The Future of Content is Public or Token-Gated

The history of content is one of rights and access. Value has derived from both protection against reproduction and distribution (i.e., copyright) and exclusion (i.e., paywalls). But these are contradictory and hard to enforce, causing creators to consistently be undercompensated. I believe the future of content will be about rights or access, and the sources of value will reverse. In fact, this transition is currently in process, as evidenced by Netflix’s attitude towards user-generated Squid Game content and the growth of creator tokens.

More monetization, more problems

The idea that rights and access are better separate than together may seem counterintuitive, but it boils down to price versus quantity. Content has a unique asymmetry: it has very high fixed costs of production, but effectively no marginal costs of reproduction and distribution. As a monetization strategy, rights protects price by increasing those marginal costs above zero. Analogously, access controls quantity by artificially creating scarcity. Since production costs are fixed, maximizing profit is equivalent to maximizing revenue, or the product of price and quantity. The problem of monetizing rights and access is that doing so limits both.

In practice, profit is further diminished by the costs of enforcement. Take rights. Copyright infringement is sometimes seen as an “internet problem” that started with Napster, but in fact it has occurred en masse and largely unchecked since (at least) the days of bootleg cassettes. The desire to share content is universal and so deep-rooted that the threat of penalties has never deterred people. In addition, often what we reproduce and distribute are the ideas of a piece of content (i.e., as remixes) rather than the content itself, making detection and prevention that much more difficult. Worst of all, content that appeals to many, and is therefore exceptionally valuable, is the IP most at risk for precisely that reason.

Enforcing access is similarly frustrating. Paywalls are always vulnerable to leaks because the cost of access is fixed and sunk. Payers are therefore incentivized to maximize their return, which by definition can only take the form of a leak. Interestingly, the return itself is almost never financial — how often do you see leaked content for sale? Instead, leakers seem to have a benevolent mentality in which they are “taking one for the team” so that their friends or the online communities to which they belong can also enjoy the content. No enforcement technology can counteract the resulting social status and positive feedback that the leaker receives. Technology is not even mechanically sufficient since once a leak occurs, removing the “original” leak does not prevent subsequent leaks from local copies.

So what should content creators do to get more out of their work? I propose a barbell-shaped strategy that forfeits either rights or access to maximize profit while minimizing enforcement costs. The strategy diverges depending on the intended audience: mass media should give up rights and optimize for quantity, while curated content should open up access and focus on price.

Sharing (and remixing) is caring

That mass media is a quantity play is obvious; it’s literally in the name. Making the IP freely accessible to consumers¹, however, is much less apparent. The key to understanding this strategy is the fact that attention has become zero-sum. Reed Hastings famously observed that Netflix’s biggest competitor is sleep — that we have access to much more content that we can possibly consume. Given its scarcity, mindshare itself is value. So when content captures our imagination, its creator should not only allow sharing and remixing, but also encourage and celebrate it. And since going viral is quite rare, mass media should always be available to people so creators are positioned to capitalize if it does happen.

Relaxing rights also helps mass media creators monetize “off-content”. Ads have long been a way to monetize attention, and shared content gets more attention. The popularity of songs used on social media drives users to concert stadiums (and has outright created new artists like Lil Nas X and Bella Poarch). Harry Potter, Despicable Me, and much of the Disney portfolio have are more valuable in merchandise stores than movie theaters because their characters and stories persist in pop culture.

But these examples are still different from my recommendation of intentionally giving away IP to the audience. Why would content creators want to monetize off-content? The optimist would answer that most off-content markets are larger and therefore more attractive. Google and Facebook lead NASDAQ thanks almost entirely to online ads. Musicians make far more money from tours than from albums. The consumer goods market is worth over $1.5 trillion in the U.S. alone, compared to just $12 billion in global box office revenue.

The realist would answer that creators don’t have a choice. Despite how famously trigger-happy Disney is with cease-and-desists, the latest MCU movie effectively enters the public domain the second it hits Disney+ through high-quality pirates. Mass media has never had the upper hand in the fight against copyright infringement. So why not make the IP an actual public good for fans, reap the off-content benefits, and forget the enforcement costs? A smaller piece of a much bigger pie is still better than the leaky bucket of directly monetizing content.

