What Web 3.0 will bring to the creator economy

Chen Yongwei

Start with a failed legislative effort

Last June, Kevin Brennan, a 62-year-old Labour MP, introduced a legislative bill to the British parliament. In the bill, Brennan called for legislation to pay a portion of streaming revenue directly to the music creator himself, bypassing the record label. At the same time, the bill proposes the introduction of a "rightofrevocation" that allows songwriters and artists to apply to copyright owners or record labels after 20 years to reclaim their rights. By convention, the bill was given the name of its sponsor and was colloquially known as the Brennan Bill .brennan Bill. At the same time, because the main starting point of this bill is to straighten out the high-profile distribution of benefits in the streaming music field, it is also known as the "Fix Streaming Bill" in many reports.

Obviously, the "Brennan Act" seriously touched the interests of record companies and distribution channels, so it suffered a lot of resistance after it was proposed. After half a year of deliberation and discussion, the bill was not passed in Parliament.

Although the Brennan Act ultimately failed to pass, the problems it revealed could not be ignored. With the popularity of the Internet, especially the mobile Internet, streaming media, especially streaming short videos, has increasingly become the main channel for people to listen to music. But in contrast, the current entire music industry is still largely based on the traditional system centered on record companies and large distributors. So, while musicians as creators can easily stream their work to reach listeners, if he wants to monetize those music, the main thing to do is through a contract with a record label. Under such an operation and distribution mechanism, record companies and channels have great bargaining power. Last May, British musician Tom Gray launched a survey on Twitter about musicians' incomes. The results show that, on average, musicians receive only 16% of their streaming revenue, while record labels and streaming services receive 41% and 29% of total streaming revenue, respectively – meaning that the most direct creators get the smallest percentage of their overall revenue.

Of course, the above data is analyzed by music creators as a whole. If we further differentiate between different creators, we find another important problem, namely, the huge inequality in the distribution of income among different creators. Take spotify, the famous streaming app, for example, where 90 percent of the music royalties go into the hands of the top 1.4 percent of musicians, and the vast majority of musicians don't get any income from their work. Of course, this distribution pattern is partly caused by the difference in levels between creators. However, the income gap between the two is so high that I am afraid it cannot be fully explained by the difference in level. In reality, popular musicians have a greater advantage in negotiations with record labels and music platforms because they have a larger audience base, and can therefore get a higher share of music revenue, while those creators who are just starting out and have a smaller audience are also weaker in their bargaining power, so they get less from the income of works that are not much. It is the existence of this mechanism that will lead to the "Matthew effect" of more and less in the distribution of income in the field of streaming music.

Obviously, such an old operating mechanism will affect the creative enthusiasm of musicians to a considerable extent and limit the development of the entire music industry.

The financial difficulties of creators

From the perspective of the entire Internet industry, the problems existing in the field of streaming music are by no means unique.

From the very beginning of the Internet, it has been conceived as a place where human freedom is realized. According to some futurists, on an ideal Internet, most of the content should be created by users themselves. Microsoft founder Bill Gates, for example, wrote an article titled "ContentisKing" in the mid-1990s. In the article, he imagined: "One of the exciting things about the internet is that anyone with a personal computer and a modem can publish whatever they create. ”

However, due to technical conditions, at the beginning of the development of the Internet, this idea could not become a reality. At this stage, the content that people get online is mainly provided by some portals. Later, with the development of technology, the network became more and more interactive, and the Internet began to enter the Era of Web 2.0. At this stage, they can publish their own articles on blogs, upload their own photos on social platforms, make videos, create their own virtual buildings in games such as Second Life, and even freely publish their own software. "UserGenerated Content," or UGC, became a major component of Internet content in this era.

At first, users created their own content entirely out of hobby or passion. Later, a group of professional creators were separated from the general user population: some bloggers who loved to write blogs gradually became writers of public accounts, some amateur film editors became professional up masters, and some music enthusiasts became professional musicians... Behind these micro-shifts, the "Creator Economy" was also quietly born.

Thanks to the platform economy that has emerged at this stage, these creators can get a lot of support when they carry out their own creative activities. After the work is formed, it can be easily distributed and found at a very low cost to find its own potential audience. In this sense, the so-called "creator economy" is based on the development of the platform economy.

