Hacking The Superstar Economy

As a follow up to one of our previous posts where we explored the concept of long-tail, today we will dive into a study done in the 1980’s by an American economist by the name of Sherwin Rosen. He describes the phenomenon of the “Superstar Economy”, in which he notes why markets are dominated by the most popular and the most talented individuals.

Rosen points out that in the superstar economy, there is a higher demand for products and services that are better than the rest. To put it simply, people are willing to pay more for quality products and services. This means that it cannot be substituted with an equivalent in terms of quantity. A higher price point for goods and services would lead to higher supply and lower demand, which creates what we consider to be a ‘normal’ market.

He uses doctors as an example, where a quality doctor would charge a higher fee or make you wait in line to avail of their services. In this setup, you are likely to consider that it’s worth the wait rather than quickly substituting them for a lower quality doctor.

In relation to the content creation industry, let’s say that there are only 10 creators revolving around a specific niche. If one of them is even a percent more ‘talented’ than the other 9, audiences will flock to that individual while the others struggle to attain that level of success. We see it today with Tiktok superstars like Addison Rae Easterling and Charlie D’Amelio raking in millions of dollars, brand endorsement deals, and sponsorships at unprecedented rates. All while there are tons of other content creators that are doing the same thing.

The argument holds true in this regard — when the smoke clears, the more talented individuals are likely to ascend to the top. When individuals become attached to a brand or individual, they are less likely to consume content made by others in the same space. Furthermore, the concept of Imperfect Substitutes in economics supports this. The reality is that even combining “less talented” individuals will not make up for the perceived value that an audience has for the face of that space. Simply put, it’s just not the same.

The truth is, the creator economy isn’t fair. It’s a winner-take-all market, and a small margin of advantage that one holds over everyone else is more than enough to tip the scale. The superstars of the creator economy will rise quickly and attain fame and fortune, and the reality is that the rest will struggle to catch up to them. In a time where tools are accessible and the market is ripe, you can no longer be above average, you have to be the cream dela creme.

Another concept worth introducing is that of positive feedback loops. Media publishing platforms are mostly revenue driven, with digital advertisements serving as their profit centers. When an individual ‘blows up’ or goes viral on a platform, the algorithms will drive attention to them for views. Having more views also means getting more return on investment for potential advertisers in that niche, which means that it becomes difficult for everyone else to break through. More ad revenue means more money for the content creators as well, which means that they solely grow while everyone else is left out.

The good news is that with the right mindset and a good eye, the superstar economy can be hacked. Rosen says that an individual in the field is faced with competition in two different ways:

  1. When there are people in the same space who are held in the same regard or ‘as talented’ as they are, meaning that audiences are given options on whose content they want to consume more.
  2. When an individual is over exposed, or the barrier to entry to interacting with them is too high, that other ‘lesser known’ or ‘less talented’ individuals are considered to be good substitutes because they’re much more accessible.

Just like in business, when people see huge income made by creators, they want in. What they don’t realize is that the vast majority of them won’t even come close to that simply because it’s already dominated by someone else.

The internet has effectively broken down barriers and physical constraints for an individual to reach superstardom. While it is true that it would be difficult to break through markets where there are already multiple established personalities, there’s a wide array of niches and sub-niches that have yet to be tapped. This is how one could potentially leverage the long tail economy, by focusing on an area without much competition and ensuring that the best possible product can be delivered through individual skills, knowledge and influence in that sphere. By building up an audience this way, more revenue comes in, which means that one could explore more avenues as time goes along.

The challenge, then, is identifying what audiences want and how to best respond to it. BitFans uses tokenization as one of the intermediary solutions for growing communities. Through community tokens, they can design their own digital economy. Creators can extract vital information by pinpointing their most valuable followers and the touchpoints that are most effective for their growth. They can provide services, benefits, and access to exclusive content for the members of their ecosystem. It can be for an individual, a sub-group within their community, for sponsors, or everyone involved. The bottomline is, with BitFans, aligning incentives with different players in the creator environment is as easy as 1–2–3.

Did you enjoy this read? To learn more about our platform, feel free to join our community of like-minded individuals, community leaders, and content creators in any of our socials using this link: https://linktr.ee/bitfans

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