Written by Jai Ta
the creator economy, then and now
The creator economy has exploded in popularity with the industry being worth over $100 billion worldwide and consisting of over 50 million self-identified creators turning their passions into successful careers. The ecosystem consists of influencers, artists, gamers, bloggers and so much more. Content creators have thrived on Web2 platforms such as Youtube, Instagram, and Twitter. However, with the latest addition of platforms such as Twitch and Patreon, curating content has been enhanced by enabling direct creator-to-fan content and new methods of monetization. The implementation of Web3 technologies, more specifically non-fungible tokens (NFTs) are revolutionizing the way creators distribute content, claim ownership, and monetize work.
With the increasing accessibility to the internet, new forms of media emerged and altered the way we consume content and entertainment. Content such as blogging and podcasting saw a rise in popularity and laid out the blueprint for what we now know as the creator economy. However, it was not until the unfolding of social media platforms like Instagram, TikTok, and YouTube that the industry truly took off. These platforms provided creators with a new level of exposure and access to their audiences, enabling them to monetize their content through brand partnerships, sponsorships, and advertising.
In the early days of content creation, monetization was limited to a few select platforms, and creators were largely dependent on these platforms for their income. However, as the economy has grown, so has the number of monetization options available. Nowadays, platforms like Patreon allow creators to receive recurring payments from fans. NFTs provide a new way for creators to monetize their digital content with the added benefits of control and ownership. Figure 1 shows the evolution of the creator economy over the years and how we’ve progressed from the pioneer era where new platforms and technologies were just emerging to the creator era of using top-down tools to support a larger market of creators.
Figure 1: The Evolution of Creator Economies (Radoff, 2021).
Another aspect to consider is the level of competition in the space. In the past, there were only a handful of distinguished creators in each respective niche (games, travel, beauty, etc.) that were able to build large followings relatively quickly. Now, the industry is becoming saturated with millions of individuals fighting for attention and engagement across all platforms. Thus, creators need to differentiate themselves from their competitors by implementing more strategic and innovative approaches. Whether these strategies involve diversifying their brand or exploring different avenues of delivering content to the consumer.
Despite the new changes in the ecosystem, the tried-and-true method to capture a consumer base is recognizing the importance of building relationships with the audience which yields loyal communities around content. There is also a strong emphasis on authenticity which plays a crucial role in fans’ expectations of creators being transparent and genuine.
NFTs for Creators
An NFT is a one-of-a-kind digital asset that is stored on the blockchain that emphasizes verified authenticity, scarcity, and ownership. They can range from a variety of assets, from digital trading cards to event tickets. NFTs are disrupting the ecosystem by democratizing the creative economy, allowing creators who are lesser known in the space to easily create, display, and sell their assets. As a result, this gives new-media adherents a pathway into the mainstream realm, creating viable revenue streams and expanding the market beyond galleries, auctions, and commissions. Since ownership is verifiable, this eliminates the need for intermediaries, such as galleries or record labels, and enables creators to sell directly to their audiences, thus retaining more of the profits from their work.
In the music sector for example, Grimes sold a collection of NFTs for over $6 million, allowing her to retain control over the original files and ownership of the art. Musician 3LAU released an album as an NFT, providing buyers with exclusive access to the music and other perks, such as VIP experiences and memorabilia. This provided a way for 3LAU to distribute his music directly to fans while generating revenue and creating a more engaged fanbase.
NBA Top Shot, a platform that sells NFTs of basketball highlights, has generated over $230 million in sales, with some assets selling for millions of dollars on the secondary market. This provides a way for creators to generate ongoing revenue from their work, even after it has been sold initially.
Furthermore, NFTs can create new revenue streams for creators past the initial sale. By selling their creations as an NFT on a marketplace, creators can earn money from the initial sale of the asset and any subsequent sales on the secondary market. This provides a way for creators to earn ongoing income from their work, even after it has been sold initially. Revenues in the NFT sector are projected to reach $1,601 million (USD) in 2023, with an annual growth rate (CAGR 2023-2027) of 18.55% resulting in a total projected amount of $3,162 million by 2027. Additional data and details are shown in Figure 2.
Figure 2: Market Forecast for NFTs in the World, Revenue in millions USD (Statista, 2023).
