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Posted on Mar 01, 2022Read on Mirror.xyz

What Lies Beyond Patronage? Crypto's Role in the Creator Economy

written by Charlie Durbin, edited by Jackie Berardo

This is the first of a series of posts evaluating how web3 can advance the creator economy. This post sets the problem by highlighting a novel interpretation of Kevin Kelly’s 1,000 True Fans.

INTRODUCTION & MOTIVATION

How can an independent creator build a vibrant career?  This series of posts will explore the  well-documented and romanticized pursuit of individual creation, without defaulting to creator monetization as the keystone problem-to-be-solved.  Past iterations of this problem statement have considered this a one-sided question of patronage or exchange: what might a creator offer an audience for maximum profits?

This series evaluates creator monetization as a question of incentive alignment: how might a creator and an audience share in value jointly created?  In creative endeavors, the benevolence and enthusiasm of each party persists with or without monetization.  If we consider success, capital, and fame to be assets jointly created by both creator and audience, what new models of value-capture and creation might we consider? 

Patronage is a straightforward problem to solve; however, fan acquisition and retention are more challenging and most important for creators.  Applications should optimize for the amount of money each fan can generate on behalf of creators rather than price discrimination of fans.

The first blog of this series demonstrates this theory by establishing that Kevin Kelly’s 1,000 True Fans (1ktF - 2016 revised version linked) thesis is predicated on relative fame more so than deep monetization of a loyal fanbase.  Building from this distinction, subsequent posts will depict how Li Jin’s 100 True Fans is a positive step and, ultimately, propose how web3 applications can dramatically improve the financial conditions of independent creators. 

Web3 applications leverage token economics and are built on decentralized blockchains.  Though it feels like the creator economy goes through a rebrand every few years; a recent iteration, the attention economy, has interesting and relevant ramifications. The attention economy is the concept that quantity consumed is limited by time, not price. In a world where time is increasingly limited, it’s hard to see this existing dynamic as optimal for creators or their audiences (more on this to come). 

Let’s start here: the average earnings per creator on Patreon is only ~$120 / month and natively born stars are rare. Is patronage really the answer and if not, then what?

1,000 TRUE FANS IS A BATTLE FOR ATTENTION, NOT A MONETIZATION STRATEGY

In 2008, Kevin Kelly’s 1kTF theory predicted the “infinite riches of hidden niches.”  The core premise was that a creator can earn a sustainable income by identifying their 1,000 biggest fans and charging them $100 per year.  This was moderately contrarian as it instructed creators to forgo “blockbuster hits” and pervasive fame in favor of a strategic base of true fans willing to purchase anything a creator produces.  The thesis was prescient as it assumed creators would be able to circumvent traditional distribution platforms and gatekeepers to monetize their work directly on internet networks. 

The core idea is that a creator may be able to derive more value from 1,000 True Fans than even 100,000 average fans. Previous analyses of 1kTF laude the idea of deep monetization of a small-but-loyal fanbase (one example, another with pictures).  The result of this has been an emergence of patronage-based solutions, but what if we draw a different conclusion? 

To get to a different destination, let’s start at the beginning. Kevin Kelly makes a couple of interesting, and often overlooked, observations:

  1. Excerpt: The actual number may vary depending on the media. Maybe it is 500 True Fans for a painter and 5,000 True Fans for a videomaker. The numbers must surely vary around the world. But in fact, the actual number is not critical, because it cannot be determined except by attempting it. Once you are in that mode, the actual number will become evident. That will be the True Fan number that works for you. My formula may be off by an order of magnitude, but even so, it’s far less than a million.

    Takeaway: 1kTF != 1kTF.  1,000 is a nice round number on which to anchor.  The back-of-the-envelope math checks out.  However, really, the takeaway is just that creators do not need a million fans.  Given this was written in 2008 and the creator economy has conservatively 10x’d since (just look at YouTube’s revenue growth), let’s assume Kevin would have written 10 million today - only specifying for the sake of illustrative scale.

  2. Excerpt: But the point of this strategy is to say that you don’t need a hit to survive. You don’t need to aim for the short head of best-sellerdom to escape the long tail. There is a place in the middle, that is not very far away from the tail, where you can at least make a living. That mid-way haven is called 1,000 True Fans. It is an alternate destination for an artist to aim for.

    Takeaway: Striving for stardom might not be necessary, but your relative position in the long tail of aspiring creators still very much matters.  

  3. Excerpt: But the long tail is a decidedly mixed blessing for creators. Individual artists, producers, inventors, and makers are overlooked in the equation. The long tail does not raise the sales of creators much, but it does add massive competition and endless downward pressure on prices. Unless artists become a large aggregator of other artists’ works, the long tail offers no path out of the quiet doldrums of minuscule sales.

    Takeaway: Democratization of audiences commoditizes creators and puts significant downward pressure on prices.  Fans derive a scarcity value belonging to each creator’s community, but most communities are substitutes.

  4. Excerpt: A more important caution: Not every artist is cut out, or willing, to be a nurturer of fans. Many musicians just want to play music, or photographers just want to shoot, or painters paint, and they temperamentally don’t want to deal with fans, especially True Fans. For these creatives, they need a mediator, a manager, a handler, an agent, a galleryist — someone to manage their fans. Nonetheless, they can still aim for the same middle destination of 1,000 True Fans. They are just working in a duet.

