• Andrew Schauer, Esq.

The Economics of Streaming - Part 1


There is something still very Wild West about the streaming world, so I am beginning a series of posts to analyze the economic landscape and drill down on how content creators do end up getting paid, and how this differs from other segments of the entertainment industry.


This series is mainly inspired by the events of last night, when Twitch streamer Ninja broke records by hosting Drake on his channel while the two played the popular third-person shooter Fortnite. It was a banner moment for the site, the streamer, and the developer Epic Games. What really struck me, though, was this follow-up article published today at GamesIndustry.biz. They report that neither Epic nor Twitch paid either Ninja or Drake any compensation whatsoever.


We all know Drake and other personalities and performers because of their creative output. But they're not making money from making music - at least not most of it. They're making money from selling stuff. When a well-known person expresses an opinion, it has a tangible, financial impact on whatever they're commenting on. Kylie Jenner tweeted 18 words to her 25 Million followers, and lopped $1.5 Billion (that's billion with a "b") off of Snapchat's market valuation.


But I can also tell you it flows the other way, too: It's extremely rare for anyone in the Kardashian/Jenner clan to send a single tweet with a brand name in it unless that brand has paid for the right to be acknowledged by them. And the price can go up depending on a number of factors, like how many tweets the brand wants the person to send over a given period of time, whether the personality actually uses and endorses the product, and so on.


So to see Drake tweet something like this:


...knowing that neither Twitch nor Epic paid for it is jaw-dropping. Of course, it wasn't just this tweet. Drake allowed Ninja to broadcast the fact that he was spending his valuable time playing this game and enjoying it. Those are two major deal points for which he easily could have requested additional compensation. Frankly, it is completely mystifying to me why his representatives allowed him to completely fail to capitalize on this landmark opportunity.


It makes a little more sense as to why Ninja would have agreed to this: He's making some money. To see how, we first have to go over the underlying agreements between streamers and Twitch. Twitch itself is a little like a meta-game: In order to monetize your steam, you have to unlock certain "achievements." You must: (1) Stream for eight hours in a given month; (2) over seven different days; while, (3) averaging three viewers at a time; and, (4) getting 50 accounts to follow yours.


Once a streamer completes those achievements, there are two direct revenue streams available to them: Subscriptions and Donations. Donations are one-time payments that a viewer can make to a streamer, while Subscriptions are recurring payments every month. 100 percent of Donations go directly to the streamer, while Subscription proceeds are split 50/50 between the streamer and Twitch.


From there, the revenue streams branch off into many other, more complex directions. We'll cover those in Part 2 of this series, coming soon.


Sources:


https://www.gamesindustry.biz/articles/2018-03-15-drake-ninja-light-up-twitch-with-fortnite-stream (accessed 3/15/18)


https://www.theverge.com/2018/2/22/17040332/snap-stock-price-kylie-jenner-tweet-snapchat-1-billion-market-loss (accessed 3/15/18)


https://www.twitch.tv/p/legal/affiliate-agreement/ (accessed 3/15/18; last modified 12/20/17)

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