While it is evidently clear that NFTs are representing new ways for creators to monetize and connect with fans, it’s more comprehensible when we compare platforms. For example, if an artist released music on Spotify in 2021 and received a certain average number of streams, they would have only made about $636. Youtube pays out about $2.47 per channel and Meta, a mere $0.10 per creator. Now, if we were to look at how much creators bring home via Web3 in 2021, it’s a dramatic take home of approximately $174,000 per creator. Although this is not the case for every 22,400 Web3 artist, it does show how significant NFTs have become in the industry with over $9 billion in primary sales and royalties on secondary sales. Web3 technologies are paving the way for creators to craft full-time on a livable and sustainable wage.
Forecasting the Longevity of NFTs
As the market continues to grow, more platforms will emerge, providing creators with additional opportunities to sell their work. However, there are many uncertainties regarding the future of NFTs in the creator economy. Some critics argue that the excitement surrounding NFTs is a bubble that will soon burst, while others believe that NFTs represent a fundamental shift in the way we think about ownership and value in the digital age. To forecast the longevity of NFTs, we must consider these factors:
Technological advances: While blockchain technology has proven to be secure and reliable, it is not without its limitations. As technology evolves, there may be new and more advanced ways of creating, distributing, and monetizing digital assets that may render NFTs obsolete.
Market demand: The demand is driven by the market's interest in owning and collecting digital assets. There is a risk of oversaturation and declining demand. If the market becomes saturated with NFTs, the value of individual tokens may decrease, and interest may decline.
Sustainability: The process of creating and verifying transactions on the blockchain requires significant amounts of energy, which has raised concerns about the long-term sustainability of this technology. Although there is no definite way to calculate the amount of carbon emissions released from NFTs, it is estimated that a single Ethereum (ETH) transaction’s carbon footprint is 33.4kg of CO2, and an NFT transaction has a carbon footprint of about 48kg of CO2. Refer to figure 3 for more carbon emission production at different stages of creating an NFT.
Security and safety: There is a risk that fraudulent or low-quality assets will be sold to unsuspecting buyers. However, reputable platforms are implementing measures to ensure that the assets sold on their platforms are legitimate and of high quality.
Figure 3: How much carbon dioxide do NFTs produce? (NFTClub, 2021).
Despite these factors, there are also reasons to believe that they will remain relevant in the long term. The growing interest in owning and collecting digital assets, the potential for increased control and ownership for creators, and the ability to generate ongoing revenue from asset sales all make NFTs an attractive option for creators and consumers alike.
Additionally, the technology behind NFTs is constantly evolving, with new developments in blockchain and other digital technologies that could make NFTs even more secure, efficient, and sustainable. As these technologies continue to improve, NFTs may become more widespread and widely adopted, leading to a more robust and sustainable ecosystem for digital assets.
Disrupting Industries
We clearly see the ways in which NFTs are disrupting industries, from new monetization avenues to enhancing creator-to-fan interactions. Direct creator-to-fan interactions create new ways for fans to engage through innovative experiences such as exclusive access to content, or virtual meet-and-greets with musicians.
By cutting out the middle man in transactions, organizational and structural changes are being made in management, allowing more of the profit to go to the original creator. With more ownership, there is greater control over distribution including how many copies of an artwork or music is created and who owns them, which in turn combats issues such as piracy and illicit file-sharing.
Although NFTs are providing various opportunities for creators and investors, it is also disrupting industries in negative ways through its environmental impact which raises the concern for significant carbon footprint. In addition, there is also an increase in inequality — the extensive prices of some NFTs allow only certain demographics to participate in the market, in other words, wealthy investors are able to buy up and control significant portions of the market leaving no room for smaller creators to enter. Not to mention the market volatility increases the risk for these investors. Lastly, the lack of regulations in place allow for fraudulent activities causing safety and privacy concerns.
Conclusion
The creator economy has rapidly expanded with millions of creators across platforms, while the economy was initially limited to a few platforms, the new era of the economy has allowed new monetization options such as NFTs. Web3 technologies are significant in the economy’s development, providing new opportunities for creators to monetize their work and retain ownership and control over their digital assets.
By utilizing blockchain technology, intermediaries are eliminated, and creators are able to retain and make more profit from their work. With the vast support of research, the market is projected to reach high levels of revenue, proving that the market is a great avenue for creatives to enter and remain in. NFTs will continue to play a crucial role in monetization strategies and provide new opportunities for creators to connect with their audiences.
While there are concerns about the longevity of blockchain technology such as demand, the potential for fraud in the market and sustainability concerns, these issues are being addressed by reputable platforms. As technology continues to evolve, we may see new and more advanced applications of NFTs that could ensure their continued relevance in the digital landscape.
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