Pay for What You Want
A wave of new companies are crushing it with non-traditional business models.
These contenders are generating revenue from consumption, and by doing so they are providing creators with opportunities for unprecedented success.
I’m talking about Cameo, Patreon, Substack, and OnlyFans.
Consumers are paying in correlation with consumption and not negligence.
Consider gyms. At a fundamental level, they’re better off with more members and a high percentage of members not showing up regularly. If every member of a gym decided to workout simultaneously, it wouldn’t end well.
Similarly, writers for major media outlets are not directly monetizing their audience. If you’re the reason why many people are reading the New York Times, you’re not necessarily getting paid in line with how people value your work. People are paying for the newspaper as a whole. In these instances, in-demand writers have wholesale transfer pricing power.
That’s why many content creators are moving to Substack. They’re able to directly monetize their audience by putting their content behind a paywall and charging a subscription fee. The unit economics of this are interesting. You’d already have an established audience, so customer acquisition cost isn’t a huge issue, but you’d still have to worry about factors like churn.
With this large-scale unbundling of traditional companies, there are more opportunities for winner-take-all effects. This is where we see power laws come into play. The New York Times offers coverage of arts, culture, real estate, business, finance, sports, etc. A little bit of everything. Why subscribe and read only a sliver of content when you can subscribe to a finance writer’s Substack, your favorite podcast host’s Patreon, and get Cameos from celebrities?
We’re destined to see a couple of winners earn a massive percentage of revenue in each of these areas. Becoming a successful content creator takes a lot of skill and even more luck. If you’re interested in learning more, there’s an excellent article from 2007 titled Is Justin Timberlake a Product of Cumulative Advantage? One paragraph says:
When people tend to like what other people like, differences in popularity are subject to what is called ‘cumulative advantage,’ or the ‘rich get richer’ effect. This means that if one object happens to be slightly more popular than another at just the right point, it will tend to become more popular still. As a result, even tiny, random fluctuations can blow up, generating potentially enormous long-run differences among even indistinguishable competitors -- a phenomenon that is similar in some ways to the famous ‘butterfly effect’ from chaos theory.
From my understanding, that’s why a tiny few are dominating the competition on OnlyFans. It’s also partially why people are funneling into Gamestonk.