The Overlooked Levels of the Creator Economy

Originally published on Future, Andreessen Horowitz media publication, on November 10, 2021.

It seems like everyone today is a creator — whether artist, developer, or other individuals following their craft — yet the creator economy still has room to grow. Despite being a multibillion-dollar market fueled by over 50 million people, this movement is much deeper than its monetization platforms, and bigger than the small percentage of people who are able to make a living off their creative work.

There are unspoken, often overlooked levels to this new economy; the playing field for creators remains uneven and replicable success stories are still far between. So what’s missing? Those that group all “creators” together risk missing out on the next phase of opportunities: particular tools that help breakout stars grow their business, improve the quality of their content, and offer bespoke resources to solve specific pain points. To help creators level up, tool builders will need to consider the levels of creators in a more nuanced way. Today, those levels are too often underserved by technology.

The case for more tailored creator tools

When the Web 2.0 era of social media kicked off in the 2000s, more people than ever turned hobbies into careers. Amateur photographers used Instagram to become professionals. YouTube turned workout gurus into fitspo influencers. SoundCloud turned amateur artists into chart-toppers.

But for each success story, there are dozens of creators who merely gained a new hobby, and hundreds who tried to make a living off their work and suffered from burnout. It’s a classic case of the 1 percent rule, in which a select few get all the rewards.

This dynamic is true for most competitive fields. But this divergence should also force businesses and platforms in the creator economy to be clear about who they set out to serve: Are they enabling the 99 percent to chase their childhood dreams? Are they helping the 1 percent build stronger businesses? Or are they working with the 0.1 percent (and the 0.01 percent) of creators to expand their wealth? Each of these groups has different pain points. Some of those pain points get overlooked because the total addressable market does not reach billions of users.

But much like the creator economy itself, solving those unique pain points can be lucrative if creator platforms serve a niche audience.

Each creator level is its own economy

A startup founder raising a pre-seed investment round would likely not reach out to a private equity firm for an investment. Both founders and investors understand the requirements behind fundraising stages. Similarly, the creator economy has its own levels that require creators and companies to match each other’s needs for the most effective outcomes.

Level 1: Hobbyists are typically those who create content for fun or on the side.

As tech continues to lower the barriers to entry for creators — in audio, for example, through tools such as Anchor, which makes it easy to launch a podcast; Descript, which makes it easy for anyone to edit a podcast; Splice, which lets anyone create music with royalty-free samples; and so on — more such hobbyists will emerge.

The big pain points at this level are that these folks either don’t have the time or money to invest into their business or lack distribution and marketing. Often, they struggle to to reach a certain level of production value or quality content, too. The fact is that the majority of hobbyists will remain hobbyists, and only a small number will earn enough to start making a living off their work.

Level 2: Full-time creators are those who can support themselves with their creative work.

The platforms that host these creators often share success stories of the people who started as hobbyists, used their platforms, and quit their day jobs to go all in. (I would know!) They’re a step ahead of the hobbyists in terms of sustainable cash flow, but are not so far removed from Level 1 that they aren’t relatable.

Creators’ pain points at this level are usually inexperience running a business, which takes time away from creative endeavors, as well as the lack of time and resources to market their work.

Level 3: Stars are those who can typically form partnerships with external brands, such as media companies, record labels, publishers, and others to maximize their reach.

The biggest challenge here is maintaining fame and relevance; there can also be potential brand crises that cost those creators their partnerships and even livelihoods. In terms of leveling up, the real pain point is figuring out how to leverage one’s brand into business and financial success.

Level 4: Moguls are those who build businesses that not only evolve, but have staying power, outliving the creator themselves.

Take Rihanna’s Fenty, Gwyneth Paltrow’s Goop, and so on. When Beyonce Knowles said “my great-grandchildren are already rich,” this is what she meant! For obvious reasons, this is the hardest level to attain.

As with any such hierarchy, it’s natural to assume that someone at Level 3, for instance, is more successful than someone at Level 2. But that’s not always the case, due to different definitions of success, as well as the tradeoffs creators make at each level. Some independent hip-hop artists, for example, earn more than artists signed to major record labels. There are comedians who make great money independently without outside capital or HBO deals.

The distinction between Level 2 and Level 3 therefore correlates with different forms of success, but also depends on the creator’s values. Those who want fame and ubiquity, for instance, often push to be stars even before they earn enough as full-time creators. Those who value profitability and control may hold off on that. It’s a classic case of, “Do you want to be rich or be king?”

