The micropayments market

This week’s Cybercultural newsletter examines the micropayments market from the perspective of the cultural industries. I dig into what micropayment solutions are currently available – or are upcoming, in the case of Facebook’s Libra – and provide analysis of where this market is headed.

First, let’s take a look at what’s happening around the traps:

  • US Independence Day makes the online world a ghost town for me, so I used that time last week to start building the Cybercultural Database.

  • Digiday has declared a war in streaming video, noting that the big gun Netflix is under fire from the likes of Disney, Apple and NBCUniversal.

  • Rolling Stone has just launched its Billboard-competing music industry charts. There are five in total, and each one is updated daily. As expected, song streams are a key part of the metrics.

Don’t click yet, just keep scrolling… Read on for my analysis of the micropayments market, followed by data points and other news at the nexus of tech and the cultural industries.

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Micropayments: many small streams form a large river

It’s not easy getting paid for creative work nowadays, but there’s growing evidence that micropayments (typically payments of less than a dollar) will soon make an impact.

Let’s quickly set the scene. As of 2019, these are the primary ways creators of cultural products can earn a crust:

  1. Online advertising, sponsorship or affiliate; an increasingly hard-to-get income stream, which has led many in the cultural industries to pivot to…

  2. Subscriptions, mostly from individual consumers; e.g. news media, magazines, newsletters.

  3. A slice of streaming revenue from the dominant digital platforms; e.g. musicians, tv or movie producers, podcasters.

  4. Sales, whether of physical products, digital downloads, virtual goods, or ticketing; e.g. book authors, video game creators, GLAM sector, performing arts.

There are variations of each of these income types; for example, the patronage model of Patreon is a form of subscription.

But what’s most interesting is that each of the above four income models could be enhanced for creators – and sometimes significantly – through adopting micropayments.

From the data I’ve collected about micropayment solutions, I’ve identified four different types.

  1. Micropayments embedded in popular apps, such as chat or gaming.

This is where the much discussed Libra cryptocurrency comes in, which Facebook originated. As you’ll recall from a previous edition of this newsletter, Libra is a new digital currency that will be made available in Facebook Messenger and WhatsApp via the upcoming Calibra wallet, sometime in 2020.

To get a sense of how this will work, look no further than WeChat in China. As I pointed out back in February 2016, WeChat is a similar app to Facebook’s Messenger – except that WeChat has e-commerce integrated into it and is therefore an essential app for Chinese consumers. Here’s how I explained it a few years ago:

WeChat is much more than a simple chat app. It’s used on a daily basis by millions of Chinese for online shopping, in-store payments, ordering and paying for transportation, paying utility bills, and more.

This is the kind of functionality that Libra could (finally!) introduce to Western internet users. Since Messenger and WhatsApp are dominant chat apps in the US and beyond, Libra will be a huge opportunity for cultural organisations. As just one example, museums and theatres will be able to more easily target and sell tickets to people via Facebook’s chat apps.

Micropayments could be a component of this; for example, let’s say a cultural organisation runs a promotion where you ‘earn’ Libra coins every time you like, share or comment on its Facebook Page (or a specific event page). Those coins could eventually add up to a discounted or even free ticket.

There’s also the tipping model of micropayments, whereby users can easily tip or “cheer” (as it’s called in Twitch) content creators. Tipping is already a feature in WeChat.

Finally, it’s worth noting that digital currency is a key part of the gaming industry. Typically this works by the user purchasing in-game credits, which can be used to buy virtual goods and the like.

  1. Browser-based micropayments.

The Brave browser, first released in January 2016, features micropayments as a built-in business model for creators. Brave has a distinguished heritage; its CEO and co-founder Brendan Eich was previously a co-founder of Mozilla and Firefox.

There’s a big cryptocurrency component to Brave, but I’ll skip those details. All you need to know is that, as a Brave user, you can set a monthly budget you’d like to pay creators, and then select the sites you want to reward. At the end of each month, your monthly budget is divvied out to your chosen sites based on views and time spent.

The micropayments angle comes from the publisher side of this. A publisher could potentially receive hundreds of ‘micropayments’ from hundreds of Brave users. Check out my March 2018 review of Brave on Blocksplain if you’re curious to know more about how this works in practice.

