Power Law Distribution of Content Creators
In recent years, content creation has become an enormous industry. Platforms like Youtube, Twitch, OnlyFans, etc. have grown meteorically due to the growing demand for entertainment from independent creators as opposed to content produced by TV networks, record labels, and other large corporations. One of the biggest players in this space today is Twitch.tv, a platform primarily dedicated to video game streamers.
The appeal of this new model is obvious. Streamers play whatever they want, on their own schedule, and get paid directly proportional to the amount of subscriptions, donations, and ad revenue they generate. On the other hand, viewers are much more incentivized to donate their money/pay for content when they know (most of) their money is going directly to their favorite streamer. In a sense, by removing the need for labels or other middlemen and creating a connection directly between creators and consumers, the Twitch platform represents the free market distilled into its purest form.
In such a market, with few regulations or large corporate players, we can observe many of the network effects discussed in class. One of the most striking effects we can see is the power law distribution/rich get richer phenomenon in full effect.
Recently, a breach in Twitch’s data exposed information regarding streamer payouts over a two year period from August 2019 to October 2020. This revealed what many people expected; the top streamers make an astonishing amount of money. But more relevant to this class, we see that the payouts follow an almost textbook power law distribution. The top two channels made almost 10 million dollars each over those two years. Streamers 3-5 made between 5-6 million. Streamer number 25 made just over 2 million, and streamers 26 through 81 made between 1 and 2 million each. The leak only revealed data for the top 100 streamers on Twitch, but I would expect that this power distribution extends all the way down– there are thousands and thousands of small streamers getting less than 10 average viewers and probably making zero money.
These are shocking numbers, but in another sense they are just as expected. Streamer payouts on Twitch are a direct function of popularity, and as we have learned popularity generally seems to follow a power law distribution (rather than a normal distribution.) This is due to all kinds of causes, analogous to the rich-get-richer phenomena discussed in the textbook. The Twitch directory sorts by number of viewers, with the most viewed streams appearing at the top of the page. More popular streamers have enormous leverage, and can negotiate a larger cut of subscription money (over the baseline 50%.) New viewers are overwhelmingly introduced by friends, who tell them about their favorite streamers. Larger streamers are more likely to be promoted in other spaces by their sponsors. Etc, etc.
In any case, the Twitch platform is an excellent example of an unrestricted content marketplace where we can observe the effects of popularity network phenomena in real time.
https://dotesports.com/streaming/news/full-list-of-all-twitch-payouts-twitch-leaks