25 February 2021

Li’s Newsletter: “Building the Middle Class of the Creator Economy”

Ever since Wired magazine editor Chris Anderson first published his “Long Tail” theory in 2004, the idea has been endlessly reinforced, contradicted, and debated. He argued that the internet’s removal of physical limitations (local audiences, scarce shelf space) would empower niche products and creators to flourish.

In the search category, the phenomenon has proven true: Google has revealed that on a daily basis, 15% of all queries have never been searched before, a figure that has remained stable since 2013.

But for content platforms, the move to digital content hasn’t been correlated with a burgeoning long tail: the top creators are massively successful, while long-tail creators are barely getting by. On Spotify, for instance, the top 43,000 artists—roughly 1.4% of those on the platform—pull in 90% of royalties and make, on average, $22,395 per artist per quarter. The rest of its 3 million creators, or 98.6% of its artists, made just $36 per artist per quarter.

A 1981 paper by Sherwin Rosen, an economist at the University of Chicago, offers a prescient explanation of how the “superstar phenomenon” would become more pronounced as a result of technology. Rosen argued that in markets with heterogeneous providers, like most creator economies, success accrues disproportionately to those on top: lesser talent often is a poor substitute for greater talent […] hearing a succession of mediocre singers does not add up to a single outstanding performance. This phenomenon is further exacerbated by technology which lowers distribution costs: the best performers in a given field are freed from physical constraints like the size of concert halls—and can address an unlimited market and reap a greater share of revenue.

Li Jin

Interesting topic, followed up with many good proposals for combating this concentration at the top of the creator economy. This issue is equivalent to income inequality in a national economy, and some of the solutions are similar: a better distribution of incomes by platforms, including decoupling creator payouts from audience demographic, diversifying the sources of revenue and creating passive income opportunities. Other measures remind me of the roles of music labels for musicians, subsidizing artists’ early steps with advances and providing support and guidance at the start of their careers. Financial incentives for people looking to become creators may be one of the most important steps, as it allows newcomers to focus on developing their products instead of constantly worrying about income.

10 strategies for fostering the creator middle class

1. Focus on content types with lower replay value

2. Serve heterogeneity in user preferences & empower niche


3. Recommend content algorithmically with an element of randomness

4. Facilitate collabs and community

Funding 5. Provide capital investment to up-and-coming creators

6. Decouple creator payouts from audience demographic

7. Allow creators to capitalize on superfans

8. Create passive (or almost-passive) income opportunities for creators

9. Offer a form of Universal Creative Income (UCI)

Learning & Support 10. Provide creator education and training

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