Distributors and platforms make more money from digital content than its creators. Here’s how we could change that so everyone wins (including consumers).
Many musicians, authors and writers are complaining it has become harder to make money when their content is published on digital channels and platforms, even though it is typically cheaper to publish digitally. Influencers have become important on social media, but over time, the life of online influencers has become more difficult. Right now, distributors dominate the market with their powerful tools. However, consumers and creators could be in a better position if they have better platforms and are able to utilize their own data.
For many businesses, there are simple trend charts illustrating how their business has changed over time, the impact of digitization, and who dominates the value chain. But when you start to analyze the content business – especially the digital content business – it actually gets very complicated.
I wrote earlier about winning strategies for the streaming business. One fundamental observation is that the TV and content businesses are constantly changing. And if the past is any indication, there probably won’t be a single winning strategy. As the market constantly changes, there will be several successful strategies based on different combinations of content, distribution, bundling, and partnerships.
Changes and complexities
The music business has changed a lot, especially since Spotify and other streaming services came to dominate the market. Many artists and bands make a significant part of their revenue from concerts and merchandise because the amount they earn from streaming revenue can be quite small. As I wrote earlier, physical items can also be important in the digital business.
We have now also seen deals where well-known artists sell the rights to their entire song catalogs. The reason is simple: at a time when royalties from physical CD sales or radio airplay are going down, and streaming pays very little in comparison, there’s more money in selling the lot for an immediate and hefty cash return. It’s mostly been older artists keen on a large retirement nest egg who have been selling their song catalogs, but some younger artists are doing the same. Of course, this only really works for really popular music artists with really large song catalogs– for most, it’s not really an option.
For authors and writers, the publishing landscape is also complicated. Many magazines and newspapers now have to pay writers less. Ebooks and audiobooks are a growing business, but printed books still dominate the market. Generally, authors get higher royalty rates from ebooks than print books. But that doesn’t mean they make more money from them. The sales prices of ebooks and audiobooks are lower, and it is not easy to sell high volumes of them. Medium is a platform for writers to monetize content, but the only ones making money there are mainly some big names or writers who focus on popular click titles.
Self-publishers and influencers
Self-publishing has become quite popular and there are many services for it, including Amazon. It is also easy to self-publish music. Self-publishers can claim most of the revenues for themselves. But they also have to spend more to finalize and publish their content. For example, traditional book publishers will cover the costs of things like editing, layout, cover design and marketing. With self-publishing, you have to do (and pay for) all of that yourself.
The reliance on influencers as marketing channels has been increasing in the past years. Influencers – i.e. people who are somehow celebrities or otherwise have been able to gain a lot of followers on their social media channels – make their own content and, at the same time, promote products from the companies that pay for them.
Most recently, there have been reports and studies (e.g. from Vogue and Linkfluence) indicating that this market is also changing. For example, people respect influencer experiences more when, for example, they learn from people who have actually used a certain product, rather than just being paid to promote it. So, the models for influence marketing are also changing, while influence marketing itself is also becoming more fragmented.
We’re also seeing a greater emphasis on high-quality content (even though the criteria for what counts as “high quality” is of course subjective). For example, Bob Iger, who returned to the top position at Disney, has said that top-quality content is the most important thing in their business. He says that there are many ways to distribute the content and these are changing, but quality content is something that always matters and also keeps value over time.
Why the content market doesn’t work properly
All this is interesting when we think about it in terms of earnings and business models. It looks like there is a market for quality content, yet it is hard for content creators to make money from it. Does this mean the market doesn’t work properly, or does it mean something else?
We can identify at least some issues explaining why it is hard to make money from digital content:
- The market is very crowded. It’s not easy for consumers to find top-quality music, books, videos or articles from the self-publishing space. This means that distributors and media companies have quite a lot of power to select which content to promote. They’re also the ones who now dominate the market and the relevant customer data.
- Markets are getting more fragmented. There are more people making and publishing their content, and they can find their own niche audiences. They might make a reasonable living with this, but they don’t make big money like famous artists. This also divides the market (as digitization has done for many markets) so that are mainly a few megastars and lots of small stars with their own niche communities, but few middle-tier stars.
- Digitization and platforms have become especially important in terms of changing the middle-man business, e.g. distributing and selling items. This means strong distribution platforms have quite significant power in the value chain now. But this can change if content creators and consumers could access more powerful technology and platforms to optimize their own activities.
This last point is very interesting because it can open new opportunities for innovations and disruptions.
Power to content creators and consumers
Take the consumer side of the equation, for example. Right now, content search is mainly dominated by content distribution platforms (Amazon, Spotify, Netflix, etc.) that have the power to decide what they want to publish, promote and highlight in your recommendations and search results.
But what if consumers had better tools to find exactly the books, music and films they’re interested in? The business could look very different if a consumer could use their own preference and history data to search for content from all content platforms in the world, including self-published, and then pay for and consume it as easily as they can from the leading platforms today.
The same goes for the content creation and publishing side of the business. Those who publish content need better platforms to create top-level content (to include covering the roles traditionally played by editors and publishers), make it available, get it to consumers and distributors, monetize it and protect the copyrights.
For example, it’s not easy for an individual to sell content through many channels, handle royalties in each of them and track users based on copyright licensing. Most probably, this kind of platform would need some mega-star content to make its breakthrough, but then it could rapidly grow to serve the long tail of content creators.
We need better tools and data, not just good intentions
We’ve already seen some blockchain projects to create this type of platform. However, quite often, they have been too blockchain-oriented (or more interested in making quick money with their cryptos) and haven’t put enough effort into getting the market really to work or offer an excellent user experience for users. These platforms must really get all details right to work well. It takes a lot more than a good idea and nice visions (“we’re democratizing the market!”).
It is clear that digitization decreases the costs of many operations in the content business. That lowers the barrier to entry, but it also means a more crowded marketplace, making it hard to match demand and supply. The ones who dominate this market now – distribution and sales platforms – are the ones with the data. And of course, it is not their interest to change the market – they have the best weapons.
But consumers and content creators can have more power in this market when they get better tools and can also better utilize their data. This is an opportunity to build better platforms for consumers and content creators and empower them in the value chain. But this is possible only when those platforms can offer a superior user experience; good intentions are not enough.