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Gen-X bankers warn Gen-Z content creators: don’t give up the day job

Within the past few weeks, two rivalrous, chunky primers on the present and future of the global creator economy have landed in investors’ inboxes: one from Goldman Sachs, the other from Citigroup.

Both are sublime examples of what happens when Generation X bankers try to quantify the financial opportunities for Generation Z of the offspring of Generation Y approaching teenagehood as members of Generation Alpha. Readers may reach the final pages of either report unsure whether they work best as multi-asset investment manifestos, or career advice for an ambitious 10-year-old.

Taken as the latter, it may, even now, be better not to give up the day job — or on the idea of getting one. Money from brands and other marketing may flow impressively and towards elite influencers. But this thrilling economy of monetised, democratised content, one of the reports warns, has not created its own middle class.

By their nature, reports like this itch to move quickly from context (pandemic-accelerated explosion of short-form video/ self-published music/ cooking demonstrations/ educational reels/ podcasting) to bedazzlement (gasp-inducing revenue projections and a sense that everything everyone knew is changing). 

Both open with their definitions of the creator economy. Goldman has it as an “ecosystem whereby individuals create content for digital consumption with the goal of building an audience and monetising their brand”. Citi runs with something similar, noting that all this barely existed five years ago. Both acknowledge significant methodological issues in where the boundaries of this economy should be drawn, where there is overlap across platforms and what numbers make most sense.

But the top lines feel substantial. Goldman, assuming a current worldwide creator population of 50mn (of which it designates 96 per cent as “amateurs” earning comparatively little and 4 per cent as “professionals” making more than $100k per year), places the total addressable market of the creator economy at $250bn. It reckons that this economy — whose growth will be propelled by short-form video and in which it lumps digital advertising spending and influencer marketing — could grow to $480bn by 2027. That’s roughly the gross domestic product of Vietnam.

Citi, meanwhile, takes the view that there are more than 120mn content creators worldwide, generating roughly $60bn of revenue now and $75bn by 2024. In sizing this economy, Citi opts to exclude social media platforms such as Facebook, Instagram, TikTok, Pinterest, Snap and Twitter — indisputable hives of user-generated content, but with less honey for the bees. While some of these disburse payments to creators from specially designated funds, argues Citi, the platforms do not generally share revenues directly with the content creators.

Where things get either exciting or demoralising is in the share of net revenues after creators have paid the fees exacted by platforms. As both reports conclude (though from different angles), a creator’s average net income is inversely proportional to the number of creators using each platform. A writer for rarefied Substack generates an average of $25,000 per year, but the average for a content producer on behemoth YouTube is $150.

Behind these averages, though, is a quite stunning concentration of revenues on a small number of creators and a yawning gap where a “middle class” of fairly decent income might ideally be. The Pareto Principle guides the calculation of many phenomena to the idea that 80 per cent of consequences derive from 20 per cent of causes. Not, says Citi, in the creator economy where, for example, 90 per cent of Substack revenues come from less than 10 per cent of writers. The same 90/10 ratio holds at the streaming service Twitch and 90 per cent of YouTube subscribers come from less than 5 per cent of channels. Over two-thirds of Patreon revenues come from 3 per cent of creators.

Even Hollywood, in its notorious worship of the superstar and the blockbuster, is not this concentrated: in 2019, 70 per cent of global box office receipts came from roughly 20 per cent of films.

For the purposes of Goldman, Citi and any other brokers selling this story to investors, these ratios are not a problem: they militate towards potentially fabulous growth for the platform providers. The spectacle of a few creator megastars earning huge sums — and the apparent randomness of who enters that elite — will continue to generate new creators, and an endless deluge of new content for which the platforms pay almost nothing.

The odds look less pretty for the 10-year-old. While alternative revenue models may alter the creator economy again in the coming years, the game is nowhere near as democratic as it seems.

leo.lewis@ft.com

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