SUMMARY
The internet and smartphones have changed content generation from a centralized model to one that's more distributed. This disruption allows for more niche content to be produced, leading to a multibillion dollar "creator economy."
Innovations have been the wellspring of entertainment for over 600 years. The printing press, invented around 1436, enabled book publishing. The cathode ray tube set the wheels in motion for the modern television industry in 1927, and the first ever videogame introduced audiovisual interactivity in 1958. However, amidst all this innovation, one thing remained constant – content creation was both curated and centralized.
More recently, with the advent of the internet and smartphones, social media was born. And with it, for the first time, content creation was no longer centralized. It was distributed. As such, gatekeepers – like studio heads or masthead editors – were no longer required. Crucially, however, social media platforms did not share the spoils with the content creators and kept all the revenues for themselves.
But this is beginning to change.
Across industries – publishing, podcasting, esports, and education – creators are finding ways to monetize their content directly with their fans and are furthering a new content ecosystem often described as the “creator economy.”
According to the authors of our recent Citi Global Perspectives & Solutions report, The Creator Economy: Getting Creative and Growing, this ecosystem barely existed five years ago, but counts over 120 million content creators among its ranks today, many of whom are tapping into what is now a multibillion-dollar market.
For 2022, the creator economy is projected to have generated about $60 billion of revenue with a ~9% growth annual growth rate. By 2024, this figure is likely to rise to nearly $75 billion.1 And the content creators partaking in this rapidly expanding industry can serve micro-markets and niches that would be considered unprofitable for traditional content gatekeepers (see Figure 2 in the PDF).
That is, in a one-to-many paradigm, like film or newspapers, entertainment gatekeepers focus on the largest, most lucrative markets. Gatekeepers typically shun niches, but, without supply-side gatekeepers (or finite shelf space), micro-markets can now be served.
New Technology = New Entertainment
Around half of the creator economy’s revenues stem from ad-based video platforms. The other half is spread across a wide array of industries: publishing, education, and podcasting, among others.
The report’s authors point out many sub-markets within the creator economy:
- podcasts
- education
- ad-based video
- fee-based video
- esports
- social media
- publishing
- video games
- the Metaverse
- e-commerce.
When these creator economy markets are mapped against legacy media, various patterns emerge. For instance, some creator segments map nicely to traditional media. Free-to-air television maps to free video while radio maps to podcasts (see Figure 1 in the PDF). But a handful of creator segments are de novo: namely social media, esports, and the Metaverse.
Who’s monetizing the opportunity and how
There may be over 120 million participants in the creator economy but who’s thriving and how? The report’s authors note there is an inverse relationship between the number of creators on a platform and average net revenue per creator. This suggests a small subset of creators perform far better than average.
The authors’ analysis of creator revenue concentration across four leading content platforms paints a remarkably consistent picture – the creator economy is highly concentrated. In short, the creator economy does not have a middle class.
Inevitably platforms take their, often heavy, cut too. Those that help with content creation collect 7% of revenues. Platforms that host content are entitled to 19% of revenue. Those that aid in distribution typically fetch 6% of revenues. Platforms that promote content charge 33% of revenues and platforms that aid in monetization charge 11% of revenues.
However, the growing importance of content creators has not been lost on the platforms that benefit from their work. More than a dozen firms have set up content creator funds spanning key sectors including social media, podcasts, crypto and e-commerce. Most of these funds were established in 2021 as the market gained traction.
Beyond creator funds, the report’s authors point to five potential monetization sources for creators:
- advertising
- subscriptions
- donations
- purchases
- sponsorships
– all of which prove helpful to independent artists and content production labels.
Furthermore, global digital monetization along these five silos may potentially break the geographic hegemony of hitherto traditional English-language and creative content hubs in the US and UK, especially in the case of the music industry. This may ultimately create more opportunities and make content creation truly global and multilingual.
Where from here?
The largest segment of the creator economy is ad-based video, and it is likely to remain so through 2024. But most segments of the market – with the exception of ad-based video, esports, e-commerce, and donations – are poised to grow nearly 20% or more per year (see Figure 22 in the PDF).
Going forward, the report’s authors put forward three areas worth watching. First, traditional social media firms may begin to share some of the spoils with content creators and emulate the successful business model of ad-based video platforms. Some may even push further into e-commerce and create more opportunities for content creators to share in the economic spoils.
Second, the emergence of Web 3.0 – or the next generation version of the worldwide web wherein a critical mass of users will connect via a decentralized network – may create opportunities for creator economy platforms to leverage augmented reality, blockchain, crypto, and nonfungible tokens (NFTs) to alter the economics of the creator economy. These tools can help facilitate a direct relationship between content creators and fans with a diminished role for digital intermediaries. Web 3.0 may therefore help improve the economics of content creators.
Third, artificial intelligence may alter the creator economy in several ways including by helping with content creation, helping brands find the right creator or influencer and/or helping consumers find the right content. These developments augur well for an already exciting market.
