In his book, Who Owns the Future, Jaron Lanier discusses the idea of real-time income and wealth generation. He presents the topics through the lens of sharing songs in the music industry, but the principle applies to today’s sharing economy.
Copying a musician’s music ruins economic dignity. It doesn’t necessarily deny the musician any form of income, but it does mean that the musician is restricted to a real-time economics life. That means one gets paid to perform, perhaps, but not paid for music one has recorded in the past. It is one thing to sing for your supper occasionally, but to have to do so for every meal forces you into a peasant’s dilemma.
The peasant’s dilemma is that there’s no buffer. A musician who is sick or old, or who has a sick kid, cannot perform and cannot earn. A few musicians, a very tiny number indeed, will do well, but even the most successful real-time-only careers can fall apart suddenly because of a spate of bad luck. Real life cannot avoid those spates, so eventually almost everyone living a real-time economic life falls on hard times.
Who Owns the Future, Jaron Lanier
The hope is that creators can make a living from what they create and do so in a way that allows value from previous creations to drive development of the next. Without insurance, musicians may have to record new albums while on a concert tour instead of taking time away from concerts to create new songs. Yet the issues of real-time income are not scoped to the music industry, as they have found their way into many social media driven businesses.
Twitch is a video game streaming platform that runs on virtual subscriptions, much like Netflix. However, instead of subscribing to Netflix to unlock all content on the service, Twitch subscriptions are to individual creator’s channels (like Ninja’s).
Imagine paying $5 a month to watch Stranger Things and another $5 a month to watch Orange Is the New Black (plus additional $5 for every other show you want to watch). Would you pay for such a subscription? Sure you could subscribe for a weekend to binge watch an entire new season, but what is your incentive to stay subscribed to Stranger Things while the next season is in development? The show is “off the air” for over a year and you only get to watch re-runs in return for your subscription.
Aggregate movie and music subscription services like Netflix and Spotify garner a recurring subscription fee because there is consistently new content, even if it’s not always from your favorite show or artist. You can watch the entire back catalog of hundreds of other shows, while you wait for the next Netflix original to season to be released.
The economics work a little differently for singular channel subscriptions on Twitch, but the underlying struggle to maintain attention remains the same. There is no monthly subscription to Twitch.tv. Access to all Twitch content is free and ad supported, and viewers can subscribe to multiple streamers’ channels, each with a $5 subscription (or more depending on tier). Because all the content comes from a single source, creators must supply a near constant stream of gameplay to maintain relevancy and keep subscriber count high.
Right now, Tyler Blevins (aka Ninja) is the most popular source of gameplay on Twitch and the biggest name in video gaming. He rose to super-stardom in less than a year with the popularity of Fortnite, but his way to the top was not immediate. He’s been at it non-stop for eight years, yet even after such a level of investment, his future success still hinges on him showing up to stream games every day.
Blevins compares himself to the owner of a small business, and the only product is Ninja. He weighs every decision to leave his computer — to travel to a celebrity-heavy event like the Pro-Am in Los Angeles or even to visit family — against the financial repercussions
There’s the constant threat of fading popularity. “The more breaks [streamers] take,” he says, “the less they stream, the less they’re relevant.”
Fortnite legend Ninja is living the stream via ESPN
By default, Twitch creates a business model that plants its creators squarely in a real-time economics life. Ninja and the most popular streamers have some level of recurring revenue through a back catalog of highlights uploaded to YouTube, but staying current is of utmost importance. Attention is fickle and people will quickly find ways to spend their time elsewhere. Over the course of a weekend, Ninja lost thousands of subscribers (equating to nearly a quarter million dollars in lost revenue for the month).
“I lost 15,000 subs yesterday,” he says. Even though he’s headlining today’s celebrity event, because he’s not livestreaming on Twitch, he’s losing subscribers — 40,000 of them, to be exact, by the end of the two days he’ll spend in LA
Yet, his hard work is paying off as Ninja is currently bringing in close to $1 million a month from Twitch subscriptions, donations, YouTube revenue, and sponsorships (up from ~$80,000 in 2011), but others in the long tail of Twitch success are not in such a fortunate position. Streamers and YouTubers are working just as hard, just as often as Ninja and still not at the level of 2011 Ninja. And all Twitch stars are worrying about what comes next.
