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Source: The post on the Creator Economy has been created based on the article “In the wings: The Creator Economy” published in “Business Standard” on 4th December 2023.
UPSC Syllabus Topic: GS Paper 3 – Indian Economy
News: The article discusses the advantages of the creation of a creator economy based on NFTs and Blockchain.
The internet was supposed to democratise the sharing of information and give everyone the power to share their ideas or do transactions. However, it is getting dominated by a few big corporate players.
The reason for this dominance is the lack of understanding of the force of network effect. Competition policy legislation worldwide hasn’t been updated to effectively regulate competition in the era of network effects. As such, the force of network effects quickly leads to industry dominance by a few players that have the money to grow the network.
What is the network effect?
The network effect is a business principle that illustrates that when more people use a product or service, its value increases. The network effect significantly applies to digital platforms. When the internet became more widely used, more people relied on it to conduct work, deepen personal connections, and for research and other functions.
Social networks such as Facebook and Instagram are key examples of the network effect. The more people that use the platform in an individual’s network, the more likely it is that individual will use the platform, too.
What is the creator economy?
The Creator economy is an internet-facilitated economy that allows content creators and influencers to earn revenue from their creations.
Examples of creator economy software platforms include YouTube, TikTok, Instagram, Facebook, Twitch, Spotify, etc.
What technologies is the creator economy based on?
Two technologies underpin the creator economy:
1 Non-Fungible Tokens (NFT)
NFTs, or non-fungible tokens, are unique digital items stored on a blockchain. Anything digital – images, videos, music, online versions of various articles – can be converted into an NFT and monetised.
More on NFTs here.
The NFT verifies ownership. It also removes the necessity for middlemen (such as music labels (like T-Series)). This allows creators to sell directly to their audience, enabling them to keep a larger share of their earnings from their work.
2 Blockchain Technology (BCT)
Blockchain is a decentralized, distributed ledger technology. It is a chain of blocks, where each block contains a list of transactions. It is shared and duplicated for everyone on the network to see it. This makes it difficult to change anything in the record without others verifying the transaction, making it very secure and trustworthy.
NFTs are stored on blockchain. Use of blockchain ensures that storage is decentralised such that no single person or group has control; instead, all users collectively retain control.
More on Blockchain Technology here.
What will be the possible advantages of the creator economy?
No Need for Intermediaries: It will eliminate the necessity for intermediaries by allowing creators to leverage digital platforms to produce and distribute their own content, products, or services.
Direct Relationship with Audience: By removing the intermediaries, the creator economy fosters direct relationships between creators and their audience.
Democratisation of Creativity: Entry barriers (such as the cost of being onboarded by an intermediary) will diminish, enabling individuals to become creators with minimal initial expenses. This democratization will foster a broader range of voices and content, challenging the established traditional media structures.
Creative Independence: Content creators will have the freedom to generate material that resonates with their vision and values.
Attract New Audiences: It will draw in fresh audiences searching for genuine and specialized content that might not be easily accessible through conventional media channels.
Multiple Fields: This model can extend to all kinds of services: Financial, legal, medical, educational, technical, and others.
With the rise of the creator economy, countries must undertake substantial legislative innovations to adapt to this evolving landscape and reap its full benefits.
Question for practice:
In the wake of rising digitalisation of India, the creator economy has risen as an avenue of multiple opportunities. Elaborate.