Note: Brave competitor Firefox has been hinting at a subscription scheme, where it’ll charge $4.99 per month for ad-free access to a group of websites it partners with. But there doesn’t appear to be a micropayments component to this (i.e. it’s not open to all websites to participate in), which is a shame.

  1. Blockchain solutions.

A company called Breaker (formerly SingularDTV) is working on a blockchain system to decentralize the entertainment industry. One of its features is automatically piping streaming payments to creators and their teams. Last year I interviewed the company’s director of business development, G. Thomas Esmay. He was keen to point out how Netflix screws with creators:

He said that with Netflix, “rights and royalties are signed away” and there is “no data transparency” for artists. Often, he said, Netflix will buy the rights to a movie for a relatively small sum. Even worse, creatives will have no idea how well their movie does – because Netflix won’t share that data. SingularDTV will solve this problem, claimed Esmay, because “all of the value is transparently tracked on the blockchain.”

As with all blockchain services, there’s a big TBD mark on Breaker. But anything that helps provide more transparency into streaming platforms would be a good thing for the cultural sectors.

  1. Niche stand-alone solutions.

In my research I found a number of micropayment startups that provide stand-alone solutions for creators. One of the more interesting was a Sweden-based startup called Flattr, which enables its users to automatically pay creators without having to subscribe to each creator individually. It’s similar to Brave, in that payments to creators are distributed based on usage. Here’s how the company describes it:

“Using a privacy-friendly smart algorithm, Flattr measures attention and distributes the subscription accordingly. That means that once the extension is installed, you can sit back and enjoy the internet as you always do, and Flattr does the rest.”

Interestingly, one of Flattr’s founders is Peter Sunde, best known for being a co-founder of controversial P2P site The Pirate Bay. So it’s nice to see those talents being put to good use for the benefit of creators.

I also really like Flattr’s motto:

“The Swedish saying, “Många bäckar små blir en stor å” (many small streams form a large river), outlines the philosophy of Flattr — small contributions from many can make a meaningful difference!”

Tracking 👀

  • BBC article on how technology is changing the craft of screenwriting; for example streaming has allowed TV scripts to become more complex, as viewers can now easily catch up on previous episodes or series. 📺

  • “An emerging crop of streaming-native artists is finding its audience in a much more targeted and efficient way than via the traditional music marketing,” writes Mark Mulligan, founder of MIDiA Research. 🎹

  • Thought-provoking essay in The New Yorker about the influence of Apple lead designer Jony Ive. Nikil Saval writes that Apple’s designs “are intended to absorb and centralize—and, in some cases, to wish the physical world out of existence.” 🍏

  • 17-year old Sally Williams from England writes that Netflix and Snapchat are now more popular for her generation (Gen Z) than Instagram and YouTube. 📱

  • It hasn’t been a great time to buy book industry stocks, says Publishers Weekly: “After declining 21.2% in 2018, companies on the Publishers Weekly Stock Index dropped 9.9% in the first six months of 2019, compared to a 14% increase recorded by the Dow Jones Industrial Average.” 📚

Data Points 📊

  • Pokémon GO has grossed an estimated $2.65 billion worldwide since launching in the US on July 6, 2016. 🎮

  • UK employment in the creative industries is growing at twice the national rate, and now accounts for more than 6% of all jobs (UK government report). Via ArtsJournal. 🎭

  • Comscore’s ‘State of OTT’ report: 78.8% of OTT [over-the-top] streaming is spent on the “big four” — Netflix, Hulu, Amazon, and YouTube. Via The Streamable. 📺

  • Digiday: The Economist’s newsletters are now driving more traffic to its website that Twitter. 📜

  • SensorTower: Gaming accounted for nearly 75% of global mobile spending in the first six months of this year, grossing $29.6 billion for the period. 🎮

Tweet of the week 🐦

A new Spotify ad campaign gets called out for being “tone-deaf” to the reality of struggling musicians (hat-tip Hypebot).

That’s it for another week. As noted above, I’ve just opened my inbox to consulting enquiries. So do reach out if you’d like me to dig deeper into a specific sector.

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