    Takeaway: The pursuit of 1kTF takes work.  That work comes at the expense of time spent on artists’ crafts. 

The points above imply a significantly different problem than ‘ease’ of monetization.  Rather than the gross number of ‘fans’ or ‘true fans’, what matters is a creator’s position in the long tail. Kevin Kelly states as much in excerpts #1 + #2.  

To understand this distinction and what number of fans is enough, let’s double-click into #2.  In practice, the theory of 1kTF is typically some retort to a zero-sum pursuit of celebrity; a creator only needs 1,000 fans for a comfortable income, and anyone can get 1,000 fans even if only a small number can have 1M.  However, here, Kevin Kelly is actually saying that what matters is your relative fame:

distribution of creators in Kevin Kelly's 1kTF

The diagram above is somewhat misleading (see #1); the point is really that a creator cannot afford to be in the long-tail of semi-success, or in this case, the orange.  In the red, creators can sell a small number of products to a large number of fans or a large number of products to a small number of fans, but it’s unlikely creators sell enough at all should they slip into the orange.  Therefore, what matters is how a creator’s audience ranks among the fan bases of other creators and where a creator sits in the hierarchy of each fan’s preferences.  

The chart above characterizes the distribution of creators’ fan bases but applies to the consumption patterns of individual fans on the following curve:

proposed distribution of creators for an individual fan

Let’s take music as an example.  The average person can only name  10 to 20 artists, that’s it.  More artists than ever are reaching 1M streams and old songs are remaining popular longer than ever.  Therefore, competition for spots 1-20 in fans’ mindshare has increased as top artists are effectively retaining fans, and the long tail is acquiring new fans at an unprecedented rate.  Visualize this as a consolidation of preferences in spots 1-10 and fragmentation across spots 10-20.  If an artist slots anywhere into places 1-20, we can assume that they are safely in the red area of the chart above.

This is where the attention economy piece comes into play: each fan only has so much time to allocate to streaming music.  Getting into spots 1-20 is structurally zero-sum.  To retain mindshare, an artist has to displace another; to displace another, a fan has to stream that artist instead of another.  Fans have an unlimited quantity of songs for essentially zero marginal cost (fixed fee subscription priced well below consumption); therefore, time ends up dictating quantity.  For each fan, time is zero-sum, which means composing fan bases is cannibalistic among creators.

Artists cannot afford to lose fans and have to acquire new fans at the expense of other artists to remain above the long tail.  Even as new fans are onboarded to DSPs (digital streaming platforms - e.g., Spotify), artists must compete in the same manner for each additional fan.

This competition is fierce due to excerpts #3 and #4  of Kevin Kelly’s.  The long tail is generally commoditized; there is no cost for fans to switch from one artist to another, and no benefit to fans to stick with any one artist other than intrinsic loyalty or social status.

To rise above the substitutes, quality matters.  A creator has to be demonstrably better than their peers to capture and retain a fan.  Excerpt #4 highlights the opportunity cost of curating 1kTF; it takes work and that work represents time that a creator is not committing to their craft when other creators are.  This ultimately puts creators pursuing 1kTF at a competitive disadvantage to attract and retain fans.

IMPLICATIONS IF THIS IS TRUE

The anecdote of Robert Rich captures the analysis above, likening the struggle of retaining and attracting fans to Sisyphus.

In reality, the life of a “microcelebrity” resembles more the fate of Sisyphus, whose boulder rolls back down the mountain every time he reaches the summit. After every tour, I feel exhausted but empowered by the thought that a few people really care a lot about this music. Yet, a few months later all is quiet again and CD/download sales slow down again. If I take the time to concentrate for a year on what I hope to be a breakthrough album, that time of silence widens out into a gaping hole and interest seems to fade. When I finally do release something that I feel to be a bold new direction, I manage only to sell it to the same 1,000 True Fans. The boulder sits back at the bottom of the mountain and it’s time to start rolling it up again.

Robert’s experience effectively positions attention as the a priori challenge to monetization.  Creator economy solutions should target the root problem, not a symptom.

Applications touting 1kTF should be entirely focused on incentivizing fans to work on behalf of creators.  Creators should not ask how much money they can extract from each fan, but rather how much each fan can generate on their behalf.  This way, the theoretical boulder remains at the top of the hill.

NEXT STEPS

The next post in this series will cover Li Jin’s 100 True Fans.  Her “value model” represents the power of moving beyond patronage, incentivizing fans to act in their own best interests to maximize value for creators.  Li Jin introduces switching costs by rewarding those atop information cascades.  Future posts will highlight how this may be profitable with the right mechanisms (check out Bonding Curves in Curation Markets or my senior thesis for a sneak preview).  Ultimately, this series will synthesize recommendations for the creator economy into a logical evolution for NFTs, moving from patronage tools to an identity layer within incentive-aligned DeFi applications.

Thanks for reading! If you have any thoughts or suggestions for future posts, please feel free to reach out to me on Twitter or in Decent’s Discord.