Thoughts and reactions from this essay The Web3 Renaissance: A Golden Age for Content
The lived experiences of creators tell the story: 90% of streaming royalties on Spotify go to the top 1.4% of musicians. The top 1% of all streamers earn more than half of all revenue on Twitch. 1% of podcasters claim the majority of podcast ad revenue.
I've heard this before for teaching platforms (e.g. teachable) where small percent of teachers earn majority of the revenue.
While it's true there is money to be made from content on the Internet, the essay notes that "much of that money has bypassed the creators that produce the content, landing instead in the pockets of the platforms that aggregate it."
The problem with web2 seems to be the lack of native monetization methods for creators. The Internet was not built to facilitate the flow of money, payments were not built into the Internet's infrastructure. This is supposedly called the original sin of the Internet (by Marc Andreessen).
That is the argument for why users are currently monetized through advertising:
The lack of payment infrastructure is the reason why so much of the internet is monetized via advertising. Rather than requiring users to pull out a credit card and type their information into a website, users could be monetized frictionlessly and indirectly, paying not with their money but with a different asset: their attention
And the implications this model has for both the users and for content creators are enormous. Users are funneled to content that's already popular creating a power law. Content creators are incentivized to create content that appeals to the broadest possible audience and content that can easily attract advertisers.
This leads to incentivizing viral, attention-grabbing, and aspirational content, while disincentivizing niche, in-depth content.
New incentives that reward new behavior
That is how web3 concepts can be characterized. The essay outlines 4 main ways that this will happen:
- By introducing digital scarcity and restoring pricing power to creators
- By making supporting creators an act of investment, not just altruism
- By introducing new programmable economic models that spread wealth across the creator landscape
- Most importantly, by creating pathways for creators to own not just the content they produce, but the platforms themselves
I get #2, that makes total sense. It's about aligning incentives. If the creator succeeds and you've bet on them early by investing in them then your investment also yields higher returns.
I also get #4 (alluding to decentralized autonomous organization DAO) Co-ownership makes sense and again serves to align incentives. This is like giving employees options. Is this not similar to the existing business model by the name of workers owned co-operative. Cheeseboard in Berkeley was the first example of this I ever came across. The website says workers owned co-op since 1971.
There is more of the Cheeseboard story in their about us. It defines co-ops as:
A worker cooperative is an enterprise that produces goods, distributes goods and/or provides services and is owned and controlled by its worker-owners. Ownership of a worker cooperative is vested solely with the worker-owners on an equal basis. Worker-owners control the resources of the cooperative and the work process
I didn't really get #3 before reading this, but the essay makes it pretty clear. It's about royalties and the idea that creators can benefit from their work being remixed and used in collaboration down the road (e.g. sound track in a Youtube videos, memes). The programmable economic model in essence is the ability to distribute these money automatically to the original creators via their wallets.
It's #1 that is the least clear to me introducing digital scarcity and restoring pricing power. Yes this is alluding to Non Fungible Tokens NFTs. It is still an artificial scarcity. What about people who don't actually want to own stuff, physical or digital (wannabe minimalists like me). I've seen the analogy of collectibles such as art and sports stuff used to explain NFTs. Aren't both of those things about status? The value is based on artificial scarcity and desirability. But I guess it works as long as all parties involved keep up the charade (like diamonds!). Still learning about this one.
There is one new thing I learned about NFTs I didn't know in the essay:
Excitingly, the introduction of scarcity through NFTs doesn’t mean that access to the underlying media is limited, as it would be with paywalls or paid digital downloads. The actual media underpinning NFTs can remain public goods, available to be consumed by anyone at no cost. Those who think this undermines the scarcity of NFTs (“right-click and save”) fundamentally miss the point.
So it's not about restricting access but more about having bragging rights by being able to prove that you own something via record on the chain.