Netflix seems to have realized this with Squid Game. I have never seen as much as a clip from the show, yet I feel like I have studied each episode from seeing UGC everywhere for months. The long half time is no accident — Squid Game is engineered to be a public good. Think about it: the show is based on Korean children’s games and the characters wear track suits. Any able-bodied person can simulate Squid Game to a high degree of fidelity at minimal cost, especially if they ignore wardrobe. Like all internet challenges, the games are easy to understand and play but hard enough to win that the tension between success and failure stops our scroll every time. Netflix is practically begging us to claim our player number and prep our dalgona².

And so we have, endlessly and on every platform. On one hand, this is remarkable because not once has Netflix struck down Squid Game content for copyright infringement — not when critics called out MrBeast for plagiarism, not even when major brands used its imagery in their ads. On the other hand, this is not interesting at all because it is exactly what Netflix intended. The point of Squid Game is to keep us playing, thus extending its relevancy long past the initial rush of virality (which was itself driven by our play). Rather than targeting MrBeast in a lawsuit, Netflix should be thanking him for reigniting and expanding interest in Squid Game³.

As for monetizing off-content, Netflix is investing heavily in merchandise. It opened an online store last June and started selling through Walmart in October. Given the impact that Stranger Things had on the brands featured on that show, I think product placements could be another successful source of revenue. There are also indirect benefits to keeping consumer attention with open IP. Memes and merch can help keep subscribers paying by bridging the gap between seasons (especially since Netflix releases all episodes at once) and sparking repeat viewings. Monetizing off-content will also help Netflix maintain its growth in the long term by diversifying its income; it can’t continue to add 30 million subscribers per year forever.

New tech, old problems

There has been a lot of excitement around cryptomedia, or the marriage of rights and access using NFTs. The content in question is usually curated in the sense that its intended audience belongs to a particular community, such as a newsletter or piece of art. On paper, curated content makes good cryptomedia because their specificity selects for interested people, who in turn may become fans. This is important because fans have a higher willingness to pay than the general public. And tech thinkers love to talk about how few true fans a creator needs to be able to support themselves on their content.

I agree that web3 technology offers new ways for curated content to optimize price, and indeed advocate for one in the next section. But the idea that content can be “both freely accessible and have economic value”, as Rex Woodbury puts it, is a crypto daydream.

The existence of technology that enables content to be both media and market does not imply appetite. To start, the idea that public content can have private value makes no sense to most people. Western tradition especially has long held exclusivity as the defining characteristic of ownership. I personally struggled with this idea when I started exploring web3, and I was actively trying to understand it as someone who works at a startup with crypto plans and follows people in this space. Most people don’t have the benefit of that context and don’t care; they just want to see the Mona Lisa. The ones on Google Images don’t have to be the original to serve that purpose.

Even if people get over this apparent paradox, most will not want to own public content. Half of Americans don’t even own stock, and NFTs are subject to much wilder price fluctuations than most stocks. The level of financial sophistication (and for the foreseeable future, technical sophistication⁴) needed to manage and trade cryptomedia is accordingly much higher. As the 50% statistic has not improved for decades, and is in fact part of a decline, I believe the majority of people will never be cryptomedia investors. Web3 idealists should remember that early adopters are nothing like the average user it will have to serve if it goes mainstream.

Another complication is some people will view buying cryptomedia as a donation instead of an asset. Content faces a peculiar challenge when it comes to pricing because it is information. In classical economics, information is considered an input to price — you need to know what you’re evaluating in order to put a price on it. But evaluating content would require consuming the content itself. It would be as if smelling a burger and eating it were the same thing! And by definition, paying for something whose existing price is free is a donation. This may sound like a trivial distinction, but it may have a big impact on ownership: when the perception of curated content switches from a public good with private value to a pure public good, it becomes subject to the free-rider problem⁵.

It’s the incentives, stupid

Since web3 cannot reconcile rights and access, which monetization strategy should curated content use? Despite the previous section, I think cryptomedia is right to focus on curated content’s ability to price discriminate. This is a valuable advantage over mass media, and it should be exploited in a price strategy. The implementation I suggest uses creator tokens to change the incentives of leaking by replacing access with self-interest.

