A few weeks ago, we wrote about the Creator Economy and how it is parallel to the subscription economy due to one major shared pillar: recurring subscriptions. For those of us new to the term, the Creator Economy refers to an industry of digital creatives and professionals that use social media platforms and subscriptions to earn revenue. The ability to control a revenue stream from your audience, on a daily basis, is something that thousands of creatives take advantage of in order to build a real career on platforms like Twitch, Patreon, YouTube, and others.
Recently, the biggest streaming creator platform, Twitch, has enacted new policies that have practically incited a revolt among streamers. By cutting subscriptions revenues down to half and no longer handing out exclusive contracts, scores of streamers that have helped define the industry via Twitch as their platform of choice are now considering moving to YouTube, who are ramping up their creator outreach. From the outside looking in, it seems as if a skirmish is occurring between the powers in the Creator Economy.
To understand the kerfuffle, I decided to sit down and talk with Stefan Etienne, one of the ZEOs at Zuora, who is also a creator and continues to manage a Twitch channel as a side hustle.
Stefan, first, for us old people out there, what is Twitch, and what is the Creator Economy?
Twitch is a video game live streaming service used by users called “streamers” to broadcast their gameplay, commentary, and other forms of content to a global audience. It’s built on a community of other gamers and people who enjoy video game entertainment and is a large part of the Creator Economy – an economy built around digital creators sharing and monetizing content from audiences willing to consume said content. Think YouTube and Twitch stars!
The concept of being a Twitch streamer has held an allure to younger people for years. The grind mindset went something like this: earning your first hundred followers to build a community, then your first thousand subscribers to build a career. Earn sponsorships and make collaborations with other streamers to increase the scope of your audience. For a while, Twitch used to be about the creators and the Creator Economy that they help support.
And that’s where the subscription model comes in?
Let’s cement this fact quickly: streamers love subscriptions. Why? Besides being guaranteed revenue, subscribers are not just customers, but part of your audience. When a viewer subscribes to a Twitch channel, they enjoy an ad-free experience, receive special live stream chat privileges on the stream, and most importantly, they motivate and energize that streamer to keep streaming. In fact, the practice of streaming simply for the sake of gaining more subscribers in a short period of time is called a “subathon”. The more subscribers you gain, the more time is added to a descending timer, incentivizing you to continue the live streaming event, for hours, days, even a whole month.
This is a model that works, since it has catapulted many streamers from obscurity straight into fame, and yes, even fortune. I, for one, am not hedging my future of making a fortune by being on Twitch, but I’m committed to making a breakthrough and establishing a dedicated subscriber base, like many other streamers. In different circumstances, being a Twitch heavyweight can also bring you equity, like co-owning one of the biggest video game tournaments in the world.
So what happened recently that has the creators all upset?
Recently, in an open letter to creators, Twitch president Dan Clancy detailed the 50/50 split that is, pun intended, splitting the creator economy apart. You can still make hundreds of thousands, or even millions as a Twitch streamer, but it’s the hardest it’s ever been.
More than that, Twitch is also phasing out custom-made deals that were made with more popular creators. This is a direct attack on up-and-coming streamer’s earnings, but also for established creators.
From the perspective of a streamer, Twitch has made three notable missteps: reducing revenue splits on subscriptions from 70/30 to 50/50, ignoring the recommendations of the creators, and generally has a track record of requiring massive public outcry to make changes.
If anything, Twitch is telling creators that they need the platform more than the platform needs them. But that’s a grave mistake, as more and more content creators and streamers of all levels are leaving Twitch for more profitable platforms, like YouTube.
But, now Twitch (owned by Amazon) has pivoted and become more anti-creator for both internet stars and beginners than it has ever been.
Why do you think they did that?
I’m sure Twitch is feeling pressure from Wall Street and its owner Amazon, but essentially, they’re looking for ways to boost profits. As Bloomberg reported back in April, Twitch leads the market in creator streaming, but Amazon is looking for them to make money over the long-term.
If you were a top streamer and made $100,000 per month off purely subscriptions, under the old rules you’d earn $70,000, but now you’d only earn $50K. All current and future streamers on the platform are subject to these new 50/50 split rules. This new change kicks in on June 1, 2023. Oh, and that’s all before taxes.