However, when creators rely too much on platforms, they also lose control of their work. With the exception of a very small number of big Vs, most creators do not have enough negotiating power when facing the platform, and it is difficult to get a reasonable income from their works. Not only that, but some platforms may also use their advantages to force users to sign some other unfair agreements, such as giving up the right to adapt their works in the future, or being forced to transfer copyright to the platform. But without these centralized platforms or intermediaries such as record companies that master key channels, they are unable to create and distribute their own works normally. The consequence of this is that their creative enthusiasm has been seriously hit, and the vitality of the creators' economy cannot be stimulated at all.

To turn this around, the creators have been working hard. They actively called on the relevant regulators to intervene and restrict the centralized organizations that control their fate, such as platforms and record companies. The "Brennan Act" mentioned at the beginning of this article is actually a response to this call. However, as we have seen, the effectiveness of such efforts is not obvious. It is precisely for this reason that more and more creators are beginning to hope for another path, that is, to fundamentally subvert the existing Internet and achieve the transition from Web 2.0 to Web 3.0.

Web 3.0 and the transformation of the creator economy

The most recent one of Web 3.0 originated in "chain circles". As an opponent of the increasingly centralized Internet, the "chain circle" people have always hoped to use blockchain and other technologies to break the monopoly of the centralized platform on the Internet, thereby returning control of the Internet to users. Therefore, in their eyes, Web 3.0 should be an Internet that users can have. On December 8, 2021, former U.S. Monetary Audit Office (OCC) Administrator Brian Brooks delivered a feature presentation at a hearing on "Crypto Assets and the Future of Crypto Assets and Finance" before the U.S. House Financial Services Committee, bringing the definition to Congress. Since then, this expression has become the most official definition of Web 3.0.

While popularizing the concept of Web 3.0, "chain circles" people are also actively using blockchain technology to practice the concept behind this concept. Obviously, this practice is also changing the creator economy in many ways.

(1) The creator will become the master of his own work

The idea of letting users own the property rights of the Internet actually existed at the beginning of the Internet, but for a long time, the relevant technology was not enough to support this beautiful idea. It wasn't until recent years, with the advent of blockchain, and technologies such as smart contracts, cryptocurrencies, and non-fungi-bleToken (NFT) built on it, that the idea became possible. NFTs, in particular, are essential for establishing property rights on the Internet.

Technically, NFTs can match an asset to a location on the blockchain. Taking advantage of the transparent, traceable, and hard-to-tamper features of the blockchain itself, people can use them to establish property rights to this asset. As long as the user owns an NFT, it means that he does have the appropriate control and control over the asset (or a right in the asset) – just as if we have a title deed, we can show that we own a certain house. Using the traceability of the blockchain, people can easily see the history of their assets' viewing, use, and circulation, and can claim corresponding fees from relevant personnel accordingly.

Whether it's a song, a painting, a text, or a UGC work in Minecraft, it's essentially an asset. Therefore, creators can use NFTs to confirm their property rights and directly put them on the blockchain for transaction. Since blockchain transactions are decentralized, peer-to-peer, creators can circumvent the control of those centralized characters very well, thus truly realizing autonomy in their own works.

After the emergence of NFT technology, it has been favored by creators. Taking the music creation circle as an example, in February 2021, Mike Shinoda, the lead creator of rock band Linkin Park, took the lead in making a piece of music he created into an NFT and released it for auction on the platform, and finally sold for $10,000. Shortly thereafter, the well-known DJ and producer 3LAU made 33 limited edition records into NFTs, which sold for a sky-high price of $11.6 million. Subsequently, NFTs quickly spread in the music creation circle.

Although on the surface, these cases are only a re-enactment of the story of the "head" artists getting high incomes, unlike previous stories, the income of these "head" artists is no longer obtained through a centralized platform. Similar operations, those "waist" and even "tail" creators can also follow suit. While their NFT revenue may not be too high compared to those of "head" creators, their revenue may still increase due to the high commissions of centralized platforms. In addition, when the complete property rights of their works are mastered through NFTs, creators are no longer worried about unreasonable requests such as the transfer of copyrights that the platform may make. Thus, in the unlikely event that their work explodes overnight, they will no longer miss out on these revenues by giving up their copyrights.

(2) Decentralized platforms will become a new force for support service providers

Although in theory, when blockchain technology and NFTs are available, creators can create and trade their own works, bypassing centralized platforms. But it must also be noted that if you leave the platform, the process can be inefficient. Just think, if a creator publishes his own work on the blockchain network without the corresponding matching and pushing of the platform, then the probability of him successfully finding his audience is very low. From this perspective, if the creator economy is to run smoothly, it would be unrealistic to completely abandon the platform.