Say this ends tomorrow, we don’t have enough for the rest of our lives. I tell Jess, “Honey, we’re not going to have that much quality time this year, or even next year. But if we do this right and I continue to grind for a couple more years, we can set ourselves up, and our family and our family’s family, for the rest of our lives.’
Ninja isn’t the only one making waves for tremendous individual online success. Compare the story of the biggest new entrant in the world of sports and with the work of fashion mogul and world’s youngest billionaire: Kylie Jenner. Both have tremendous followings and leverage their social media influence to build greater notoriety. The difference is in the kind of work they do.
Kylie Jenner is different than other pure social media stars who rely almost solely on ads and sponsorships, whereas her main source of income comes from her business that sells products (not just brand merchandise). She pieced together various technology services to generate supply, ship orders, and orchestrate the operation from her social media accounts. Instagram and Snapchat are tools in her business strategy rather than arbiters of wealth such as YouTube and Twitch on which so many (like Ninja) rely for their livelihood. And what’s the result? Jenner has transcended all other social media influencers. She is not just the most popular social media icon, but the most business savvy (by far). One can imagine she is the first of many to come.
Forbes wrote an article detailing Jenner’s business success in August:
Kylie Cosmetics launched two years ago with a $29 “lip kit” consisting of a matching set of lipstick and lip liner, and has sold more than $630 million worth of makeup since, including an estimated $330 million in 2017. Even using a conservative multiple, and applying our standard 20% discount, Forbes values her company, which has since added other cosmetics like eye shadow and concealer, at nearly $800 million. Jenner owns 100% of it.
Her near-billion-dollar empire consists of just seven full-time and five part-time employees. Manufacturing and packaging? Outsourced to Seed Beauty, a private-label producer in nearby Oxnard, California. Sales and fulfillment? Outsourced to the online outlet Shopify. Finance and PR? Her shrewd mother, Kris, handles the actual business stuff, in exchange for the 10% management cut she takes from all her children. As ultralight startups go, Jenner’s operation is essentially air. And because of those minuscule overhead and marketing costs, the profits are outsize and go right into Jenner’s pocket.
How 20-Year-Old Kylie Jenner Built A $900 Million Fortune In Less Than 3 Years via Forbes
To compound her success, contrast Ninja’s schedule with Jenner’s. To maintain the Ninja audience, Tyler and his wife Jess keep a tight schedule of 12+ hour days.
They typically spend half an hour together in the morning, then he streams, usually for about six hours while she takes business calls. They take a break around 4 p.m. before he gets back on the stream around 8 p.m. for another six hours. He goes offline one day a week, which they call a “date day,” though recently they’ve been skipping it because he’s been so busy.
And Kylie Jenner?
Basically, all Jenner does to make all that money is leverage her social media following. Almost hourly, she takes to Instagram and Snapchat, pouting for selfies with captions about which Kylie Cosmetics shades she’s wearing, takes videos of forthcoming products and announces new launches. It sounds inane until you realize that she has over 110 million followers on Instagram and millions more on Snapchat
Which job would you rather have? For Jenner, certainly there is more work involved than just posting photos, but the idea remains the same. Her business will continue to operate even when she is not online. Instagram posts can continue to bolster sales, but there is less of a risk of loosing 20-40% of your customers in a weekend.
Yet, like Ninja, Jenner is not immune to the risks of fleeting interest.
It seems far-fetched to think the brand, whose customers are mostly women ages 18 to 34, will last that long, much less independently. Especially with a business tied to the fickle world of personal fame. Stars fall out of public favor or lose interest.
“All of them could change their minds,” Shannon Coyne, an equity research analyst at BMO Capital Markets, says of the influx of celebrity makeup entrepreneurs. “Kylie seems to want to create this beauty empire, but anything can happen, and she’s so young.”
When you can make such quick cash, who needs a big exit? Kylie Cosmetics has already generated an estimated $230 million in net profit.
In either case, both Ninja and Kylie Jenner are doing well for themselves, but it is worth considering the leverage applied to scaling a business. While the next big thing in gaming or fashion may dwarf the current leaders in popularity, maybe future business minds should focus less on “the grind” and more on creating things that last.
Antifragile by Nassim Taleb
Perennial Seller by Ryan Holiday
(Somewhat) Unrelated reading
Crazy Rich Asians by Kevin Kwan