For those who become stars, their success becomes dependent on fame, which feeds a constant (sometimes virtuous, sometimes vicious) cycle to maintain relevance and maximize any opportunity.

The mogul mindset

Much of the above is my own lived, and closely observed experience. As the founder of Trapital, I’ve studied how hip-hop artists build their businesses, the common challenges they face, and what it takes to level up at each stage.

Historically, I’ve seen that Black entertainers are more likely to branch out on their own and are more likely to end up on tables like the one above — partly because many Black creators have struggled to achieve the same backing and validation as their non-Black peers at different points in their careers. If those creators don’t believe that the system works in their best interest, they’re more likely to take matters into their own hands.

One of the reasons Jay Z started Roc-a-Fella Records, for example, is that no major record label wanted to sign him. When he later became president of Def Jam, his power was still limited. When he asked for a credit line to get Def Jam into both the headphones and clothing businesses, his request for more money was turned down by label executives.

He eventually launched Roc Nation, then became a billionaire largely because of deals he made on his own terms. That trajectory is less common in rock or pop music: Historically, those artists tend to have more support from both record labels and radio stations. Rock, pop, and country stars that are structurally taken care of are less incentivized to branch out on their own.

Jay Z’s journey helped influence a generation of hip-hop business leaders who have likewise been underestimated. But they still have an uphill battle. And this systemic lack of resources is not just a challenge for hip-hop artists, or Black artists in particular. One major draw of the creator economy is the allure of being able to take control of one’s own livelihood and forge a business independently, without the backing of mainstream labels or publishers.

But that allure is often a pipe dream. However, more of those dreams can be realized if the tools and platforms serving these creators have a clear vision on who they are designed for, which level of creator they reach, and what value they provide.

Open opportunities in the creator economy

Builders for the creator economy need to know which groups in their target demo are over-indexed and which are underserved. The most successful creator platforms have a deep understanding of their user base and a laser-focus on addressing those pain points and needs. The best opportunities help creators get better at creating and building their business.

So far, much of the money in the creator economy has come from mature, established platforms like Facebook, Snapchat, and YouTube. These platforms target hobbyists who may want to become full-time creators. That focus is no surprise; tech is scalable, and hobbyists are the largest addressable market. It’s aligned with what social networks already do well.

But there’s still a huge business opportunity in other levels of the creator economy, especially in areas that look beyond the standard “creator tools.”

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Technology can address many of the unscalable aspects of the creator economy. As a creator’s business evolves to new levels, they often need to hire more people. A 10-person company is very different from a 25-person company, a 40-person company, and so on. Tech tools and platforms can ease these transitions and common pain points as creators level up.

Currently, the jump from full-time creator to star or mogul often relies on bespoke, often expensive solutions. Creators may partner with agencies, business managers, consultants, and contractors to solve specific needs. But tech can solve those pain points. Businesses like Smooth Ops and Mad Rev have emerged to help creators manage operations, partnerships, endorsements, and more. These companies gain insights from each client, which helps strengthen their position over time.

Indify, for example, is a startup that helps artists receive funding from investors and connects artists with experienced business partners. Those are two overlooked areas in music. Outside investors are an alternative to the capital that comes from a record label contract. Plus, those investors can be creators themselves, which creates a two-sided marketplace. A comedian could invest in an artist, for instance, then use that artist’s music in their next standup special. Both creators win.

These types of tech tools address the business side of the creator economy, which is often neglected. Creators still need to know how to build a sustainable business (or partner with those that do), and those skills are often markedly different from the ones they use to create their content.

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Clearly, we need more tailored solutions for creators. The billions of dollars poured into the creator economy might suggest that the space is oversaturated, but that’s far from the truth. There are tons of burgeoning hobbyists who need help with marketing. For rising multi-hyphenates — inspired by, say, the way Issa Rae started her own record label to feature music in her media properties — the opportunities are there. But the tools are not keeping up.

If these tech platforms are successful, then there will be more creators than ever. They will require solutions tailored to their various business needs, whether in marketing, copyright expertise, investing, operations, community-building, or product launches. The companies that recognize this trend — and build tools for a particular swath of creators — will have a tremendous advantage. I believe it will unlock new levels of creativity for creators.