All About Epic’s Creator Economy 2.0 and What It Means for Gaming and Web3
The rise of the creator economy and the adoption of Web3 technologies are changing the way we think about content creation and ownership
by Noah Roy, investment analyst at Sino Global Capital
Epic Games, the developer behind the popular video game Fortnite, has recently launched a new initiative called "Creator Economy 2.0" during its State of Unreal at GDC 2023. The program is designed to reward creators for their contributions to the game by paying them based on their island's engagement levels similar to the UGC (User Generated Content) strategy used by games like Sandbox, Decentraland and Roblox.
The system entails giving 40% of Fortnite's monthly net revenues to creators, determined by player engagement with their islands. This includes revenue from V-Bucks, in-game outfits, and the Fortnite Crew subscription service. All of these earnings are pooled and distributed among creators under the new program, promoting a more fair and equitable ecosystem for creators.
This new system is a significant step forward for the gaming industry, as it highlights the growing recognition by big players in the industry of the value that creators bring to digital platforms. In the past, developers have often received the lion's share of the profits from their games, leaving content creators with little compensation for their contributions. Epic Games' new initiative aims to change this by rewarding creators based on their island's success.
Why do creator economies matter?
While platforms can help creators monetize their content, the fees charged by these platforms can vary significantly based on the value they provide in five functions: creation, hosting, distribution, promotion, and monetization. Fees can range from less than 10% on platforms like Patreon, Spotify, and Unity, to nearly 85% on platforms like Roblox.
The present-day creator economy is no longer solely focused on providing value to platforms, but instead on developing novel ways of establishing direct relationships between creators and their communities. Creators produce content that provides value to their audience, opening up opportunities for them to provide additional benefits to their fans, such as financial gains, and enabling both creators and their communities to partake in the shared value that they contribute to platforms. The rise of Web3 and blockchain games is altering the definition of a creator as power dynamics shift from platforms to creators and their communities
In his 2020 talk on the future of gaming, Epic Games founder and CEO Tim Sweeney, outlined 3 trends he saw on the horizon:
Gaming as a social experience
Gaming as a platform for discourse
Gaming as an economy.
More importantly, he famously said that “We really need to start thinking about games, not just as entertainment experiences but as an economy where other creators can participate, contribute, and have their ideas heard.” Signifying a paradigm shift in the way gamers not just consume content but engage in the circular economy of value creation.
As the creator economy continues to evolve and expand into new forms of media, it may lead to the emergence of decentralized platforms built on Web3 technology. These platforms could provide creators with increased control over their content, ownership of their data, and more transparent payment systems, allowing them greater autonomy over their creations. It is likely that we will see a proliferation of platforms and tools that empower creators to take ownership of their work and build profitable businesses on their own terms.
Web3 is enabling creators to build and own communities while bringing their creativity to broader groups of people involving them in the creation process in unique ways. And this community angle is going to be the most interesting over the next few months bringing a new lens to the creator economy.
Importance of Ownership in the creator economy
The concept of ownership is crucial in the world of user-generated content platforms such as Roblox, TikTok and now Fortnite. However, in these platforms, the content created by users is owned entirely by the platforms, and users have no control over their creations. This means that the platforms have the power to change compensation splits, ban users without proper resolution, and even delete users' entire life's work. The lack of ownership and control is a significant problem in the Web2 creator economy. Web3 solves some of these issues and provides possibilities not possible with centralized platform in Web2. Some of these include
Ownership of assets — Most notably, players now own the in-game assets they generate, which may be held outside of the game in cryptocurrency wallets. NFTs have managed to revolutionize how objects in games are made, sold, and purchased. Assets can also be exchanged in-game or on external markets for far lower fees than in Web2 games.
Composability and Interoperability — Assets can be transferable from game to game which allows players to create a single identity that can travel across different worlds, amongst other things. The compositely of Web3 means that creators are not limited to a single set of tools provided by the game and can integrate different Web3 protocols into their games or virtual lands.
Improved Monetization Opportunities — In Web3 games, there are more opportunities for creators to profit from UGC. The number of in-game items and assets that can be created is potentially limitless, and they can also be sold without the need for a 3rd party. These assets can also be rented out to other users who can use these items to create their own income, creating a more level playing field for developers and players. This means that creators would have the ability to buy and sell rights to each other's content and post them as collateral against debt positions. This would open new markets and liquidity sources for developers and incentivize creators to produce high-quality content.
In the case of Roblox, creators could sell the rights to their maps, while TikTok creators could trade clips, songs, and filters they created. The standardized data associated with the content, regardless of platform, could be stored in some on-chain format and migrated off-platform if the user has a disagreement with the platform. This would enable users to maintain control over their creations even if they move to a different platform.
Creator platforms in Web3 would likely adopt standardized formats to import creators from disparate sources, encouraging users to migrate between platforms as content standards and trends evolve. This would allow creators to negotiate on more even footing with the creator platforms, as opposed to the current unilateral status quo of Web2. Platforms and creators could attach royalties to these digital assets and even incentivize users to go off-platform to drive high royalty volumes.
The result would be more liquid markets, both in terms of user capture and actual cash liquidity, driving more innovation at the industry level and higher value accrual at the individual level. This would empower creators to have more control over their content and provide them with a transparent and fair compensation system.
Final Thoughts
In conclusion, the rise of the creator economy and the adoption of Web3 technologies are changing the way we think about content creation and ownership. With the launch of Epic Games' Creator Economy 2.0 initiative, we see a major player in the gaming industry acknowledging the value of content creators and offering a more equitable way for them to monetize their contributions.
This trend towards empowering creators is set to continue, as decentralized platforms built on Web3 technology offer even greater control, ownership, and transparency for creators. With these developments, we can expect to see a new wave of innovation and creativity in the content creation and gaming space, as creators and players are empowered.