How to resolve this contradiction? One possible approach is to create some new platforms, but no longer adopt the centralized operating model of the past. Specifically, people can adopt blockchain to transform the platform into a decentralized community co-operated by creators. At present, people have established many decentralized platforms to help creators with the help of blockchain and other technologies, such as Audius in the music field, VoiceStreet, Chingari for short videos, and Thirdweb, a creator tool platform, which are all well-known representatives.

We can take the music platform Audius as an example to illustrate how a similar decentralized platform works.

On the surface, general music platforms such as Audius and Spotify are very similar: users can browse hot singles and playlists or search directly. After logging in, they can further follow a singer as a fan, and they can also upload and publish their own works on the platform.

However, in essence, Audius is fundamentally different from traditional music platforms. As a decentralized platform in the Web 3.0 era, Audius is not operated by a centralized group, but a decentralized platform that runs on the blockchain. Its user information is stored on the Ethereum or Sorana chain, and the music and image data is stored on a self-built distributed storage network based on IPFS technology, thus achieving decentralization and immutable.

Without centralized leadership to regulate, Audius primarily uses blockchain-based tokens to incentivize users and govern the platform. As soon as each user creates a new work, the platform will automatically reward them with a certain number of tokens. Of course, the better the user's previous works, the higher the popularity, and the more tokens he can obtain through his works. This kind of measure ensures that users have a certain incentive to improve their creative level and increase their influence.

After the user obtains the token, a part of it can be pledged, thereby gaining the right to participate in the governance of the platform. Depending on the amount of token he pledges, he can get the corresponding voting rights. Theoretically, all questions about the development of the platform can be voted on on the blockchain. However, this seemingly democratic mechanism is actually problematic. On the one hand, due to the many problems in the operation of the platform, and the cost of blockchain voting is very high, it is actually very inefficient to initiate on-chain voting for everything. On the other hand, because the voting rights are distributed according to the number of tokens pledged by users, this makes the gap between the rich and the poor between users seriously affect the operation of democratic mechanisms, resulting in a situation in which a small number of rich users control the majority of poor users.

In response to these two problems, Audius cleverly designed a two-tier voting method. Specifically, Audius has created a forum where users can freely express their views and propose proposals that interest them. All users can vote in the forum to decide which issues need to be submitted to the chain for voting. Obviously, after such screening, only a relatively small number of issues may enter the on-chain voting process, and most of the disputes can be resolved by voting on the forum. Not only that, because the forum voting is completely based on the number of people to determine the result, even if some users are rich, pledge more tokens, and have large voting rights on the chain, the topics he cares about may be denied in the forum voting link. By designing this mechanism, Audius can effectively avoid being controlled by individuals or a small group, and the resulting risk of decentralization.

(3) "Sponsorship" will be the first driving force to support creators

If we have some knowledge of art history, we know that many of the famous artists in history have achieved success with the support of their patrons. For example, many famous artists of the Renaissance were largely sponsored by the Medici family, while many contemporary artists were sponsored by the Ullens. Intuitively, a similar sponsorship model should also be reflected in the content creation of the Internet.

However, this idea is not so easy to realize. In fact, the patrons of art history, while seemingly generous, also appealed. As long as these artists become popular in the future, they can get a huge reward from it. In this sense, this is actually an investment in disguise. So, under the conditions of the Internet, how can this model be reproduced? In the Web 3.0 era, with the help of NFTs, people can not only verify and realize their own income, but also write complex sharing terms between them and their patrons on smart contracts and run them automatically. In this way, people can easily earn income through sponsorship, and their enthusiasm for becoming a sponsor will increase accordingly.

A good example is AxieInfini-ty. In a previous column, we mentioned this popular gamification meta-universe product in Southeast Asia. In this product, users can cultivate a pet called Axe and use them to fight and earn income. It is worth noting that each Axie in this product corresponds to an NFT, so through the cultivation of Axie, the NFT can be promoted to increase in value, and users can also get income. Since both buying and nurturing Axie requires a lot of investment, this discourages many people who want to earn income from it. In response to this situation, some wealthy users have invented a "scholarship" model, through the prior financial sponsorship of some outstanding players, in exchange for their subsequent income from Axie's value-added commission. If we see Axie's cultivation as a continuous creation and re-creation of a certain UGC product, then this "scholarship" model is actually a sponsorship of creators.

Of course, similar sponsorship is not limited to games, in the fields of music, video, online literature creation, etc., this sponsorship model has been realized to varying degrees.

