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The creator economy is not failing to spread the wealth
It's not true that only 1% of aspiring creators succeed.
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The creator economy is not failing to spread the wealth
It’s difficult to pin an accurate number on the size of the creator economy, but I usually use YouTube as my north star. The company recently reported that it’s paying out $10 billion to creators through its partnership program and that it supports 400,000 jobs. Even if you’re conservative and assume every other platform combined only generates an additional $10 billion, then that’s a $20 billion market that barely existed a decade ago.
But for every article touting the success of the creator economy, there’s another one that attempts to throw cold water on it. For instance, a recent piece from Axios is titled “The creator economy is failing to spread the wealth,” and it pulls together several stats to argue that it’s really only the top 1% of creators on any platform who are bringing home most of the revenue. “New platforms have long offered hope of empowering smaller voices, only to see the top creators reap the most benefits,” Axios writes.
The takeaway from these kinds of stories is clear: if you make a go at a career as a solo creator, you have a 99% chance of failure.
That’s sort of true, but only in the most literal sense. Let me illustrate what I mean by talking about the restaurant industry.
Restaurants are known for having a particularly high failure rate: 30%. That means three out of every 10 restaurants that launch will close down within their first year. But those aren’t bad odds, if you think about it. You still have a 70% chance of succeeding — at least for the first year — which is much higher than any odds you’ll get at a Vegas casino.
But think about all the time and resources that go into launching a restaurant. You have to lease a retail space and then pay for construction. You have to hire servers and cooks. You have to deal with health inspections. By opening night, you’ve already invested tens of thousands of dollars and hundreds of man hours into the venture. The barrier for entry is extremely high.
Now imagine a scenario in which it’s as easy to launch a restaurant as it is to open an account on YouTube or Substack, meaning you can have your restaurant up and running within an hour and it requires no upfront investments. Suddenly, the market would be flooded with restaurants. Every person who’s been told at some point that they’re a good cook would make a go at it. You wouldn’t be able to walk outside your house without encountering 10 sandwich delis within a stone’s throw away.
Under that scenario, the 70% success rate would plummet. Probably at least 90% of new restaurants would close within the first few weeks after the owners get bored. Most of the others would shut down after only a few months when people realize it’s incredibly difficult to run a business as a side hustle. The only successful businesses would be run by truly dedicated restauranteurs, the ones who were already planning to devote their blood, sweat, and tears into running a successful restaurant. In other words, the very same people who own and operate restaurants today.
That’s why the 99% failure rate for the creator economy can be so misleading. It applies to every person who launched a YouTube video, published a few videos, and then got bored. It applies to the Substack writers who grew discouraged after readers didn’t rush to pull our their credit cards and subscribe. When the barrier to entry is so low, you get millions of would-be entrepreneurs who aren’t all that dedicated to their craft.
Let me propose an alternate way of measuring a success rate. Let’s call it the 100 Pieces of Content Rule. Here’s how it would be applied:
What’s the average earnings for podcasts that have produced at least 100 episodes?
What’s the average earnings of YouTubers who have published at least 100 videos?
What’s the average earnings of newsletter writers who have put out at least 100 issues?
And so on and so forth. Using this method, you’ll weed out many of the creators who weren’t all that dedicated to their craft in the first place, and I bet you’ll see a success rate well north of 1%.
Don’t get me wrong; I still think building a solo content business is tough. I did, after all, recently publish an article about the gritty economics for Substack’s middle class. But I don’t think articles that focus on the 1% rule paint an accurate picture of what it actually takes to succeed as a solo content creator.
One other point before I close out this essay: while the top 1% of social media stars take home a disproportionate amount of revenue, they also employ a lot of people. In a recent episode of How I Built This, the founders of the YouTube channel Dude Perfect revealed that, in addition to the five guys who appear on camera, the company employs 20 people who work behind the scenes. That’s true of most major social media channels.
There are currently 22,000 YouTube channels with at least 1 million subscribers. If each of those channels employs an average five people, that’s 110,000 jobs. That’s a lot of creators who make a living from the top 1% of YouTube accounts.
There's this misconception that only opinion writing can thrive on Substack, but Judd Legum has amassed thousands of paid subscribers through his investigative journalism.
The perils of sharing revenue with creators
It's difficult for platforms to develop revenue share systems that are fair and produce the right incentives. I wrote about why over here.
If I'm interpreting this data correctly, Spotify has brought a lot of casual podcast listeners into the fold, but Apple still dominates when it comes to hardcore podcast listening. [Podnews] It's worth pointing out though that the Apple Podcast app auto-downloads new episodes, while Spotify doesn't. That might skew the data.
Bloomberg reports that The New York Times is testing out a new audio app. [Bloomberg] Last year, NYT acquired a company that creates audio versions of magazine articles. It's clear that its ambitions for audio go beyond just producing a few hit podcasts.
Flipboard is trying to lure more photographers onto its platform. [Yahoo] I always have a hard time getting an accurate read on how healthy this company is.
Why Netflix still wants you to binge-watch its new shows. [YouTube] Sure, the success of Ted Lasso and The Mandalorian showed that a weekly release schedule could work with streaming, but Netflix is still committed to releasing entire seasons at once.
The Atlantic is in negotiations to partner with solo newsletter writers. [Vox] I've been predicting this for a while now: media outlets will act more and more like book publishers/music labels; they'll sign contracts with star writers that guarantee a cut of the revenue those writers bring in.
The second most followed person on TikTok never speaks in his videos. That's part of the reason for his success. [YouTube]
Music IP is the next big content bubble. [Bloomberg]
"Netflix’s greatest impact on pop culture will not be allowing us to 'binge watch,' or stream TV on-demand. It will be globalizing the entertainment business." [Bloomberg]
It turns out podcasting is a much better delivery mechanism than radio.
I have a secret Facebook group
By secret, I mean you can’t find it by searching on Facebook, and I only promote it within this newsletter. This ensures that 100% of the people who join the group are really interested in building content businesses. If you fit that description, you can join here: [Facebook]
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