And what Twitch seems to be turning to is: ads. Call it the TikTok effect. Twitch’s president himself is telling streamers to use ads to make up for the lost subscriptions revenue: “Our recent bump in ads revenue share to 55% as part of the Ads Incentive Program is a great way for these larger streamers to make up most, if not all, of that revenue.”
It feels to me they are taking the lazy route and roll out ads and ad tiers with streamers. It’s a general lack of foresight. The problem is, this goes against their community ethos and the point of uninterrupted streaming and despite providing some incentives for creators to run ads, taking away revenue from subscriptions is going to upset a lot of streamers. Even the Bloomberg report points to Twitch employees warning this could alienate its most valuable streaming stars and creators.
And that’s already started happening.
Is encouraging the use of ads on streams a step backwards?
Absolutely. The simple fact is that subscriptions are meant to ensure a quality viewing experience without ads. No one likes ads. In the case of Netflix’s ad-supported plan, the cost of the subscription goes down, and in exchange, you watch ads relevant to your watch history. There’s no such benefit for a Twitch viewer here; my channel subscription still costs the same, except now you’d also see ads. Meanwhile, I’ve had viewers immediately leave a stream if I decided to run an ad if they aren’t subscribed. As a viewer, I know I probably would have done the same.
Twitch president Dan Clancy’s excuse for this change in posture around creator revenue is also due to the cost of running the low-latency, high definition streaming service. “Live video costs for a 100 CCU streamer who streams 200 hours a month are more than $1000 per month,” says Clancy. While I won’t argue that point, isn’t Twitch owned by Amazon? To say your bills are high when you’re under the umbrella of one of the most powerful companies in the world is what I’d call a convenient excuse.
So, Stefan, you are a creator. As a creator, what do you think Twitch should do?
Twitch needs to think of new ways to help creators earn money, outside of ads and subscriptions. Some subscribers send donations to their favorite streamers, but that’s not a reliable source of income for every streamer, especially for those who aren’t in the top 100.
However, Twitch has effectively shot itself in the foot by not allowing for much flexibility.
They’ve also noted that they will no longer create custom deals for high performing streamers, whereas YouTube still does and is increasing its scope by handing out contracts to streamers looking to jump ship. In other words, an exodus of top talent is already happening.
One, after, the other. Some of the biggest names in streaming are leaving for YouTube’s live streaming platform, branded as YouTube Gaming. Some are leaving the platform due to changes in policy, others due to the grind culture that it encourages. I reached 1000 followers on Twitch this year, but I’m even thinking of leaving for YouTube. I’m already starting to build a user base for content that I don’t even continuously update on that platform. An increasing number of streamers are thinking like this. It’s presenting an opportunity for us and a threat to Twitch.
Another way of looking at it is, a Twitch stream only serves the creator while it’s live, but a YouTube gaming stream can earn you money while you’re asleep. Discoverability is also better on the YouTube platform because Google has had more than a decade of experience classifying new and popular content. On top of that, YouTube’s infrastructure is more robust and easier to work with.
Any streamer will tell you, it often takes the perfect conditions and the best internet connection to even get a decent Twitch stream running for an hour, but YouTube is far more forgiving in terms of latency and staying consistent. Maybe Twitch can look into that with the increased revenue it’s seeing from the 50/50 subscription revenue splits.
So, let me get this straight, streamers want to maintain a direct relationship with their subscribers and fans, they want a clean way to monetize that, and subscriptions that provide the right business model, but Twitch is forgetting their core role in helping streamers do this?
That’s right. The future of streaming belongs to whichever platform encourages its creators to produce content, but also listens and incentivizes them. Right now, the greener pasture looks like YouTube, but that will only be the case if the audience also shows up. Currently, Twitch is the dominant platform due to its familiarity with viewers, as well as its massive audience where the top 1,000 streamers account for more than half of total hours watched on the platform. However, YouTube, which is far less saturated in the streaming space, maintains the 70/30 subscription revenue split (which is better for creators) and is continuously investing in creator tools plus monetizing new sections of the site.
Thanks, Stefan. I learned a lot!
You’re welcome. It’s always great to discuss topics like the Creator Economy, consumer technology, and gaming with you! Looking forward to speaking again.