(4) "Memeticization" will stimulate people's greater creative motivation

On the Internet, a lot of content is done on the basis of predecessors. For example, many of the "ghost animal" videos we see on Station B are actually editing and recreating a certain movie. It is reasonable to say that subsequent creators should give them a certain amount of remuneration when modifying the works of their predecessors, but under the traditional Internet conditions, it is difficult to trace the history of the adaptation of the works, so this is difficult to achieve. In the Web 3.0 era, this problem can be solved to a certain extent. For example, based on Mirror and Foundation's revenue streaming function, users can not only clearly restore how many predecessor "memes" are based on the production of a work (Note: memes are the Chinese of memes. Memes can be roughly understood as "cultural genes") to be realized, and can also be directly through smart contracts, directly to the adapted object to give corresponding returns. In this way, doing originality can suddenly transform from a loss-making business into a business that can be effectively profitable, and people's enthusiasm for doing originality will be mobilized.

Combining the above four points, we can see that the opening of the Web3.0 era will likely have the effect of completely reshaping the creator economy, and a new creator economy may be on the way.

The Dark Side of the Force: Possible Problems with Web 3.0

In January 1996, Bill Gates wrote in Content Is King: "For the Internet to flourish, content providers must be fairly paid for their work." In this sense, Web 3.0 allows creators to grasp the property rights of their own works and obtain considerable returns from their works, which will undoubtedly make a huge contribution to increasing the content supply of the Internet and prospering the ecology of the Internet."

However, from the perspective of developing the content ecology, we also need to adopt an objective attitude towards the economic stimulus effect brought about by Web 3.0. It should be recognized that while this effect has a positive effect on the supply of content, it may also have a certain negative effect:

On the one hand, it may distort the creative motivations of creators, causing them to deviate from the pursuit of the value of the work itself while pursuing economic benefits.

Lin Qingxuan once complained about Gu Long's style of writing novels in an interview, saying that he loved to break sentences when writing things, and originally a good sentence always liked to be divided into many sentences to write, "'Dead vine' line, 'old tree' line, 'crow' line again." What's even more excessive is that the writer jumps off the roof one by one, bang bang bang... Eighteen lines". Jin Yong, who is also a master of martial arts novels, does not have this "fault". Why is there such a difference? In addition to the difference in the style preferences of the two people, there is also an important reason that Taiwan and Hong Kong have different methods of calculating the manuscript fee, Taiwan is calculated according to the line, while Hong Kong is calculated according to the word, so Gu Long has an incentive to make more lines in order to earn more fees.

This is still the case with martial arts masters, and even more so with general content creators. If the economic incentives are strong enough, they may have a great impact on their original creative style. For example, many of today's metaverse products (such as the early Second Life, later Minecraft, etc.) have UGC products. Originally, these UGC products had no exchange value, so the creation of UGC products by users was also based on their own interests, which gave birth to many interesting products, which in turn prospered the ecology inside these metaversics. However, when some metaverse products introduced NFTs, allowing users to earn revenue by exchanging their own UGC products, the quality of UGC products produced by users in these metaverses declined. In order to get more income, many users will pursue the number of products more, or turn to the production of more "vulgar" and more expensive products, while those who have their own style pursuit and adherence to the process of "bad money expelling good money" slowly left.

On the other hand, the value of content in Web 3.0 is mainly reflected through NFTs, and people's over-hype of NFTs will bring a lot of negative consequences.

In its original sense, the NFT of the work is the title certificate of the work on the blockchain, so like the real property certificate, its value should of course be determined by the value of the work behind it. However, perhaps because people do not yet fully understand the nature of NFTs, or perhaps for some other reason, the current value of NFTs is largely deviating from its proper value. For example, the early "crypto cat" NFT and later the "boring ape" NFT, the works behind them are just very simple pixel pictures, and their value is obviously impossible to match their corresponding sky-high prices. As for the reason for this serious divergence between value and price, it may be difficult to find a better explanation than hype.

Some argue that NFTs are a new thing, and that some appropriate hype will help raise awareness of them in the early days of their emergence, thereby accelerating their popularity. This view may be correct, but if this hype is too much, it will not only make people lose confidence in the new tool of NFT, but also lead to too strict regulatory policies by the relevant authorities, and ultimately make creators lose the opportunity to use this tool. From this point of view, in order to ensure the sustained and healthy development of the creator economy, we must of course affirm the value of tools such as NFTs and give full play to their role as much as possible, but we also need to pay enough attention to the excessive praise and hype about NFTs.