Tobold's Blog
Wednesday, May 10, 2023
The creator economy

Because videos about new games appear faster on Twitch than on YouTube, I've been watching a lot of Twitch streams about Age of Wonders 4 lately. And, with me always interested in economics, that provided some interesting insights. First of all, Twitch is a lot more heavily monetized than YouTube. I have a "YouTube Premium Lite" subscription, which costs $7 per month, and that turns off all advertising on all YouTube channels. On Twitch, advertising is per channel, which means you would need to subscribe to all channels you follow, at $4 each, to get rid of all ads. Twitch also has tier 2 and 3 subscriptions for $8 and $20 per month, as well as "cheers" using paid for "bits", plus the possibility to gift subs. Links to other services that allow donations to the streamer, like Patreon, are also frequent.

At first glance that appears a bit strange. Compared to $10 basic (without ads) Netflix subscription, a $4 Twitch subscription, and especially the higher tiers, seems overpriced. $4 to see a single content creator's stream ad-free, who can't possibly stream 24/7, doesn't seem like good value for money. But observation shows that subscriptions and gift subs are quite common, even on smaller channels that don't have thousands and thousands of viewers. So what is the motivation for voluntarily giving a content creator money, if you could just watch his content for free with ads?

I think the secret is the parasocial interaction we have with content creators. Just like with celebrities or even fictional characters, we think that we know these people, that they are our friends. But in reality the relationship is one-sided, the person we think we "know" is barely aware that we exist, and the facet we've seen is very limited. Between that imaginary friendship, and the equally imaginary "community" in chat, we are tempted to show our appreciation with those subscriptions and gift subs. It is a quick way to achieve a perceived "status" with the creator and his audience. Which is why nearly all Twitch streams reward those subscriptions and gift subs with some sort of positive feedback, prominently showing it over the stream, and awarding special chat emotes to subscribers.

In a world where increasingly everything is subscription-based, that is somewhat dangerous. Companies and individuals want your subscription because they know you are unable to keep track of everything. It isn't easy to actually know how much you spent on subscriptions this month, as the payments tend to be at different times and possibly via different channels. Already a lot of people spend more money on a bundle of commercial streaming services than they used to pay for cable TV. "Cutting the cord" doesn't necessarily mean saving money. And if you start to subscribe to a bunch of Twitch content creators as well, you'll end up with extremely high cost for entertainment, without even being properly aware of what you are spending. The creator economy has been estimated to have surpassed the 100 billion dollar mark in 2022. Are we really getting our money's worth here? Or are we paying for imaginary friends?

What's wrong with paying for imaginary friends? If the result is that you feel better about yourself or happier or more satisfied with your life, then it's money well spent, isn't it? Since it's a subjective relationship, the fact that it's non-reciprocal isn't relevant.

On the subject of ads, though, I don't know about Twitch but on YouTube there is absolutely no need to see ads at all, is there? I feel like I've said this in a comment here before but I'm very confused as to why you or anyone would pay money to have the ads switched off when there are free and, as far as I'm aware, perfectly legal add-ons for both desktop and mobile YouTube that block all ads. I use them on my PC and on my Kindle Fire and don't see any ads at all. I'm not sure why I'd need to pay $7 a month for the same service.
My problem is that my main viewing device is an Apple iPad, not jailbroken or anything. I think there are ad blockers for the Safari browser, but those don't seem to work on the YouTube iOS app.
Correct, the ad blockers only partially work on the browser apps and youtube would be more than dumb to allow third party tools to block their revenue stream.

On the topic of paying for streams and getting recognized: it depends on the size of the stream.
With smaller channels you have more personal interaction than in a larger one where chat just scrolls past.

The higher subscription tiers usually don't add anything important on twitch but sometimes come with other perks like exclusive discord channels where you then have again a smaller group and are recognized again.

I don't agree on the comparison with a Netflix subscription. That's saying that the content doesn't matter. Yes, you get 24/7 access but once you have binged the shows you wanted to watch, you are left with 24/7 access to stuff you don't care about.

There is a dangerous parasocial component to it, sure, but that can be said about many situations in life where your perception doesn't match reality. Like when does something become an actual community?

Cutting the cord was better when Netflix launched and big studios would sell their rights - but as Netflix became popular, the studios wanted a bigger share of the pie and would not easily sell to a competitor. So that's why we now have Disney+, Paramount+ and all the others as their individual subscription. Which works if you are only interested in one category, but if you want all the top movies or shows, then you need all the subscriptions. If that's worth it, is up to the individual in my eyes.
I think there is also a Company VS People. WHen I subscribed to YouTube, I am giving money to Youtube to remove their ads. WHen I am suscribing to *whatever streamers* I am paying this subscriber so he/she can still produce their content.

In one case, I am paying the author ( with a cut from the distributor) while in the other I am paying the distributor and he used a part of it to retribute author for their number of view, not specially the author I am interested in.

It could be a strong marketing move from YouTube : replace YouTube Premium by YT Supporter (or whatever name) where 70% of what you pay is distributed to whoever you chose. My guess is the smaller cut YouTube received will be replaced by a large increase in the number of subscriber.
Substack may be similar. A single blogger / journalist might not produce enough content to really justify the subscription, but you are probably in part donating to somebody fighting for a cause you care about. Same goes for Patreon etc.
Google recently announced they will be blocking AdBlocker on blocker and are already testing it for some users. While it's only a matter of time before someone gets around it, this is likely to become an ongoing war that drives more people to subscribe to YouTube to just get rid of advertisements.

I think the Twitch individual subscriptions and payments are generally overpriced, unless you have a desire to specifically encourage that content. To me, it is no different than paying into their Patreon as far as that goes. (Of course, paying through Twitch may have a different revenue share, and would likely cause Twitch to be more likely to push a channel that is bringing in revenue.)
Youtube already does per channel style membership called Joining. Not everybody sets it up and I don't actually know if it turns off ads for that channel for you.
The nice thing about a twitch sub is that's it's not automatically recurring. At least, not yet. So, you don't have to worry about forgetting about a sub and it perpetually charging your account. Each month you need to decide whether to renew, which is why streamers give extra perks to those who continue to renew.
I agree
The equivalent for the YouTube subscription is Twitch Turbo,
Twitch don't seem to promote this service, but it's been around a while.
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