Specifically, token gating turns curated content from a one-shot game to a repeated game. Unlike a paywall, token gating is based on persistent value. As long as there is new content and demand for that content, creator tokens will have value. Furthermore, that value belongs exclusively to their holders. This means creator tokens fit within our traditional understanding of ownership; combined with their fungibility, they look and behave like currencies. There is no conceptual hurdle that fans need to cross to participate, nor a requirement to understand and actively manage risk⁶. More importantly, exclusivity disincentivizes token owners from leaking since doing so would lower the value of their holdings⁷. The source of value shifts from mandated exclusion to voluntary abstinence. And fans explicitly benefit when the value increases because that is also the price they receive when they sell tokens to other fans.

Token gating disincentivizes leaking even more when creator tokens are exchanged as gifts. If a token is obtained as a gift from the creator rather than by purchase, it becomes a manifestation of the relationship between creator and fan. People self-reinforce the positive views that others have of them, so recipients are more unlikely to leak than if the tokens were purely financial because leaking in this case is a violation of personal trust. Similarly, creators could encourage fans to share their content — and thereby grow their audience — while minimizing leaking by allowing fans to gift tokens at a discounted rate. Friends of fans may not care about the impact leaking has on the value of their few gifted tokens, but they will care about the impact on the fans’ holdings. (The discount makes sharing more generosity than sacrifice.)

This isn’t just all theory. Patreon recently announced that it is exploring creator tokens after the idea came up repeatedly in community feedback. This followed an update to its terms of service last October that allows its users to gift creator coins minted on other platforms; they were completely forbidden previously. Patreon’s change of heart towards web3 perfectly supports my strategy for monetizing curated content. For one, Patreon considered and explicitly rejected NFTs (and thus cryptomedia) as the mechanism because it thinks that they fail to create a “sustainable recurring future for creators”. It also chose to allow only gifting to start, even though the fact that Patreon doesn’t manage the tokens means it easily could have enabled purchasing too. I believe that this was a conscious decision aimed at seeing how strong non-financial disincentives to leaking are. Finally, the significance of the very pioneer of paywall experimenting with price-based monetization should not be overlooked.

Of course, there are also companies focused on creator tokens. Roll and Rally are among the most prominent of these, and both have seen explosive growth. Roll, which serves crypto-native creators and fans, has signed on more than 350 creators since its founding in 2019. Over $2 million of creator tokens are bought and sold on its platform every day. Rally, its non-crypto-native counterpart, has amassed more than 200 creators in just over a year. Impressively, three-quarters of those creators have token market caps in the six figures. The success of Roll and Rally shows there is appetite for creator tokens and supports the idea of using them to achieve higher prices for curated content⁸.

Together with Squid Game, these developments signal that rights and access are already decoupling. Creators will soon experience a middle squeeze, with those in mass media forced into quantity and those in curated content turning to price. As this becomes the norm, enforcement will no longer be a major problem. And the resulting revolution in the creator-consumer relationship will make the future of content better for everyone. ∎

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1. I use “consumer”, “audience”, and “fan” to mean anyone who engages with the IP without material financial gain. The creator should be the major beneficiary by far of the mindshare that they acquire.
2. In its own words, Netflix welcomes and celebrates fans sharing and remixing Squid Game content.
3. The gaming industry has institutionalized this strategy as modding. It is no coincidence that Roblox, Minecraft, and Fortnite are all simultaneously games and platforms for game creation.
4. This is already a strong barrier to entry, but I am not stressing this point since many web3 companies are trying to make crypto more user-friendly and less expensive (e.g., Solana-based dapps).
5. Li Jin may argue that these are not fatal issues, but in practice most creators will never get to 100 true (and NFT-fluent) fans. Put another way, low ownership perpetuates creator power laws, especially given the importance of liquidity.
6. This is especially true if the creator token uses a bonding curve (like Rally) to limit volatility from speculation and eliminate the need for counterparties. Token gating therefore needs fewer fans to function properly than cryptomedia to begin with.
7. Creator tokens with more underlying content are more valuable since their price reflects aggregate demand for that portfolio of content. Leaking effectively reduces the size of the portfolio.
8. Startups working specifically on token gating are even more aggressive with helping creators monetize price. For example, MintGate hides the URLs of content as additional protection against leaks.