content creation tools, while also ensuring that there is a strong online payment infrastructure that underpins digital commerce. But zooming in there is also a need to encourage new engines of growth by simplifying tax and compliance for smaller businesses, providing protections for smaller businesses working with larger ones, encouraging or subsidising provision of capital and insurance to smaller companies, and, for jurisdictions like the US, making it simpler for Creator Economy businesses to obtain insurance and other non-wage benefits will help put this new generation of entrepreneurs on safer footing.
This shift is necessary as the world of work, innovation and entrepreneurship is changing in dramatic ways. The countries that understand the benefits of a more decentralised and networked world need to encourage the development of this creator economy both as a means to encourage individual autonomy and liberty in the digital age, but to enable this new digital-native industry to flourish and create paths to economic success.